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Ottawa’s proposed emission cap lacks any solid scientific or economic rationale

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7 minute read

From the Fraser Institute

By Jock Finlayson and Elmira Aliakbari

Forcing down Canadian oil and gas emissions within a short time span (five to seven years) is sure to exact a heavy economic price, especially when Canada is projected to experience a long period of weak growth in inflation-adjusted incomes and GDP per person.

After two years of deliberations, the Trudeau government (specifically, the Environment and Climate Change Canada department) has unveiled the final version of Ottawa’s plan to slash greenhouse gas emissions (GHGs) from the oil and gas sector.

The draft regulations, which still must pass the House and Senate to become law, stipulate that oil and gas producers must reduce emissions by 35 per cent from 2019 levels by between 2030 and 2032. They also would establish a “cap and trade” regulatory regime for the sector. Under this system, each oil and gas facility is allocated a set number of allowances, with each allowance permitting a specific amount of annual carbon emissions. These allowances will decrease over time in line with the government’s emission targets.

If oil and gas producers exceed their allowances, they can purchase additional ones from other companies with allowances to spare. Alternatively, they could contribute to a “decarbonization” fund or, in certain cases, use “offset credits” to cover a small portion of their emissions. While cutting production is not required, lower oil and gas production volumes will be an indirect outcome if the cost of purchasing allowances or other compliance options becomes too high, making it more economical for companies to reduce production to stay within their emissions limits.

The oil and gas industry accounts for almost 31 per cent of Canada’s GHG emissions, while transportation and buildings contribute 22 and 13 per cent, respectively. However, the proposed cap applies exclusively to the oil and gas sector, exempting the remaining 69 per cent of the country’s GHG emissions. Targeting a single industry in this way is at odds with the policy approach recommended by economists including those who favour strong action to address climate change.

The oil and gas cap also undermines the Trudeau government’s repeated claims that carbon-pricing is the main lever policymakers are using to reduce GHG emissions. In its 2023 budget (page 71), the government said “Canada has taken a market-driven approach to emissions reduction. Our world-leading carbon pollution pricing system… is highly effective because it provides a clear economic signal to businesses and allows them the flexibility to find the most cost-effective way to lower their emissions.”

This assertion is vitiated by the expanding array of other measures Ottawa has adopted to reduce emissions—hefty incentives and subsidies, product standards, new regulations and mandates, toughened energy efficiency requirements, and (in the case of oil and gas) limits on emissions. Most of these non-market measures come with a significantly higher “marginal abatement cost”—that is, the additional cost to the economy of reducing emissions by one tonne—compared to the carbon price legislated by the Trudeau government.

And there are other serious problems with the proposed oil and gas emissions gap. For one, emissions have the same impact on the climate regardless of the source; there’s no compelling reason to target a single sector. As a group of Canadian economists wrote back in 2023, climate policies targeting specific industries (or regions) are likely to reduce emissions at a much higher overall cost per tonne of avoided emissions.

Second, forcing down Canadian oil and gas emissions within a short time span (five to seven years) is sure to exact a heavy economic price, especially when Canada is projected to experience a long period of weak growth in inflation-adjusted incomes and GDP per person, according to the OECD and other forecasting agencies. The cap stacks an extra regulatory cost on top of the existing carbon price charged to oil and gas producers. The cap also promises to foster complicated interactions with provincial regulatory and carbon-pricing regimes that apply to the oil and gas sector, notably Alberta’s industrial carbon-pricing system.

The Conference Board of Canada think-tank, the consulting firm Deloitte, and a study published by our organization (the Fraser Institute) have estimated the aggregate cost of the federal government’s emissions cap. All these projections reasonably assume that Canadian oil and gas producers will scale back production to meet the cap. Such production cuts will translate into many tens of billions of lost economic output, fewer high-paying jobs across the energy supply chain and in the broader Canadian economy, and a significant drop in government revenues.

Finally, it’s striking that the Trudeau government’s oil and gas emissions cap takes direct aim at what ranks as Canada’s number one export industry, which provides up to one-quarter of the country’s total exports. We can’t think of another advanced economy that has taken such a punitive stance toward its leading export sector.

In short, the Trudeau government’s proposed cap on GHG emissions from the oil and gas industry lacks any solid scientific, economic or policy rationale. And it will add yet more costs and complexity to Canada’s already shambolic, high-cost and ever-growing suite of climate policies. The cap should be scrapped, forthwith.

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Liberals Twisted Themselves Into Pretzels Over Their Own Pipeline MOU

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From Energy Now

By Margareta Dovgal

Playing politics with pipelines is a time-honored Canadian tradition. Recent events in the House of Commons offered a delightful twist on the genre.


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The Conservatives introduced a motion quoting the Liberals’ own pipeline promises laid out in the Memorandum of Understanding (MOU) with Alberta, nearly verbatim. The Liberals, true to form, killed it 196–139 with enthusiastic help from the NDP, Bloc, and Greens.

We all knew how this would end. Opposition motions like this never pass; no government, especially not one led by Mark Carney, is going to let the opposition dictate the agenda. There’s not much use feigning outrage that the Liberals voted it down. The more entertaining angle has been watching closely as Liberal MPs twist themselves into pretzels explaining why they had to vote “no” on a motion that cheers on a project they claim to support in principle.

Liberal MP Corey Hogan dismissed the motion as “game-playing” designed to “poke at people”.

And he’s absolutely right to call it a “trap” for the Liberals. But traps only work when you walk into them.

Indigenous Services Minister Mandy Gull-Masty deemed the motion an “immature waste of parliamentary time” and “clearly an insult towards Indigenous Peoples” because it didn’t include every clause of the original agreement. Energy Minister Tim Hodgson decried it as a “cynical ploy to divide us” that “cherry-picked” the MOU.

Yet the prize for the most tortured metaphor goes to the prime minister himself. Defending his vote against his own pipeline promise, Carney lectured the House that “you have to eat the entire meal, not just the appetizer.”

It’s a clever line, and it also reveals the problem. The “meal” Carney is serving is stuffed with conditions. Environmental targets or meaningful engagement with Indigenous communities aren’t unrealistic asks. A crippling industrial carbon price as a precondition might be though.

But the prime minister has already said the quiet part out loud.

​Speaking in the House a few weeks ago, Carney admitted that the agreement creates “necessary conditions, but not sufficient conditions,” before explicitly stating: “We believe the government of British Columbia has to agree.”

​There is the poison pill. Handing a de facto veto to a provincial government that has spent years fighting oil infrastructure is neither constitutionally required nor politically likely. Elevating B.C.’s “agreement” to a condition, which is something the MOU text itself carefully avoids doing, means that Carney has made his own “meal” effectively inedible.

Hodgson’s repeated emphasis that the Liberal caucus supports “the entire MOU, the entire MOU” only reinforces this theory.

This entire episode forces us to ask whether the MOU is a real plan to build a pipeline, or just a national unity play designed to cool down the separatist temperature in Alberta. My sense is that Ottawa knew they had to throw a bone to Premier Danielle Smith because the threat of the sovereignty movement is gaining real traction. But you can’t just create the pretense of negotiation to buy time.

With the MOU getting Smith boo’ed at her own party’s convention by the separatists, it’s debatable whether that bone was even an effective one to throw.

There is a way. The federal government has the jurisdiction. If they really wanted to, they could just do it, provided the duty to consult with and accommodate Indigenous peoples was satisfied. Keep in mind: no reasonable interpretation equates Section 35 of the Charter to a veto.

Instead, the MOU is baked with so many conditions that the Liberals have effectively laid the groundwork for how they’re going to fail.

With overly-hedged, rather cryptic messaging, Liberals have themselves given considerable weight to a cynical theory, that the MOU is a stalling tactic, not a foundation to get more Canadian oil to the markets it’s needed in. Maybe Hodgson is telling the truth, and caucus is unified because the radicals are satisfied that “the entire MOU” ensures that a new oil pipeline will never reach tidewater through BC.

So, hats off to the legislative affairs strategists in the Conservative caucus. The real test of Carney’s political power continues: can he force a caucus that prefers fantasy economics into a mold of economic literacy to deliver on the vision Canadians signed off on? Or will he be hamstrung trying to appease the radicals from within?


Margareta Dovgal is managing director of Resource Works Society.

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Daily Caller

Paris Climate Deal Now Decade-Old Disaster

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From the Daily Caller News Foundation

By Steve Milloy

The Paris Climate Accord was adopted 10 years ago this week. It’s been a decade of disaster that President Donald Trump is rightly trying again to end.

The stated purpose of the agreement was for countries to voluntarily cut emissions to avoid the average global temperature exceeding the (guessed at) pre-industrial temperature by 3.6°F (2°C) and preferably 2.7°F (1.5°C).

Since December 2015, the world spent an estimated $10 trillion trying to achieve the Paris goals. What has been accomplished? Instead of reducing global emissions, they have increased about 12 percent. While the increase in emissions is actually a good thing for the environment and humanity, spending $10 trillion in a failed effort to cut emissions just underscores the agreement’s waste, fraud and abuse.

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But wasting $10 trillion is only the tip of the iceberg.

The effort to cut emissions was largely based on forcing industrial countries to replace their tried-and-true fossil fuel-based energy systems with not-ready-for-prime-time wind, solar and battery-based systems. This forced transition has driven up energy costs and made energy systems less reliable. The result of that has been economy-crippling deindustrialization in former powerhouses of Germany and Britain.

And it gets worse.

European nations imagined they could reduce their carbon footprint by outsourcing their coal and natural gas needs to Russia. That outsourcing enriched Russia and made the European economy dependent on Russia for energy. That vulnerability, in turn, and a weak President Joe Biden encouraged Vladimir Putin to invade Ukraine.

The result of that has been more than one million killed and wounded, the mass destruction of Ukraine worth more than $500 billion so far and the inestimable cost of global destabilization. Europe will have to spend hundreds of billions more on defense, and U.S. taxpayers have been forced to spend hundreds of billions on arms for Ukraine. Putin has even raised the specter of using nuclear weapons.

President Barack Obama unconstitutionally tried to impose the Paris agreement on the U.S. as an Executive agreement rather than a treaty ratified by the U.S. Senate. Although Trump terminated the Executive agreement during his first administration, President Joe Biden rejoined the agreement soon after taking office, pledging to double Obama’s emissions cuts pledge to 50 percent below 2005 levels by 2030.

Biden’s emissions pledge was an impetus for the 2022 Inflation Reduction Act that allocated $1.2 trillion in spending for what Trump labeled as the Green New Scam. Although Trump’s One Big Beautiful Bill Act reduced that spending by about $500 billion and he is trying to reduce it further through Executive action, much of that money was used in an effort to buy the 2024 election for Democrats. The rest has been and will be used to wreck our electricity grid with dangerous, national security-compromising wind, solar and battery equipment from Communists China.

Then there’s this. At the Paris climate conference in 2015, U.S. Secretary of State John Kerry stated quite clearly that emissions cuts by the U.S. and other industrial countries were meaningless and would accomplish nothing since the developing world’s emissions would be increasing.

Finally, there is the climate realism aspect to all this. After the Paris agreement was signed and despite the increase in emissions, the average global temperature declined during the years from 2016 to 2022, per NOAA data.

The super El Nino experienced during 2023-2024 caused a temporary temperature spike. La Nina conditions have now returned the average global temperature to below the 2015-2016 level, per NASA satellite data. The overarching point is that any “global warming” that occurred over the past 40 years is actually associated with the natural El Nino-La Nina cycle, not emissions.

The Paris agreement has been all pain and no gain. Moreover, there was never any need for the agreement in the first place. A big thanks to President Trump for pulling us out again.

Steve Milloy is a biostatistician and lawyer. He posts on X at @JunkScience.

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