Inefficient and duplicative climate policies are among the factors discouraging investment in Canada's natural gas and oil industry - prompting companies to move operations to countries with little or no emissions-reduction programs thus increasing future global emissions, according to Competitive Climate Policy: Supporting Investment and Innovation, the third in a series of economic reports released by the Canadian Association of Petroleum Producers (CAPP).
This loss of investment curbs industry development of innovation and technology that is key to breaking the link between energy growth and emissions growth over time. Policies that reduce greenhouse gas emissions and encourage innovation in Canada's natural gas and oil sector will do a better job of helping Canada and the world meet its climate change mitigation goals.
"Competitiveness continues to be one of our biggest challenges. Investment in Canada's energy industry - and jobs for Canadians - will continue to leave for other jurisdictions unless there are changes to regulatory policies that enable growth," said CAPP president and CEO Tim McMillan. "We operate in one of the world's most stringent regulatory environments. It's important we have a robust regulatory framework that meets environmental goals, but we must pay attention to added costs, delays and inefficiencies so we do not risk falling further behind."
The goal of any climate policies should be to decrease global GHG emissions - not just in Canada. Currently, climate policies in Canada come at a high cost to the country's economy with minimal effect on global emissions as natural gas and oil production migrates to regions with fewer, if any, regulations.
The loss of investment to other oil and natural gas producing regions deprives Canadians of the social and economic benefits that come from a thriving natural gas and oil industry in Canada.
"Canada has already lost $56 billion in investment over the past three years. This investment is critical to fund innovation and technology to meet Canada's climate mitigation goals," McMillan said. "Industry has taken early action and continues to improve its environmental performance, while growing the economy."
This phenomenon, known as carbon leakage, jeopardizes global GHG emission-reduction targets and prevents the world from accessing Canada's responsibly produced energy.
CAPP recommends a climate policy approach that assesses all costs and recognizes the cumulative burden of all policies and regulations, corporate tax increases and royalty changes.
The report outlines five key areas to bolster Canada's capital and carbon competitiveness:
- Protection mechanisms for the emissions-intense, trade-exposed (EITE) upstream oil and natural gas sector to avoid carbon leakage, foster innovation, and encourage technological advances to reduce emissions and allow for the continued growth of the sector;
- A limited scope for the duplicative and costly Clean Fuel Standard to exclude the upstream natural gas and oil sector
- Enable efficient domestic and international offsets to help Canada meet its domestic emissions-reduction goals in a cost-effective manner;
- Utilize carbon-related revenue from EITE industries to facilitate and accelerate innovation funding; and,
- Protection of the competitiveness of internationally trade-exposed industries through immediate deductibility for natural gas and oil investment.
Competitive Climate Policy: Supporting Investment and Innovation can be downloaded at www.capp.ca/economicseries.