Re­duce green­house gases, but sell en­ergy, too

The Niagara Falls Review - - OPINION - NICK MARTIN SPE­CIAL TO POST­MEDIA — Nick Martin is a pol­icy an­a­lyst at the Canada West Foun­da­tion.

The Na­tional En­ergy Board (NEB) re­leased its up­dated long-term en­ergy outlook re­cently with a pretty stun­ning con­clu­sion. Fos­sil fuel con­sump­tion in Canada will peak in the next two years. Yet at the same time, the NEB projects Canadian oil production will con­tinue to in­crease through 2040.

These fore­casts may seem coun­ter­in­tu­itive, but in re­al­ity, they demon­strate how Canada’s en­ergy and cli­mate pol­icy should work.

Com­bust­ing oil for things we do ev­ery day like driv­ing cars and heat­ing homes pro­duces green­house gases. On the other hand, pulling it out of the ground and sell­ing it to the world that con­sumes it brings big eco­nomic ben­e­fits. Canada’s do­mes­tic cli­mate poli­cies should be ex­pected to re­duce our own de­mand for the very same re­sources we are de­vel­op­ing.

Yet, the rest of the world’s en­ergy de­mand is go­ing up, and our en­ergy poli­cies should be ex­pected to al­low Canada to reap the eco­nomic ben­e­fits of our nat­u­ral re­sources while there is a global ap­petite for them.

This is the first time the NEB, the gov­ern­ment’s en­ergy reg­u­la­tor and main agency for mon­i­tor­ing en­ergy sup­ply and de­mand trends, has fore­cast a long-term de­cline in Canadian fos­sil-fuel con­sump­tion. In fact, just last year the NEB’s outlook con­cluded do­mes­tic fos­sil fuel con­sump­tion would con­tinue to grow do­mes­ti­cally through 2040.

So, what has changed in the last year? The an­swer is a price on car­bon.

Since the pre­vi­ous fore­cast, the fed­eral gov­ern­ment has de­tailed its ap­proach to pric­ing car­bon, al­low­ing the NEB to in­cor­po­rate a pan Canadian car­bon price into its mod­els, and the sub­se­quent re­sult is ex­actly what we should expect to see. Pric­ing car­bon re­duces de­mand for fos­sil fu­els.

This is be­cause a car­bon price makes it fi­nan­cially ben­e­fi­cial to re­duce emis­sions. It also al­lows busi­nesses and house­holds to choose how to achieve these emis­sion re­duc­tions in the most cost-ef­fec­tive way pos­si­ble.

While pric­ing car­bon drives cost­ef­fec­tive emis­sion re­duc­tions, it does not im­pede car­bon-emit­ting ac­tiv­i­ties that have a greater eco­nomic ben­e­fit than the car­bon price. Oil is a global com­mod­ity, and while Canada is on pace to re­duce our own re­liance on it in the near-term, many coun­tries will con­tinue to de­mand more for the fore­see­able future. The world is awash with oil, so as long as this global de­mand ex­ists, some­one will sup­ply it. And who­ever can sup­ply it will reap the eco­nomic ben­e­fits.

The NEB’s fore­cast as­sumes Canada seizes this eco­nomic op­por­tu­nity. Crit­i­cally, it as­sumes Canada builds all re­quired in­fra­struc­ture to de­liver oil to mar­ket, and it as­sumes production in­creases sub­ject to cli­mate poli­cies like Al­berta’s oil­sands emis­sion cap.

This is how Canadian en­ergy and cli­mate pol­icy should work. We should ag­gres­sively work to re­duce green­house-gas emis­sions, but we should also seek to sell our nat­u­ral re­sources while the op­por­tu­nity ex­ists.

If the rest of the world adopts more ag­gres­sive poli­cies, global oil de­mand will de­crease. While this would mean Canada would not con­vert as much of its oil into eco­nomic ben­e­fits, it would be for the right rea­son, global ac­tion to mit­i­gate cli­mate change.

The NEB’s fore­casts are not pre­dic­tions. They sim­ply model what the world will look like under cur­rent en­ergy pol­icy and re­cent tech­nol­ogy, eco­nomic, and de­mo­graphic trends. These poli­cies can change, and many politi­cians are fight­ing to do ex­actly that. But the NEB’s most re­cent fore­cast shows that the poli­cies Canada is putting in place — namely a price on car­bon — are putting us on the right track for do­mes­tic con­sump­tion.

But as long as the world con­tin­ues to con­sume, we should be al­lowed to meet those needs as well.

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