Dan McTeague knows Canadian industry, the need for affordable energy, and the role of taxation in building sound economic policy. He is the president of Canadians for affordable energy, a businessman, and former liberal federal MP with an 18-year career in parliament where among many roles he served as the vice-chair of the Standing Committee on Industry for 12 years. He spoke with the BOE report about his concerns about Net-zero policies and the economy in advance of his appearance before a HOC committee yesterday. He told the BOE report…
“In my discussion before the Committee, my commentary is very much focused on the fact that when MNP says that 53% of Canadians are $200 away from bankruptcy at the end of every month this is not the time to be toying around with the trendy ideas that are likely to lead to economic dislocation on the scale we’ve never witnessed since The Dirty ’30s “
Just two weeks ago, at the Leaders Summit on Climate, hosted virtually by U.S. President Joe Biden, Prime Minister Trudeau announced new greenhouse gas reduction targets under the Paris Agreement as“40 to 45 percent below 2005 levels by 2030″. This is an increase from the previous Paris target of 30% and was in the context of ( and perhaps egged on by) the Biden administration’s more ambitious plan of at least 50 percent reductions. But these lofty goals may precipitate a stifling economic slowdown according to energy commentators like Dan McTeague who regularly blogs about energy matters at affordableenergy.ca.
His most recent post was about what he calls “a train wreck” -Trudeau’s decision to double down on the Paris climate agreement targets. According to McTeague;
“These targets are not achievable. Environment Canada released data earlier this month (Greenhouse gas emissions – Canada.ca) showing that 2019 saw emissions increase over the previous year. Measured against the 2005 baseline year, emissions had only decreased by 1%. So in 14 years emissions had been reduced by 1%. During these 14 years, all kinds of coal plants were shut down – so the so-called “low-hanging fruit” of emissions reductions only helped enough to deliver 1% of decline!”
He sees the virtue signalling of leaders like Biden and Trudeau as hollow proclamations with little accountability – lacking the intention to actually achieve the targets. Even worse, McTeague thinks this lack of intention will be adopted by industry.
“Corporations across Canada are doing the same, making commitments to distant targets – 2030 or net-zero or more – hoping that nobody will hold them accountable and that, by parroting the PM and others, they will avoid criticism.”
As Biden and Trudeau double down on climate targets, McTeague reminds us that the reductions we made so far ( since the 2005 baseline) have cost a great deal of money. He points out that in Ontario for example, – electricity rates shot up on the back of coal-fired facility closings and poorly conceived green energy plans. He questions the impact on energy prices that will result from ramping up targets – something both US and Canadian administrations have not forecast accurately. He states…
”If your energy prices shoot up in an effort to deliver 1% reductions, how much more will they shoot up if you have to start going at 35 times the speed?”
McTeague certainly voices great points to be made and questions to be posed to the HOC committee, but will there be fact-based, reliable answers in response? McTeague is interested in holding MPs, the PM, and certain proponents accountable and he has criticized Erin O’Toole as well as Trudeau on carbon tax policy. Mc Teague asserts that numerous bank presidents, insurance company presidents, big tech CEOs, and other wealthy people in positions of power, not to mention celebrities and influencers have joined in on the climate conversation and are prescribing that everyone, as good citizens of the planet, needs to dramatically change how we live.
Everyone except those recommending the change, who are not actually prepared to change their lives. He uses John Kerry flying in his private jet to tell others to reduce emissions as an example. Kerry and others like Bill Gates claim they are doing their part by buying carbon offsets to offset their hydrocarbon use. So carbon offsets are going to figure heavily into the future of industry and are especially important to the oil and gas industry, but how do carbon markets actually work? They seem very vaguely defined – are they another black box of yet-to-be-determined solutions being pushed by current Net-zero ambitions?
If we’re looking at the way the carbon credit market works, there are two jurisdictions you can examine – CFS or low carbon fuel standards in California and British Columbia. The actual cost of a carbon credit is about $425 a credit according to the BC government’s data and information. McTeague finds this price shocking because he calculates that the price translates to a gasoline price increase of 14 cents a litre for the carbon credit cost alone. He notes that is charged on top of the $170.00 a ton price increase that the Federal government has imposed. This is why McTeague and others say the CFS is really a second carbon tax.
In addition, the pricing of carbon offsets is higher than governments have expected. For example, in BC, one can examine the average price according to the Ministry of Energy mines and low carbon innovation-. In the bulletin for the first quarter of 2021 -under the title “Credit transfer activity” the average price is listed as $410.73 per credit -with a maximum price of $457.00. That is four times greater than anyone in their wildest dreams could have anticipated according to McTeague and he says that what it means is that for a company to buy credits to offset emissions, they will be passing on a greater cost (to the consumer) than governments are disclosing. According to McTeague, the carbon credit at $110 works to a price increase of the four cents litre, at $215 it works out to seven cents, if it works out to $330 that’s eleven cents a litre and now at $410 to $450 it’s fourteen cents a litre. At $0.14 for gasoline then it’s $0.17 for diesel $0.17 for train fuel , farmers fuel & mining & jet fuel. McTeague says;
“It’s deliberately and extraordinarily lucrative for those who are involved in it- in trade as well as in the establishment of these carbon credit markets and it’s literally making money out of thin air and they (the governments) know it,”
In Canada, McTeague sees a bigger problem. Canadian For Affordable Energy did a study on the CFS and determined that it constitutes an improper way of distorting the importance of price signals on the existing carbon tax. As he explains, if you are an economist or a carbon tax purist, the last thing you want to do is layer on more regulations or find more methods to drive up prices. He says the idea behind a carbon tax is you charge and then rebate. This is not the case with the CFS, because it relies on the carbon credit market – an intangible market. As McTeague concludes, the CFS will drive up prices and more…
“You end up over-regulating and ultimately distorting price instead of achieving the end you want. You create a false market in which there are substantial and excessive profits being made (by others) in order for companies to achieve emission targets at the expense of consumers and the vitality of your economy. It’s what’s happening in BC and I think it is a portent of what’s to come. This is going to be extraordinarily harmful to the poor, to single people on single incomes, and to provinces that have fewer means to find alternatives
McTeague points out one of the deficiencies of the Paris Accord is that it does not have allowances for countries like Canada who have a rapidly growing population which results in a significant increase in consumption each year. He also notes that the Paris Accord agreement will not allow any manner in which we displace emissions outside of Canada to be counted. He points out that if Canada sells more natural gas to China or India to displace coal combustion, we get no credit towards our own objectives. so even if we convert our economy and reorient it to selling more LNG, the practical effect would be to help China achieve lower emissions but we can’t use that as part of our emission reduction commitments. Perhaps it is time to reimagine the Paris accord? As an inter-country agreement, it seems to punish countries located in northern latitudes that rely on greater amounts of energy for home heating and have a population spread out over greater distances. There should perhaps also be a consideration for countries whose primary industries are extractive industries which are by their very nature, more energy-intensive. Perhaps the ability of countries like Canada to offset more damaging coal combustion offshore with a bridge fuel like natural gas should factor in the calculation of a country’s total emissions.
Maureen McCall is an energy professional who writes on issues affecting the energy industry.