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Alberta

Ottawa’s oil and gas emissions cap will hit Alberta with a wallop

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From the Fraser Institute

By Kenneth P. Green

Even if Canada eliminated all its GHG emissions expected in 2030 due to the federal cap, the emission reduction would equal only four-tenths of one per cent of global emissions—a reduction unlikely to have any impact on the trajectory of the climate in any detectable manner or produce any related environmental, health or safety benefits.

After considerable waiting, the Trudeau government released on Monday draft regulations to cap greenhouse gas (GHG) emissions from Canada’s oil and gas producers.

The proposed regulations would set a cap on GHG emissions equivalent to 35 per cent of the emissions produced in 2019 and create a GHG emissions “cap and trade” system to enable oil and gas producers (who cannot reduce emissions enough to avoid the cap) to buy credits from other producers able to meet the cap. Producers unable to meet the cap will also be able to obtain emission credits (of up to 20 per cent of their needed emission reductions) by investing in decarbonization programs or by buying emission “offsets” in Canada’s carbon markets.

According to the government, the cap will “cap pollution, drive innovation, and create jobs in the oil and gas industry.” But in reality, while the cap may well cap pollution and drive some innovation, according to several recent analyses it won’t create jobs in the oil and gas industry and will in fact kill many jobs.

For example, the Conference Board of Canada think-tank estimates that the cap would reduce Canada’s GDP by up to $1 trillion between 2030 and 2040, kill up to 151,300 jobs across Canada by 2030, and national economic growth from 2023 to 2030 would slow from 15.3 per cent to 14.3 per cent.

Not surprisingly, Alberta would be hardest hit. According to the Board, from 2023 to 2030, the province’s economic growth would fall from an estimated 17.8 per cent to 13.3 per cent and employment growth would fall from 15.8 per cent to 13.6 per cent over the same period. Alberta government revenues from the sector would decline by 4.5 per cent in 2030 compared to a scenario without the cap. As a result, Alberta government revenues would be $4.5 billion lower in nominal terms in fiscal year 2030/31. And between 54,000 to 91,500 of Canada’s job losses would occur in Alberta.

Another study by Deloitte estimates that, due to the federal cap, Alberta will see 3.6 per cent less investment, almost 70,000 fewer jobs, and a 4.5 per cent decrease in the province’s economic output (i.e. GDP) by 2040. Ontario would lose more than 15,000 jobs and $2.3 billion from its economy by 2040. And Quebec would lose more than 3,000 jobs and $0.4 billion from its economy during the same period.

Overall, according to Deloitte, Canada would experience an economic loss equivalent to 1.0 per cent of GDP, translating into lower wages, the loss of nearly 113,000 jobs and a 1.3 per cent reduction in government tax revenues. (For context, Canada’s economic growth in 2023 was only 1.1 per cent.)

And what will Canadians get for all that economic pain?

In my study published last year by the Fraser Institute, I found that, even if Canada eliminated all its GHG emissions expected in 2030 due to the federal cap, the emission reduction would equal only four-tenths of one per cent of global emissions—a reduction unlikely to have any impact on the trajectory of the climate in any detectable manner or produce any related environmental, health or safety benefits.

Clearly, the Trudeau government’s new proposed emissions cap on the oil and gas sector will impose significant harms on Canada’s economy, Canadian workers and our quality of life—and hit Alberta with a wallop. And yet, as a measure intended to avert harmful climate change, it’s purely performative (like many of the government’s other GHG regulations) and will generate too little emission reductions to have any meaningful impact on the climate.

In a world of rational policy development, where the benefits of government regulations are supposed to exceed their costs, policymakers would never consider this proposed cap. The Trudeau government will submit the plan to Parliament, and if the cap becomes law, it will await some other future government to undo the damage inflicted on Canadians and their families.

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Alberta

Parents in every province—not just Alberta—deserve as much school choice as possible

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From the Fraser Institute

By Michael Zwaagstra

Not only does Alberta have a fully funded separate (Catholic) school system, it also provides between 60 and 70 per cent operational funding to accredited independent schools. In addition, Alberta is the only province in Canada to allow fully funded charter schools. And Alberta subsidizes homeschooling parents.

This week, the Smith government in Alberta will likely pass Bill 27, which requires schools to get signed permission from parents or guardians prior to any lessons on human sexuality, gender identity or sexual orientation.

It’s a sensible move. The government is proactively ensuring that students are in these classes because their parents want them there. Given the sensitive nature of these topics, for everyone’s sake it makes sense to ensure parental buy-in at the outset.

Unfortunately, many school trustees don’t agree. A recent resolution passed by the Alberta School Boards Association (ASBA) calls on the Smith government to maintain the status quo where parents are assumed to have opted in to these lessons unless they contact the school and opt their children out. Apparently, the ASBA thinks parents can’t be trusted to make the right decisions for their children on this issue.

This ASBA resolution is, in fact, a good example of the reflexive opposition by government school trustees to parental rights. They don’t want parents to take control of their children’s education, especially in sensitive areas. Fortunately, the Alberta government rebuffed ASBA’s demands and this attempt to abolish Bill 27 will likely fall on deaf ears.

However, there’s an even better safeguard available to Alberta parents—school choice. Out of all Canadian provinces, Alberta offers the most school choice. Not only does Alberta have a fully funded separate (Catholic) school system, it also provides between 60 and 70 per cent operational funding to accredited independent schools. In addition, Alberta is the only province in Canada to allow fully funded charter schools. And Alberta subsidizes homeschooling parents. Simply put, parents who are dissatisfied with the government school system have plenty of options—more than parents in any other province. This means Alberta parents can vote with their feet.

Things are quite different in other parts of the country. For example, Ontario and the four Atlantic provinces do not allow any provincial funding to follow students to independent schools. In other words, parents in these provinces who choose an independent school must pay the full cost themselves—while still paying taxes that fund government schools. And no province other than Alberta allows charter schools.

This is why it’s important to give parents as much school choice as possible. Given the tendency of government school boards to remove choices from parents, it’s important that all parents, including those with limited means, have other options available for their children.

Imagine if the owners of a large grocery store tried to impose their dietary preferences by removing all meat products and telling customers that the only way they could purchase meat is to make a special order. What would happen in that scenario? It depends on what other options are available. If this was the only grocery store in the community, customers would have no choice but to comply. However, if there were other stores, customers could simply shop elsewhere. Choice empowers people and limits the ability of one company to limit the choices of people who live in the community.

Think of government school boards as a monopolistic service provider like a grocery store. They often do everything possible to prevent parents from going anywhere else for their children’s education. Trusting them to do what’s best for parents and children is like assuming that the owners of a grocery store would always put the interests of their customers first and not their own self-interest. Monopolies are bad in the private sector and they’re bad in the education sector, too.

Clearly, it makes sense to require schools to get proactive consent from parents. This ensures maximum buy-in from parents for whatever courses their children take. It’s also important that Alberta remains a bastion of school choice. By making it easier for parents to choose from a variety of education options, Alberta puts power in the hands of parents, exactly where it belongs. Parents in other provinces should want that same power, too.

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Alberta

Alberta government’s fiscal update underscores need for rainy-day account

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From the Fraser Institute

By Tegan Hill

According to the Smith government’s recent fiscal update, the government’s $2.9 billion projected budget surplus has increased to a $4.6 budget surplus in 2024/25 mainly due to higher-than-expected resource revenue. But the resource boom that fuels Alberta’s fiscal fortunes could end at any moment and pile more government debt on the backs of Albertans.

Resource revenue, fuelled by commodity prices (including oil and gas), is inherently volatile. For perspective, in just the last decade, the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and accounted for just 6.5 per cent of total government revenue. In contrast, according to the Smith government’s fiscal update, projected resource revenue is $20.3 billion this fiscal year and will account for more than a quarter (26.1 per cent) of total government revenue.

But here’s the problem.

Successive Alberta governments—including the Smith government—have included nearly all resource revenue in the budget. In times of relatively high resource revenue, such as we’re currently experiencing, the government typically enjoys surpluses and, flush with cash, increases spending. But when resource revenues decline, the province’s finances turn to deficits.

The last time this happened Alberta ran nearly uninterrupted deficits from 2008/09 to 2020/21 while the province’s net financial position deteriorated by nearly $95 billion. As a result, Albertans went from paying $58 per person on annual provincial government debt interest costs to nearly $600 per person.

So how can the Smith government avoid the same fate as past Alberta governments who wallowed in red ink when the boom-and-bust cycle inevitably turned to bust?

The answer is simple—save during good times to help avoid deficits during bad times. The provincial government should determine a stable amount of resource revenue to be included in the budget annually and deposit any resource revenue above that amount automatically in a rainy-day account to be withdrawn in years when resource revenue falls below that stable amount.

This wouldn’t be Alberta’s first rainy-day account. In fact, the Alberta Sustainability Fund (ASF), established in 2003, was intended to operate this way. A major problem with the ASF, however, was that it was based in statutory law, which meant the Alberta government could unilaterally change the rules governing the fund. Consequently, the stable amount was routinely increased and by 2007 nearly all resource revenue was used for annual spending. The ASF was eventually drained and eliminated entirely in 2013. This time, the government should make the fund’s rules constitutional, which would help ensure it’s sustained over time.

Put simply, funds in a resurrected ASF will provide stability in the future by mitigating the impact of cyclical declines on the budget over the long term.

In the recent fiscal update, the Alberta government continues to risk relying on relatively high resource revenue to balance the budget. To avoid deficits and truly stabilize provincial finances for the future, the Smith government should reintroduce a rainy-day account.

Tegan Hill

Director, Alberta Policy, Fraser Institute

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