How do the Liberals rate on Energy Policy?

Looking back in history to December 1979, Joe Clark was the leader who introduced a tax of 4 cents a litre as a measure to balance the budget.  His minority government lost on a non-confidence vote and the Tories are defeated in the 1980 general election.  The lesson is burned into the political brain trust of all parties … must not have tax increase just before election.  And sometimes, smart governments cut taxes to win votes.

Fast forward to 1996, when Stephane Dion transitions from university professor to minister of intergovernmental affairs.  One of his accomplishments was the “clarity bill” setting the conditions for Quebec referendum questions and separation negotiations in clear and unambiguous terms.    From 2004 to 2006, he was environment minister and from accounts of independent observers, did a credible job.    Recently, he became leader of the Liberal party.

The 2008 Liberal platform consists of some interesting energy commitments – to retrofit 50% of all homes by 2020 and 100% by 2030.  Provisions for doubling financial incentives and a zero interest $10,000 green mortgage for major energy improvements like geothermal and solar are all good steps.  They want higher energy standards for the National building code and for all appliances to ensure that “all new builds are green builds.”

A Stephane Dion government also proposes strong enforcement of the post 2010 fuel efficiency standards and improvements in car-scrapping programs to increase efficiency of existing cars.  $250 million is suggested for a Green fisheries and Transport fund encouraging public transport initiatives.  In addition, he proposes a 10% reduction in the carbon content of fuel by next generation bio-fuels.  Unfortunately, this part of the program to be weaker and less defined than I would have liked.

The amount of electricity generated by low impact renewables would rise from 5% to 10% by 2015 and to 15% by 2020 causing large investments and 10’s of thousands of green energy jobs.  But these items have not been getting as much attention in the media as the “greenshift”.

The leader of the Liberal party has suggested a remarkable change in the way that Canada views pollution. This is proposed by a reform of tax policy – increasing taxes on carbon energy sources and lowering income taxes.

In the past, companies have caused pollution without penalty or in the worst cases, were ordered to install pollution abatement equipment.  With this change, a stronger link is made between corporations and the environment.  Pollute with carbon energy and you will pay a fee.  The fee is then rebated to citizens and this makes alternative renewable energy more competitive.

The Conservatives have been accused of confusing Canadians about Stephane Dion’s “green shift” which transfers taxation from income to carbon.   The Tory “tax grab” attack seems unusual in light of the plan’s promise, “ putting it into law that every dollar raised in pollution taxes be returned to citizens in tax cuts.  The Auditor General will ensure the Green shift’s revenue neutrality.”

A second Tory theme, that the plan will destroy the economy, seems exaggerated as well. One blogger humorously notes that if the “greenshift” plan would destroy the economy, then the opposite, to raise income taxes and lower carbon taxes, should create a boom.

Lowering corporate and personal taxes, as the “greenshift” suggests, is similar to the Conservative mantra.   Taxes on fuel in Europe are $1 a liter higher than here without serious harm to the economy.  This plan leaves the gasoline tax without change.  Furnace oil would increase gradually and be a total of 8.5% higher by the fourth year. Diesel would increase 7 cents by the fourth year, a 5% increase.   Finally, it is likely that a world cap and trade system will eventually surface with all countries participating.  Trade sanctions will ensure that all play their part.

Canadians seem to want leadership to reduce global warming and to adjust to higher energy prices as peak oil arrives.  But is reality different from the perception?  The Liberal plan is actually quite modest in comparison to the size of the economy or the government’s operating budget.  Are Canadians ready to accept real change, however gentle it may be?  Stephane Dion has proposed wide-ranging solutions that rate a “B” on my energy scale.  The plan is incomplete in terms of national energy security, but it is courageous and forward-looking.

There are real differences being offered to Canadians this election.  Voters can easily compare the platform of all parties directly off the Internet and should do so.  Stephane Dion’s clarity in energy policy is one of his advantages in this campaign.

His refusal to follow Harper’s lead and spend huge sums on Arctic patrol vessels is an example of the different thought process among leaders.  As he noted “We can’t win against the Americans, we can’t win against the Russians, and we’re too civilized to shoot the Danes.”

Prior to George W. Bush’s tenure, the United Nations was the primary arena for discussion or international arbitration of differences.  When common sense returns, the UN will regain an important role in meeting the challenges to come.  World co-operation on adapting to declining energy supplies and carbon reduction steps are the answer.

How do the Conservatives rate on Energy Policy?

Political campaigns are remarkably like war.  Lots of resources and blitzkrieg attacks disorient the other side.   To re-phrase von Clausewitz – “politics is war by other means”.   And it’s starting to get rough out there.   Political opponents are demonized (scary, not ready to lead, etc. ) so that any tactics are permissible.

But let’s look at energy policies.  What are the leaders of each party thinking about?

Stephen Harper is a master tactician of the political game.  Some say he’s got control issues or perhaps he just uses “enhanced management tools.”  He spots weakness and dive-bombs the opposition with attack ads, campaign or no campaign.  Take no prisoners is a description that comes to mind.  Hey, who knew that Karl Rove lived at 24 Sussex Drive? But you can’t argue with success.  He’s had the opposition on the run for some time.

Energy costs are the sword of Damocles hanging by a horsehair, and will have serious consequences for each of us.  However, this is not apparent when viewing the Conservative website. Of the eight key priorities on the Conservative website, energy doesn’t make the list.

Our PM has been using short-term tactics and guerilla warfare to build support and destroy enemies.  His long-term vision is less clear.  One of his greatest successes has been the fee on gas-guzzlers and the ecoAuto rebate.  The rebate was cancelled after the 2008 model year.  The relatively low program cost of $150 million couldn’t have been the cause of its demise.  Was it GM unfriendly and had to go?  Luckily, he retained the fee on gas-guzzlers.

His need to retain or increase his power will always trump good policy. The diesel tax cut is a good example.  Stephen is an economist and knows that lowering the price of a product encourages the use of it.  Two cents will lower the cost of fuel by 1.5%.  Since fuel is only one third of transportation cost, the actual reduction in product cost will be ½ of 1% if it’s passed on to consumers.  Since most food comes from the US, this only affects transport within Canada.  So, there’s virtually no effect on your head of lettuce from California.

If you own a diesel car, it will save you $24 a year. This policy will cost the treasury $600 million a year, have questionable results, but it will buy votes.

The National Energy Board recognizes that conventional oil is declining in Canada and that imported LNG will have to take the place of domestic natural gas production in coming years.  Export applications do not have to consider whether Canada has adequate natural gas reserves, as was the case before 1985. Only tar sand development, which has a low net energy output, is on the rise.  Should we be proud of the ecological fallout in Alberta?  Will other countries eventually ban the import of these products or penalize us for carbon output?

Does Stephen still believe that Canada is an energy superpower? What was his purpose to promoting this view of Canada’s energy resources?  Should Canada have a national security policy on energy with actual physical reserves?  Should there be an east-west pipeline through Canada?  What about an east west DC electric transmission line?

An important question remains unanswered: How will we heat our homes in the future at reasonable prices? Those with oil heat in the Atlantic Provinces are in for a rude awakening.  Quebec has cheap electricity and Ontario has natural gas, for the moment.  The votes of Atlantic Canada make little impact on the national scene.

Although the price of oil is now lower than its peak in June, it will rise again in the near future as world production starts a decline in roughly 2010.  The investments required to meet the energy challenges of the 21st century will take a significant number of years to achieve.  We should have started decades ago.

How will we get around as fuel becomes very expensive and is rationed?  How will our economy and jobs survive the shock of energy shortages and prices?  How does Stephen feel about conservation of energy?  Ignoring the problem of peak oil doesn’t make it go away.

My rating given to Stephen Harper for a lackluster energy policy – F.    His lack of attention and understanding of important energy issues is counterbalanced by his desire to spend money on boondoggles like patrol vessels for the arctic.  And $490 billion over the next twenty years for the military to participate in overseas adventures with the US.

Peak oil and your wallet

If you have concerns about the price of oil these days, you’re not alone. With oil at $135 a barrel and rising daily, you are witness to a major life-altering event in the world economy – peak oil. Diesel fuel is now at $1.52 a liter, roughly 23 cents higher than regular gas. The high price of fuel in Europe over the years has led to the greater use of diesel engines in their new vehicles, in turn causing a greater demand and now a higher price.

A typical barrel of oil provides 73 liters of gas and 29 liters of diesel as well as other products. European refiners ship their excess gas to North America.

In New Brunswick, the total taxes on gas / diesel is 36 cents and 39 cents respectively, which is 27% and 25% of the total price at the pumps. The taxes consist of a federal excise, provincial taxes and HST of 13%.

If the price seems to be too high in Canada, you may want to try Venezuela where the price of gas is 3 cents a liter. A fill-up will cost you roughly $1.20. Hugo Chavez provides a subsidised domestic price, an off price break for friends such as Cuba and poor neighbourhoods in the US, but also sells at the world market price.
Saudi Arabia sells a liter for 12 cents. In England and France drivers pay $2.09 due to high taxes, with the Netherlands being one of the highest at $2.38 per liter. The tax policy is designed to stimulate energy efficiency in choices.

Stephen Harper weighed in on the debate this week saying that the federal government has no power to change world oil prices. He indicated that price relief would be limited to the existing cuts in the HST. For the average Canadian, this amounts to roughly $43 / year in reduced gas prices.

In another era, the 1961 national oil policy provided higher than world prices for Alberta producers while Eastern Canada had cheap Middle East oil. The policy ended in 1973 and after the OPEC oil embargo the government broke the link between the domestic and world energy prices giving protection to Canadian consumers. A further change was the National Energy Policy of 1981 following the second oil embargo. It appears that previous governments have reacted to public concern.

The present government is buying time for the status quo. Ultimately though, as the price of oil climbs to extraordinary heights, a number of things will happen. One, the value of the Canadian dollar will rise, perhaps to $1.15 US causing serious grief to industrial Canada. Secondly, the public outcry from gas at $2 or $3 a liter will force this government or its replacement to implement a number of steps to reduce dependence on oil.

Stephane Dion’s proposal for a carbon tax is the least of the worries facing the average consumer. The carbon tax is proposed as a revenue-neutral method to introduce a higher sticker price for carbon based fuel with the intended effect of increased efficiency of use and reduced greenhouse gases. Income taxes would be reduced to compensate for the change.

Prime Minister Harper portrays this as a tax grab. Very indirectly, he indicates that peak oil is here saying, “the world is using low-cost hydrocarbons more quickly than most people are aware.” Is there some information that you should be sharing with us, Mr Harper?

How are we to feel about a government which offers us no solution to the dangers of peak oil and an opposition leader who proposes a carbon tax, which is only a partial step towards a comprehensive solution? Would the words disappointment, sadness or anger describe our lost opportunities and money?

The price of inaction on oil conservation by world leaders has been astonishing. Oil consumers now pay $2.4 trillion dollars more than a year ago to oil producers. The additional cost to Canadians is $55 billion dollars per year or $1,700 per capita. That is equivalent to 10% of the federal budget.  Do you wonder why there is less money in your wallet?  The future will be even more expensive.

Stephen Harper is right to resist lowering the cost of energy as being short-sighted and counterproductive. There are many things that could be done to reduce our dependence on oil but our existing government has little interest in an effective off-oil and conservation program.  How long can we afford this type of incompetence?