Eric Reguly, The Globe and Mail, December 10, 2009--The Harper Conservatives like to think they have healthy, hands-off approach to business: Let the markets weed out the good from the bad. It's a nice philosophy.
It's also one that's conveniently ignored by the Tories when they see fit. Case in point: At the stroke of a pen in the lead-up to the Copenhagen summit on climate change, the government's fiddling with one number, and one number only, instantly created a new list of potential industrial winners and losers.
The number in question is 1990 - the base year for reporting carbon emissions under the Kyoto Protocol. The government changed to 2006, to serve as the new base year for any post-Kyoto treaty. When Canada drones on about its pledge to reduce greenhouse gas emissions by 20 per cent by 2020 - an impressive figure, it seems - it's talking about a 20-per-cent reduction from three years ago, not 19 years ago. Canada's emissions have been soaring and it's easier to cut from a high level than a low level.
Leaving aside the dubious morality of the date switch, the 2006 base year has thrust a wedge into industrial Canada. On one side are the industries whose emissions have been shooting up in recent years. No prize for guessing that this group would include the oil sands and the power generation companies. The 2006 base year is a godsend for them; if they had to cut 20 per cent from the 1990 level, they'd file for bankruptcy tomorrow.
On the other side are the chumps who made most of their efficiency gains before 2006. They know there is truth in the saying: No good deed goes unpunished.
This group would include the pulp and paper companies, the chemical companies, some refineries and a few manufacturers. At the time, they weren't concerned so much about preventing the planet from burning alive; they were responding to brutal domestic and international competition.
The pleasant byproduct of their efficiency and automation campaigns was lower energy use, which saved money and translated into lower emissions. The Forest Products Association of Canada claims its pulp and paper members have brought down emissions by 57 per cent since 1990, equivalent to 10 times Canada's (unmet) Kyoto targets.
Now look what's happened. Harper & Co. rolled into town and realized Canada couldn't possibly meet its Kyoto target - in fact, emissions climbed 26 per cent between 1990 and 2007. So they fixed the problem by scratching out 1990 and writing in 2006. In other words, the industries that already made the bulk of their efficiency gains will be asked to do it all over again, because Canada has now agreed to cut from a base year in which emissions were much higher.
This is why the oil sands players are laughing and the pulp and paper companies are not. Another hurting party is the Ontario government, which years ago agreed to mothball its coal-fired electricity plants, one of the biggest sources of carbon dioxide in the land. Ontario should have waited. It now has to fight to get credit for carbon reductions that it had agreed to make a long time ago, before anyone had heard of Copenhagen.
Of course, using the new base year to divide the country into winners and losers is not this simple, because the industries that behaved well on the efficiency front will argue that they are being unfairly punished. They are right. They will say that the 20-per-cent emissions reduction target promised by the government should not be applied evenly across every industrial sector.
They will also argue that Canada is not an island and that any reductions should take international rivalry into account. The pulp and paper companies compete fiercely with Scandinavian, Brazilian and Chinese players. If the Brazilians cut, say, 5 per cent, and the Canadian are forced into a 10-per-cent reduction, the Canadians are effectively transferring wealth to the Brazilians.
They will face a formidable foe - the oil sands. The impression among the 192 countries at the Copenhagen summit is that the Canadian government will do anything to protect northern Alberta's filthy monster. If the feds' love for the industry goes undiminished, the industries that already made the bulk of their efficiency gains face a gruelling war. By definition, continued high oil sands' emissions have to be offset by lower emissions in the rest of industrial Canada.
In short, the feds have created a huge mess for themselves. While they have a new base year and a new emissions target, they have nothing resembling a plan to reach that target. There is no carbon cap-and-trade system in place, no market price for carbon, no real idea how technology will be used or financed to ensure efficiency gains. They don't know how to deal with the industries that were put at a disadvantage by shifting the base year.
The Canadian government has a shabby image in Copenhagen. It may soon have a shabby image among the Canadian firms that think free passes for some should not come with punishment for others.