The budget and federal environmental policy

2009-01-31

in Canada, Economics, Politics, The environment

Crossword in bike spokes

The Globe and Mail has a fairly lengthy article about the recent federal budget, oil sands policy, and environmental policy integration with the United States. It highlights the speculative nature and unknown costs of emissions reductions associated with carbon capture and storage (CCS) technology:

However, this week’s federal budget provided little sense that Ottawa is preparing the country for a shift to a green economy, or even that it is concerned about the slump in the oil sands, which extends to the oil and gas industry generally.

Rather than any direct measures, the federal government provided $69-billion to ease access to credit in the economy generally — admittedly, an important problem for a capital-intensive oil industry — and vague promises of funding for carbon-capture-and-storage technology.

CCS is the fig leaf of the oil sands — an untested, hugely expensive technology that governments and industry claim will be critical if oil-sands emissions are to be reduced to acceptable levels. The idea is to divert CO2 emissions from smokestacks and store it permanently underground, but skeptics doubt it will ever be commercially viable.

A lot of talk these days surrounds a joint North American approach to climate change and energy security. Few people seem to have publicly considered the jurisdictional difficulties associated with such an approach. If I were Barack Obama, trying to get a cap-and-trade bill through Congress, I really doubt that I would want to have to deal with ten provincial governments, a second federal government, a separate legal and constitutional arrangement (including, for instance, aboriginal issues), and all the other complexities associated with jumping straight into a two-state system. That being said, having a North American strategy that is at least poised for integration could be important for securing the support of private firms worried about cross-border competition.

Without a doubt, these are interesting times for the emergence of climate policies.

{ 7 comments… read them below or add one }

tristan February 1, 2009 at 8:09 pm

If Canada is the U.S.’s primary energy source, can’t Obama effectively impose a cap and storage policy on Canada through tariffs? Carbon Taxes would be easier – he could simply impose a “carbon tariff” at the border, and it would be equal to the US carbon tax minus the exporters carbon tax when the US carbon tax is higher than the exporters. But, wouldn’t something similar be possible with a cap and trade system? Like, preferred energy partner status to those nations which join the U.S. cap and trade system?

Milan February 2, 2009 at 4:58 pm

There are plenty of instruments through which the United States could compel climate change action in Canada. The question is whether this administration will have the will to do so, especially given their strong commitment to reducing oil imports from places like Venezuela and the Middle East.

Both tax and cap-and-trade instruments could be applied to cross-border transactions. For instance, the United States could require that those wishing to export energy into the US either pay the tax or buy credits from a US cap-and-trade system. It would also be possible to integrate carbon pricing systems in the two states: for instance, the state with a higher effective carbon price could require the payment of a tariff equivalent to the difference.

Milan February 2, 2009 at 4:59 pm

A model for such a system could be Europe’s emerging approach to international air travel: they intend to require companies flying into Europe from other states to buy credits from the European Emissions Trading System.

Tristan February 2, 2009 at 6:16 pm

I’m pretty uncomfortable with the budget in general. No one seems to be talking about how we’ll finance the debt, and what will happen if interest rates spike up when the U.S. finally decides it needs to protect its currency.

It was basically a US Fed overnight rate spike up that destroyed most of the 3rd world in the 80s (the Fed was the cause, and the IMF and World Bank were the mechanism for carrying through this destruction). It would be unfortunate if something similar were to happen to us.

Milan February 2, 2009 at 6:34 pm

There is certainly plenty of reason to worry. The people now arguing that only a stimulus approach can prevent another Great Depression are basically the same people who failed to understand the genesis of the credit crunch as it was emerging.

. February 9, 2009 at 1:33 pm

Canada’s budget
Joining the stimulating party

Jan 29th 2009 | OTTAWA
From The Economist print edition
A pragmatic budget has given Stephen Harper’s government a new lease of life—but not necessarily a long one

. May 28, 2009 at 7:35 pm

Prentice delays emissions cap until 2012 or later

May 28, 2009 02:03 PM
THE CANADIAN PRESS

OTTAWA – Environment Minister Jim Prentice says Canadian industrial emitters might not face greenhouse gas limits for another six years.

The government is delaying the development of regulations until next year, in order to match a proposed U.S. timetable.

It’s a far cry from the Conservative government’s former “Made in Canada” climate change plan that was supposed to come into force on Jan. 1, 2010.
Prentice, speaking to reporters by conference call from London, said regulations for big industrial emitters will have to be harmonized with U.S. rules in order to protect Canadian jobs and investments.

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