Is the federal government stoking a unity crisis by destroying the oil and gas sector?
The Canadian federal government is serious about climate change and wants to prove it to the entire world. They’re doing it in a grandiose way by implementing the Clean Fuel Standard (CFS), an ambitious new piece of legislation that will be implemented in 2022 that aims to reduce carbon emissions by 2030 by 30 million tonnes.
Come hell or high water, the feds are determined to meet their 2030 Paris climate commitments and reach their own goal of net-zero emissions by 2050. And there may be both hell and high water if the CFS is implemented while the Western Canadian oil and gas sector is in the worst economic crisis in a century.
It’s almost like the governing Liberals don’t care.
There will undoubtedly be a disproportionate burden placed on oil and gas producers. From the government’s own website, “The Clean Fuel Standard will be a performance-based approach designed to incent the innovation and adoption of clean technologies in the oil and gas sector and the development and use of low-carbon fuels throughout the economy.” It reads as if Canada’s oil and gas sector has done absolutely nothing to reduce its environmental impacts over the years. Improvements be damned! The government is prepared to throw the sector to the wolves to reach their quest for greatness; their journey to Knighthood; their ordination to the highest authority; their desire for more Twitter followers and social media accolades.
Canadians, and Westerners in particular, will certainly be giving up much for the benefit of the governing elite.
The CFS will disproportionately impact Western Canada, and there isn’t much more that the region is willing to take. Interest in the federal separatist and Alberta independence political parties is growing. Another punch to the gut is only going to stoke the unity issue further.
Why will the CFS disproportionately impact Western Canada and the oil and gas sector, you ask?
The CFS will apply to all types of fuels - liquids, gaseous, and solids - with the goal of reducing emissions by 12 – 14 percent. The costs of reducing emissions are placed on the shoulders of the fuel suppliers, meaning a disproportionate burden is placed on the fossil fuel sector with little opportunity to offset costs or pass them on to consumers. Facilities will have to be re-jigged requiring capital investments at a time when money is limited and getting more so every year. This means there will be more lost jobs in a region with the highest unemployment in the country.
At an estimated cost of between $163 to $170 per tonne of CO2 reduced, the CFS severely impacts Canadian industries’ competitiveness, and Canada’s oil and gas sector has already been hamstrung in more ways than one, making it a global laggard. Adding more costs and legislative uncertainty isn’t going to help.
The fuels covered under the CFS make up about 70 percent of Canada’s end-use energy consumption, a July 2020 report by ICF estimates. Canada will need to either grow domestic production of low-carbon fuels or import them to meet the near quadruple amount of fuel required to comply with the new regulations. Currently, Canadian production meets only 60 percent of ethanol demand and only 55 percent of biodiesel demand; the remaining needs are met through imports from the USA.
Where the capacity exists, so do the jobs. Right now, much of the capacity for low-carbon fuels exists in the USA, Europe, and South America.
Given the ever-growing, adversarial, and burdensome regulatory environment in Canada and the country’s declining business investment, it’s difficult to imagine that any new domestic production facilities will be up and running in time to provide supplies to meet the CFS’s demands. It’s either a matter of putting the cart before the horse or a desire to make a foreign supplier wealthy at the expense of Canadians.
If you think the carbon tax created a tornado of upset across the country, you’ll be even more frustrated with the CFS as it will be applied in addition to existing carbon tax plans. No, this isn’t the Onion News. It’s happening right here in Canada. Another tax on top of a tax. Perhaps Canada’s new slogan should be “more expensive combustion or bust”.
The federal government is not balancing the environment and the economy. In the case of the CFS, ideology does not meet reality, and the entire country may collapse as a result.
Call to action
If you would like to learn more about the CFS and biofuels, please check out:
If you have concerns about this legislation, talk to your provincial and federal elected representatives and senators. Tell them you want regulations that enhance Canada’s competitiveness and that you don’t want more costs placed on your overburdened household. https://www.ourcommons.ca/members/en