Carbon tax revenues should go to oil industry, says CAPP

Canada's petroleum industry lobby group told the federal government this summer that carbon tax revenues from oil and gas should be pumped back into the industry in order to "not only preserve, but enhance" the sector.

The pitch by the Canadian Association of Petroleum Producers came in August as federal Environment Minister Catherine McKenna and her provincial counterparts were quietly discussing the pan-Canadian climate plan promised by Prime Minister Justin Trudeau.

"Any pricing mechanism implemented should contribute to a vibrant and competitive oil and gas sector while efficiently and effectively facilitating reductions in GHG emissions," says the 17-page brief, obtained by Greenpeace Canada through a freedom of information request to the Saskatchewan government.

"CAPP recommends that any policy initiatives undertaken by the government should seek to not only preserve, but enhance the economic competitiveness of the upstream oil and gas sector."

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Trudeau meets this Thursday and Friday with provincial and territorial premiers to finalize the climate plan, with carbon pricing appearing to be the last area of significant intergovernmental friction.

A series of federal policy announcements this fall have drained much of the suspense from the first ministers' meeting, but Saskatchewan Premier Brad Wall continues to rail against a national floor price on carbon announced by Trudeau in early October.

Wall repeated his threat last week to take the federal government to court over the proposed carbon price, an escalating tax of $10 pertonneof carbon dioxide emissions starting in 2018 and rising to $50 pertonnein 2022, when the policy will be reassessed.

Wall appears to be the last holdout on pricing carbon pollution among the premiers but the petroleum association brief readily acknowledges what way the wind is blowing.

"Carbon pricing mechanisms are becoming an increasingly popular policy tool used by governments to flexibly enable cost-effective GHG reductions across the economy," states theCAPPsubmission.

Krista Phillips, CAPP's manager of oilsands, said in a telephone interview Monday that the industry association is taking its cue from Canada's Ecofiscal Commission, a cross-partisan think tank that advocates pricing carbon pollution and has proposed regionally tailored options for "recycling" the revenues raised.

"What we're suggesting is the revenue generated go back to our industry for technology and innovation to help us become that low-carbon supplier of petroleum products," said Phillips.

Under the federal Liberal carbon price plan, revenues will stay within the province or territory where they are collected and can be used however the provincial government sees fit.

Greenpeace Canada researcher Keith Stewart said in an email that pouring carbon tax revenues back into the oil and gas sector "would dramatically weaken" the policy's climate impact.

"By returning the largest share of the revenue back to the oil industry, the signal to investors to shift resources to low-carbon energy is muted," Stewart wrote.

Phillips acknowledged the Greenpeace argument but said there's a petroleum future beyond additional greenhouse gases from burning oil.

"What we're suggesting is that fossil fuel combustion is not the only end game for our industry," said the CAPP manager.

"There's lots of products, lots of markets, that demand petroleum products. We want to become the lowest-carbon supplier of products, globally."

Canada does not keep such detailed statistics but according to the U.S. Energy Information Administration, 75 per cent of the 7.1 billion barrels of petroleum products Americans consumed in 2015 was gasoline, distillate fuel (such as home heating and diesel) and jet fuel.

In advance of this week's climate meeting, the Liberals continued rolling out policy measures Monday, with Natural Resources Minister Jim Carr in suburban Toronto announcing 25 new electric vehicle charging stations

Greenpeace says more needs to be done.

"Carbon pricing is a powerful tool, but we shouldn't treat it is a panacea," said Stewart. "To achieve our mid-century goal of virtually eliminating fossil fuels, we're going to need every tool in the policy tool kit."

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