Liberals’ significant climate plan cloaked in silence

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My second Globe and Mail Economy Lab post on the new Liberal Platform is available here.  After this piece was posted, Liberal Senator Grant Mitchell posted a response to some of the questions I raised here. Rick Szostak posted another response detailing how revenues from the auction of permits would remain in Alberta here.

Think the President supported your view of the oilsands?

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President Obama’s speech yesterday had something in it for everybody, and the most remarkable thing for me on the day after the speech is that both the oil powers in Calgary and their usual allies the NRDC agreed that it was a positive development.  At least the objections of Greenpeace USA restored some balance to the universe. I think, in many cases,  interested parties were simply listening for what they wanted to hear.

The figure below shows a tag cloud of the top 50 words used in the President’s address. When you see words like clean, biofuels, reducing oil dependence, and alternative being used, that is generally not good news for the largest exporter of oil to the US.  The words domestic oil production, drill, and clean coal are not generally on the positive side of the ENGO lexicon.  I think that, as people digest the President’s remarks, people will realize that his remarks amount to a lot of aspiration, a little realism, some retail politics, and little else. In the end, I don’t think that it was really good news or bad news for anyone.

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President Obama’s address (full text)

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THE PRESIDENT: Thank you so much. Thank you, everybody.  Everybody, please have a seat. Please have a seat. It is wonderful to be back at Georgetown.

EDIT: ACKNOWLEDGEMENTS REMOVED

We meet here at a tumultuous time for the world. In a matter of months, we’ve seen regimes toppled. We’ve seen democracy take root in North Africa and in the Middle East. We’ve witnessed a terrible earthquake, a catastrophic tsunami, a nuclear emergency that has battered one of our strongest allies and closest friends in the world’s third-largest economy. We’ve led an international effort in Libya to prevent a massacre and maintain stability throughout the broader region.

And as Americans, we’re heartbroken by the lives that have been lost as a result of these events. We’re deeply moved by the thirst for freedom in so many nations, and we’re moved by the strength and the perseverance of the Japanese people. And it’s natural, I think, to feel anxious about what all of this means for us.

And one big area of concern has been the cost and security of our energy. Obviously, the situation in the Middle East implicates our energy security. The situation in Japan leads us to ask questions about our energy sources.

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on retrofit subsidies, tax credits, and other expensive policies

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It’s easy for people to have a knee-jerk reaction and support policies like the ecoEnergy Retrofit Initiative or US Production Tax Credits for Wind Energy.  After all, we want people to have more efficient houses, and we want more renewable energy, don’t we? Well, yes, we probably do.  Environmentalists and fiscal hawks should agree that each dollar spent on programs targeting these changes in our energy production and consumption decisions be spent effectively.  Unfortunately, broad subsidies and tax credits do not meet that criterion very often.

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An evening with Jack

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Last night, I decided to head downtown the NDP campaign launch to hear Jack Layton speak, to local NDP candidates, and their supporters. (I was also caught on tape by Gloria Galloway of the Globe and Mail) For those of you who know my politics, you will likely be surprised to hear that went to NDP event at all. I was little surprised too.

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So, a guy walks into a gas station…

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So, a guy walks into a gas station after filling his Prius with 40 liters of fuel and the person behind the till says, “That’ll be $40, sir. Next time, you might want to save yourself the trip in and pay at the pump.”  The man hands over $51 and says, “I would love to, but the gas pump won’t collect my carbon tax payment.  You see, we are in a climate crisis, and by adding a $100/ton carbon price to my gasoline purchase, I am saving the world. No more climate refugees, fewer earthquakes, fewer severe hurricanes. So please, just add the $11 to your tax remittance to Ottawa.  Have a nice day.”

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Time for an audit?

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Along with Dan Woynillowicz of Pembina (Twitter @danwoy), I had a very interesting discussion/debate with David Sands, (Twitter, @DSandsGovAb) on the new reclamation standards proposed by the Government of Alberta. Now, I think David has just about the worst job in the world (although he seems to enjoy it most days) because he has to argue with people like me all day long, and not just about energy policy, but about health, education, and everything else the Alberta Government is perceived to have done badly in the eyes of someone in the Twitter-sphere.  I do not envy him, but I think he does a very good job and does the Province a wonderful service.

The exchange began as David suggested that he had been working on sourcing a reply to some comments I had made in this space last night in my admittedly wonkish blog entry on the reclamation protocols, which I greatly appreciate. “FYI, trying to find an answer for you for a comment (on your blog). Interesting post, but I think you put too much in the royalty/fiscal angle. Motivation to change on both sides was increasing reclamation, not dealing with who holds the buck$.”  I replied that I was also sourcing additional info, and that I agreed that the royalty angle was likely over-played in last night’s post and that the new system was indeed an improvement in terms of the total expected reclamation payments.  We then got on to the question of risk aversion, where I asked David, “do you agree that value of asset is exposed to commodity (and regulatory) risk while the value of the liability is not?”

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New Reclamation Guidelines (wonkish)

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Today, the Alberta Government announced new reclamation guidelines for oil sands mining operations and for coal mines. Reclamation liabilities associated with the activities from the oil sands should be front-of-mind for the Government, and with activity growing all the time, the liability held by the Province in excess of escrow holdings is also growing.  Pembina’s figures for the scale of the current un-funded liabilities are $15 billion (full Pembina report here), and I have to agree with them that to shift further into the future the collection of payments sufficient to provide full financial security for the Province is simply not an acceptable solution.  At first blush, it appears that this continues a disturbing trend of the Government implicitly subsidizing activity in the oilsands through either under-valued resources or through risks and liabilities borne by those who own the resource and on whose behalf our Government is supposed to be acting.  It turns out, on further investigation, that we might be better off fiscally collecting the costs later since we will end up paying for less of them in gifted bitumen through the royalty regime. However, I believe that the costs of deferring the liabilities, in terms of both the incurred risk and the signal it sends to companies doing business here, is much higher than the potential savings on royalties or the potential increase in investment.

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