Plastics ban one more blow to Alberta’s energy sector

The Trudeau government recently announced plans to ban certain single-use plastics by 2021. As most plastics are made with chemicals sourced from fossil fuels, the new regulations will deliver another blow to Alberta’s energy industry, which has struggled in recent years with declining investment in large part due to the immense regulatory burden imposed by Ottawa. Let’s do a quick review.

First, consider the Strategic Assessment of Climate Change (SACC), a federal plan that requires certain projects (including mines and oil and gas projects) to detail how the project will achieve net-zero emissions. The SACC rules, part of the new federal regulatory process under Bill C-69, are intended to help Canada meet its net-zero emission target by 2050. Yet, the federal government itself hasn’t released details of its own plan to meet this target nor has it provided a cost-benefit analysis detailing how reaching the target would be in the best interest of Canadians. Given the lack of details from Ottawa, it’s reasonable to question the economic and technical feasibility of reaching net-zero emissions by 2050. Nonetheless, the Trudeau government is requiring firms to produce their own detailed plans to reach this target.

To make matters worse, SACC requirements will increase regulatory compliance costs at the worst possible time, when various energy companies are struggling just to survive.

Next, consider the proposed Clean Fuel Standard, which would force firms selling gas, liquid and solid fuels to reduce the amount of greenhouses gases generated per unit of fuel sold. It’s worth noting that Canada is not the first jurisdiction to introduce rules to decarbonize fuel use, but it is the first country in the world to introduce regulations that apply to all fossil fuels used by all sectors—others have primarily focused on liquid transportation fuels.

The Clean Fuel Standard would effectively be the equivalent of a $350-per-tonne carbon tax. Clearly, the new sweeping regulation, which will be added on top of the existing federal carbon tax, will have significant economic consequences for the energy sector and further contribute to investment fleeing the sector.

Now, we have the plastics ban. According to the plan, the federal government will effectively regulate plastics, which are made from fossil fuels produced and supplied by energy companies. Unfortunately, this new ban, which has implications for future oil and natural gas demand, will pose yet another challenge to Alberta’s energy industry.

And that’s not all. Consider some of the other regulatory measures implemented in recent years. As we’ve written previously, Bill C-69, which overhauled Canada’s federal environmental review process, has made the regulatory system more complex, uncertain and subjective. Similarly, Bill C-48, which bans large oil tankers off British Columbia’s northern coast, presents another barrier to exporting Canadian oil to Asia.

Not surprisingly, investment in Canada’s oil and gas sector, largely based in Alberta, has declined by a staggering 35 per cent over the last five years. And according to a recent Statistics Canada report, investment in the sector could shrink by an additional 40 per cent in 2020 and we could see up to 220,000 more jobs lost.

It’s important to recognize the important role the energy sector plays, not just in Alberta, but in the Canadian economy. In 2019, the energy sector generated $219 billion in economic activity and comprised more than 10 per cent of the national economy. Last year, more than 20 per cent of the country’s exports came from energy, making the sector the major driver of economic growth. Perhaps most importantly, Canada’s energy sector supported or was responsible for (directly and indirectly) more than 830,000 jobs. The sector also contributed nearly $18 billion to government coffers in 2018.

The Trudeau government cannot continue to bog down Alberta’s energy industry with undue regulations. It’s time to recognize and remedy the damage that has been done.