Economy
Ottawa’s proposed ‘electricity’ regulations may leave Canadians out in the cold
From the Fraser Institute
In case you haven’t heard, the Trudeau government has proposed a new set of “Clean Electricity Regulations” (CERs) to purportedly reduce the use of fossil fuels in generating electricity. Basically, the CERs would establish new standards for the generation of electricity, limiting the amount of greenhouse gases that can be emitted in the process, and would apply to any unit that uses fossil fuels (coal, natural gas, oil) to generate electricity.
The CERs would hit hardest provinces that rely on fossil fuels to generate electricity: Alberta (89 per cent fossil fuels), Saskatchewan (81 per cent), Nova Scotia (76 per cent) and New Brunswick (30 per cent). Not so much Ontario (7 per cent) and Quebec (1 per cent), which are blessed with vast hydro potential.
In theory, the government has been in “consultation” with electricity producers and the provinces that will be most impacted by the CERs, although some doubt the government’s sincerity.
For example, according to Francis Bradley, CEO of Electricity Canada, which advocates for electricity companies, there is “insufficient time to analyze and provide feedback that could meaningfully impact the regulatory design” adding that the “engagement process has failed to achieve its purpose.” And consequently, the current design of the CERS may impose “significant impairments to the reliability of the electricity system and severe affordability impacts in many parts of the country.”
This was not the first time folks observed a lack of meaningful consultation over the CERs. Earlier this year, Alberta Environment Minister Rebecca Schulz told CBC that an update to the CERs made “no meaningful corrections to the most destructive piece of Canadian electricity regulation in decades” and that CERs “would jeopardize reliability and affordability of power in the province.”
Simply put, with CERs the Trudeau government is gambling with high stakes—namely, the ability of Canadians to access reliable affordable electricity. Previous efforts at decarbonizing electrical systems in Ontario and around the world suggest that such efforts are relatively slow to develop, are expensive, and are often accompanied by periods of electrical system destabilization.
In Ontario, for example, while the provincial government removed coal-generation from its electricity generation from 2010 to 2016, Ontario’s residential electricity costs increased by 71 per cent, far outpacing the 34 per cent average growth in electricity prices across Canada at the time. In 2016, Toronto residents paid $60 more per month than the average Canadian for electricity. And between 2010 and 2016, large industrial users in Toronto and Ottawa experienced cost spikes of 53 per cent and 46 per cent, respectively, while the average increase in electric costs for the rest of Canada was only 14 per cent. Not encouraging stats, if you live in province targeted by CERs.
Reportedly, the Trudeau government plans to release a final version of the new CERs rules by the end of this year. Clearly, in light of the government’s failure to meaningfully consult with the electrical-generation sector and the provinces, the CERs should be put on hold to allow for longer and more sincere efforts to consult before these regulations go into effect and become too entrenched for reform by a future government.
Otherwise, Canadians may pay a steep price for Trudeau’s gamble.
Author:
Economy
Hydrocarbons Are The Backbone of Global Progress
From the Frontier Centre for Public Policy
By Ian Madsen
The use of hydrocarbons is a necessity for modern life.
Climate Crusaders claim that our society could do without oil and natural gas by proceeding to a Utopia of ‘Net Zero’ by 2050, extracting CO2 (carbon dioxide) emissions from the atmosphere. However, as the Canadian Energy Centre notes, that cherished goal cannot be realized. This is true of fueling transport, heating or electric power, and all other uses of hydrocarbon fossil fuels.
People use oil and natural gas constituents for more than just burning. They use them in every sector of the economy, including military equipment and non profit organizations such as universities and hospitals.
The main component is ethane, C2H6, a ‘natural gas liquid’, extracted from raw natural gas. Ethane is then converted to ethylene, a versatile building block for many other chemicals, Other natural gas liquids, such as propane and butane, are generally used as fuel, in petrochemical production, and as some oil components.
Ethylene is used in various plastics, textiles, detergents and antifreeze. Plastics are used for containers, in countless household and industrial products, and tubing, filters, surgical masks, gloves, gowns, bandages, disinfectants and other medical products. Petrochemical-sourced materials are in the outer casing of medical devices and their components– important instruments such as blood diagnostics machines, DNA sequencers, MRI devices, ultra-sound and CAT and PET scanners.
Styrene, an ethylene end-product, makes synthetic rubber in tires. Synthetic rubber and related products are vital for the gaskets, seals, hoses and tubes in internal combustion, jet and diesel engines. Diesel engines are used in long-distance trucks bringing food to supermarkets. They also power excavating equipment that mines ores to refine into metals, fire trucks, and other machines, such as combines and tractors, which are vital to agriculture.
Petrochemicals also go into polymer fabrics such as polyester, spandex, acrylic and ‘breathable’ fabrics used by themselves or with ‘natural’ materials such as wool, cotton, silk and linen to make a great variety of items like clothes, underclothes, athletic wear, waterproof or winter jackets, hosiery, belts, handbags, upholstery material, furniture coverings, lawn and garden furniture, slope-stabilizing geotechnical fabrics, retractable arenas’ roof coverings, bedding materials, curtains, drapes, and tablecloths.
The same for the construction industries. Such products include paints, solvents, lacquers, countertops, knobs, flooring, adhesives, abrasives, pipes, plumbing and lighting fixtures. Two major insulation products builders and renovators are compelled to add to homes and office buildings make use of petrochemicals: polyurethane foam and styrofoam. Plastics go into the insulation’s outer sheath and for house wrap.
Plastics and related synthetic materials are also used in the latest generation of high-insulation windows, solar panels and wind turbines. Hence, petroleum based products are crucial to climate crusaders’ goal of lower energy consumption.
Plastics indeed add to the garbage volumes people generate. But plastic trash is manageable. Current recycling programs are ineffective, says the journal Nature. Despite rampant alarmism, waste-to-energy plastic destruction, as is bacterial digestion, is a viable alternative.
Petrochemicals and plastics make modern life possible. While substitutes are now under development, they are unlikely to become common anytime soon. So forbidding plastics would be detrimental, especially for emerging economies. Petrochemicals and plastics derived from hydrocarbons are crucial to making less-developed nations healthy and prosperous. Depriving them of that opportunity would be cruel and unnecessary.
Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy
Business
Trump victory means Canada must get serious about tax reform
From the Fraser Institute
By Jake Fuss and Alex Whalen
Following Donald Trump’s victory in Tuesday’s presidential election, lower taxes for both U.S. businesses and individuals will be at the top of his administration’s agenda. Meanwhile, Prime Minister Trudeau has raised taxes on businesses and individuals, including with his recent capital gains tax hike.
Clearly, Canada and the United States are now moving in opposite directions on tax policy. To prevent Canada from falling even further behind the U.S., policymakers in Ottawa and across Canada should swiftly increase our tax competitiveness.
Before the U.S. election, Canada was already considered a high-tax country that made it hard to do business. Canada’s top combined (federal and provincial) personal income tax rate (as represented by Ontario) ranked fifth-highest out of 38 high-income industrialized (OECD) countries in 2022 (the latest year of available data). And last year, Canadians in every province, across most of the income spectrum, faced higher personal income tax rates than Americans in nearly every U.S. state.
Our higher income tax rates make it harder to attract and retain high-skilled workers including doctors, engineers and entrepreneurs. High tax rates also reduce the incentives to save, invest and start a business—all key drivers of prosperity.
No doubt, we need reform now. To close the tax gap and increase our competitiveness, the federal government should reduce personal income tax rates. One option is to reduce the top rate from 33.0 per cent back down to 29.0 per cent (the rate before the Trudeau government increased it) and eliminate the three middle-income tax rates of 20.5 per cent, 26.0 per cent and 29.0 per cent.
These changes would establish a new personal income tax landscape with just two federal rates. Nearly all Canadians would face a personal income tax rate of 15.0 per cent, while top earners would pay a marginal tax rate of 29.0 per cent.
On business taxes, Canada’s rates are also higher than the global average and uncompetitive compared to the U.S., which makes it difficult to attract business investment and corporate headquarters that provide well-paid jobs and enhance living standards. According to Trump’s campaign promises, he plans to lower the federal business tax rate from 21 per cent to 20 per cent (and reduce the rate to 15 per cent for companies that make their products in the U.S.). Trump must work with congress to implement these changes, but barring any change in Canadian policy, business tax cuts in the U.S. will intensify Canada’s net outflow of business investment and corporate headquarters to the U.S.
The federal government should respond by lowering Canada’s business tax rate to match Trump’s plan. Moreover, Ottawa should (in coordination with the provinces) change tax policy to only tax business profits that are not reinvested in the company—that is, tax dividend payments, share buybacks and bonuses but don’t touch profits that are reinvested into the company (this type of business taxation has helped supercharge the economy in Estonia). These reforms would encourage greater business investment and ultimately raise living standards for Canadians. Finally, given Canada’s massive outflow of business investment, the government should (at a minimum) reverse the recent federal capital gains hike.
Of course, there’s much to quibble with in Trump’s policies. For example, his tariffs will hurt the U.S. economy (and likely Canada’s economy), and tax cuts without spending reductions and deficit-reduction will simply defer tax hikes into the future. But while policymakers in Ottawa can’t control U.S. policy, Trump’s tax plan will significantly exacerbate Canada’s competitiveness problem. We can’t afford to sit idle and do nothing. Ottawa should act swiftly in coordination with the provinces and pursue bold pro-growth tax reform for the benefit of Canadians.
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