Climate change and Canadian energy policy: policy contradiction and policy failure.

Author:Winfield, Mark S.
Position::Report
 
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This article examines the relationship between energy policy and climate change policy in Canada. The article finds that Canadian climate change and energy policy have operated in parallel but contradictory directions. The resulting dichotomy helps to explain Canada's failures to achieve significant reductions in GHG emissions to accord with its international commitments. The article also highlights the importance of the emergence of sub-national climate change policies in Canada and in the United States, particularly in the context of the lack of effective action at the federal level in both countries.

Cet article examine la relation existant entre la politique energetique et celle qui se rapporte au changement climatique au Canada. L'article constate que les politiques canadiennes en matiere de changement climatique et d'energie evoluent dans des directions paralleles mais opposees. La dichotomie resultante contribue a expliquer les echecs canadiens a operer les reductions considerables demissions de GES exigees par ses engagemements internationaux. L'article fait aussi ressortir l'importance des politiques climatiques infranationales qui se font jour au Canada et aux Etats-Unis, particulierement dans le contexte de l'absence de mesures efficaces au palier federal dans les deux pays.

INTRODUCTION--CANADA'S DE FACTO ENERGY POLICY

Energy and climate change policy are intimately connected. The achievement of the levels of reductions in greenhouse gas (GHG) emissions that the Intergovernmental Panel on Climate Change (IPCC) has identified as being necessary to avoid "dangerous" climate change will require substantial changes to existing energy policies. In particular the IPCC has identified increases in the energy efficiency of economic activities and a major expansion of the role of renewable energy sources as the foundations of cost-effective strategies for reducing GHG emissions. (1)

Canada has gone through numerous articulations of its policies related to climate change over the past two decades. These have included negotiating positions established for the purposes of the development of the 1992 Framework Convention on Climate Change and the subsequent 1997 Kyoto Protocol to the convention, a Federal-Provincial National Action Plan (1995), a National Implementation Strategy and Business Plan (2000), bilateral federal-provincial agreements, (2) and most recently an Action Plan to Reduce Greenhouse Gases and Air Pollution (2007). (3) In contrast, Canada has had no formally articulated national or federal energy policy since the demise of the 1980 National Energy Policy (NEP) following the election of the Mulroney Conservatives in 1984.

However, a considerable de facto federal energy policy framework exists, and has been significantly strengthened since the termination of the NEP. This effective energy policy structure is strongly oriented towards the development and export of conventional, non-renewable energy resources, such as coal, oil, natural gas, and uranium. As such, it presents serious challenges to the implementation of effective climate change policy. Despite the succession of climate change policy commitments and plans Canada has seen no progress in reducing its GHG emissions since the signing of the 1992 Framework Convention. Indeed, in her 2006 report, the Commissioner for the Environment and Sustainable Development noted that as of 2004 Canada's GHG emissions were 27 per cent above their 1990 levels. Canada's Kyoto Protocol target is a 6 per cent reduction relative to 1990 levels by 2008-2012. Part of the explanation for this result is that the impact of the few initiatives that have actually been implemented under Canada's various climate change strategies has been completely overwhelmed by the effects of the existing non-renewable energy development and export policy framework.

This dominant energy policy framework consists of a number of specific elements. Long-standing policies, flowing from Canada's historical role as a natural resources exporter, provide extensive fiscal incentives for non-renewable energy exploration and development activities from the federal government. Although direct subsidies or equity investments in energy projects by Canadian governments have become less common, extensive support is provided through the federal tax system, principally through the Canadian Development Expense and Canadian Exploration Expense, both of which have existed in their current forms since the 1970s and, more recently, an Accelerated Capital Cost Allowance for oil sands development. The most recent available estimates of this support to the oil and gas sector conservatively estimate its value in the range of $1.4 billion per year. (4) These supports have been instrumental in the acceleration of oil sands development in Alberta over the past decade, making the sector the single largest source of growth in Canada's GHG emissions. (5) Other research has demonstrated the low taxation levels for the oil and gas sector relative to other sectors, (6) and the extent of the availability of tax concessions for oil sands development. (7) Additional backing is provided to other non-renewable energy sources, including an operating subsidy of between $100 and $200 million per year to Atomic Energy of Canada Ltd (AECL). Substantial export development assistance for foreign sales of nuclear reactors has been provided to AECL as well." (8) Natural Resources Canada, reflecting its long-standing role in the promotion of natural resources development and export, provides extensive scientific, technical and institutional support and representation within the federal government to non-renewable energy sectors.

Federal environmental assessment or other environmental approval processes have been applied as weakly as possible to major energy projects, with a few exceptions where aboriginal interests are involved. 'Screening-level assessments,' the lowest possible level of federal scrutiny, or very narrowly 'scoped' assessments have been required for very large projects, such as oil sands developments in northern Alberta. In some recent cases, the federal government has declined to participate at all in the environmental review of major energy undertakings. A Major Projects Management Office was established within Natural Resources Canada in October 2007, with a specific mandate to facilitate federal project approvals.

The overall conventional resource export orientation of Canadian energy policy was strongly embedded in the 1994 North American Free Trade Agreement (NAFTA). The agreement, for example, includes explicit provisions allowing the continuation of incentives for oil and gas exploration and development. The provisions of the NAFTA and other trade agreements present additional challenges to the development of more sustainable energy policies. Many US states have adopted renewable portfolio standards, requiring that a certain amount of the electricity sold into their markets come from renewable sources, as a way of promoting renewable energy. However these types of requirements, if applied to imported electricity supplies as well as domestic ones, may run afoul of the prohibitions on process or production method (PPM) standards for imported goods under...

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