Carbon pricing will give oil sands producers competitive advantage in new markets, funds diversification into petrochemicals, basis of “carbon for pipelines” deal with Trudeau

Yet another poll shows that Canadians hate carbon pricing – cap-and-trade, tax, levy, whatever one calls it – and only Saskatchewanians are more opposed than Albertans. That’s a big problem for Rachel Notley, says pollster Janet Brown, who thinks the Alberta premier has flubbed political messaging on the issue.

Janet Brown, pollster, Janet Brown Opinion Research.

“They’ve been too focused on the soft, feel-good stuff – improving the environment, making it revenue-neutral, giving people light bulbs, things like that. To the average Albertan, they just don’t see how that is translating into an economic benefit,” Brown said in an interview. 

What should Notley do differently?

Focus on the economic benefits of the carbon tax, says Brown: “She’s got to frame it in an economic context. It’s okay to talk about clean energy and working towards a clean future, but I think it’d be far more effective to talk about working towards a diversified economy. Talking about relying less and less on oil and gas.”

That last point might be a bit tricky. Oil and gas have been a big part of the Alberta economy for many decades and politicians tamper with the golden goose at their peril.

But there is plenty of room to promote the role of carbon tax revenue in funding the provincial downstream energy diversification strategy, says Gil McGowan, head of the Alberta Federation of Labour and co-chair of the Energy Diversification Committee, whose report formed the basis for $2 billion of support for partial upgrading, Phase II of the petrochemical diversification program, and incentives to build more petrochemical infrastructure.

“I’m particularly concerned about the impact that abandoning the carbon tax will have on diversification of the Alberta economy. Money from the tax is being used to support innovative new approaches to adding value to our oil and gas resources, particularly partial upgrading,” he said in an emailed comment.

“All of these things create jobs, thousands of them.”

Gil McGowan, president of the Alberta Federation of Labour.

Another angle that could be played up is the “carbon for pipelines” deal between Notley and Prime Minister Justin Trudeau, who acknowledged during his Nov. 29, 2016 remarks announcing the approval of Kinder Morgan’s Trans Mountain Expansion and Enbridge’s Line 3 pipelines that Alberta’s Climate Leadership Plan was key to the federal green light.

“We said that major pipelines could only get built if we had a price on carbon and strong environmental protection in place,” he said during the press conference.

If a Premier Jason Kenney kills the province-wide carbon tax and the Carbon Competitiveness Incentives Regulation for the oil and gas sector (which he has mused might be replaced with a modified, but weaker, version of the former Specified Gas Emitter Regulation brought in by the Progress Conservatives in 2007), might that kill the pipeline-enabling compromise between Ottawa and Alberta?

And what about the incentive provided by CCIR (there is an associated $1.4 billion Innovation Fund) that is believed to have helped get Nexen’s low-emissions $400 million Long Lake Southwest expansion project approved by the Alberta Energy Regulator in June?

If the Notley government can draw a straight line between CCIR and final investment decisions, why wouldn’t the Premier very publicly and frequently take some of the credit?

Then there’s the “carbon for no oil sands production cap” deal negotiated in early 2015 between five oil sands CEOs and five environmental non-government organizations that included acceptance of carbon pricing and first proposed the 100 megatonne oil emissions cap.

Environment Minister Shannon Phillips and former industry executive Dave Collyer told Energi News that industry’s objective was to avoid government-imposed limits on the amount of crude oil and natural gas it could produce.

Collyer said the CEOs actually put carbon pricing on the table as part of the deal.

Without carbon pricing, that deal might be in jeopardy, probably not from a United Conservative Party government but quite possibly from Ottawa if the 

Trudeau Liberals win another majority in late 2019.

And what about the oil sands producers’ insistence that their heavy crude oil be “carbon-competitive” so they can compete in the future global market?

Prof. Victor Flatt, an economist with the University of Houston, says low carbon-intensity heavy crude will provide Alberta with a huge competitive advantage as important Asian markets, particularly China, adopt carbon pricing over the near to medium-term.

“They started their carbon-intensity cap-and-trade system in China [in Dec.] and there are a lot of questions about whether they’re going to enforce it well but that’s the signal they’re sending,” Flatt said in an interview. 

“The big question is, is China going to hit the tipping point or force the tipping point of peak oil demand in China by basically requiring a transition to all electric vehicles? In the next 10-15 years, I think the answer is, yes. To do that, I think they’re going to go into carbon pricing for the downstream emissions in [crude oil] imports and refining.”

Framing the Alberta carbon tax as a competitive advantage in a carbon-constrained future economy would be a novel approach, but it fits with Brown’s polling data on Albertans’ attitude toward carbon pricing.

Prof. Victor Flatt, University of Houston.

“One thing that’s going to be critical for the NDP in the next few months is reframing the carbon tax as not something that’s hurt the economy, but something that’s been essential, that’s helped the economy,” Brown said. 

“Furthermore, that the removal of the carbon tax has the potential to do more damage than continuing with it.”

Notley appears to have more than enough material to make both arguments, if she chooses.

If she dithers, Albertans will make her pay at the polls next May, as new polling data from Angus Reid makes plain.

Only 39 per cent of Alberta respondents believe global warming is caused by human activity (24% think “Global warming is a theory that has not yet been proven.” No word on the percentage that think climate change is a hoax perpetrated by China).

Three of out of four Albertans think Saskatchewan is doing the right thing, challenging the federal carbon tax in court.

When it comes to the federal carbon tax, 65 per cent of Albertans oppose it.

These results aren’t surprising. Every public opinion poll on carbon taxes in Canada has more or less the same result.

Alberta’s displeasure with the carbon tax did not creep up on the Premier.

With Kenney and the UCP poised for a landslide in May, Notley can either change the carbon tax narrative now, telling the stories about the positive effect carbon pricing has had on the provincial economy, especially the energy sector, or she can change offices after election day.