Trudeau’s carbon tax and the Trump conundrum

A cura di Fabio Van Loon-

Just two months after the introduction of Trudeau’s at long discussed carbon tax and the election of U.S President Donald Trump, the discussion of North American fossil fuel resources has become ever more relevant. As of 2017, Canada’s carbon will be taxed in the form of a 20$/ton floor price, which will reach a cap of $30/ton by 2018, in stark contrast to the energy plans laid out by U.S President Donald Trump. Evidently, the Paris Conference policies of Trudeau and the President ‘who digs coal’ appear to be straining the tightrope of U.S. – Canadian energy relations in what is becoming a true source of ethical dilemma and economic dispute.

The carbon tax debate continues to animate the divided Canadian political climate, where many argue that whilst nobly upholding the pledge to the Paris Conference, Canada is compromising its competitive opportunities with the United States, which plans to increase research in shale oil drilling, the coal industry and natural gas. In fear of losing one of Canada’s natural endowments, Conservatives argue that the carbon tax is likely to damage Canadian energy and economic interests. Many prominent Conservatives believe the tax will lead to the moving of jobs south of the border, as the Alberta and Saskatchewan oil fields risk becoming relatively less competitive.

Moreover, many Canadians fear the carbon tax will not help the environment or the economy as oil drilling though the Keystone and Dakota pipelines will fail to mitigate any potential environmental impacts whilst simultaneously benefitting the U.S. economy. As stated by Conservative Member of Parliament Andrew Saxton in his recent article for the Financial Post, global investors could be lead to U.S destination, if “our policies and costs of doing business are not in harmony.”^{^[1]} Rona Ambrose, a Conservative member of Parliament and staunch critic of the tax stated that the Prime Minister needed to “accept a new economic reality in North America.”^{^[2]} This ‘new’ economic reality alludes to the energy policy of the Trump administration, implying that Canada should change its policy towards fossil fuels in an effort to remain competitive. In specific relation to the matter at hand, the U.S president stated that government policy would seek to unleash an estimated $50 trillion worth of untapped oil, coal and gas reserves in the United States. It is thus understandable that much like Honorable Rona Ambrose, millions of Canadians are starting to question if Trudeau’s carbon tax is really ‘worth it’ considering energy ambitions south of the border.

Recent studies estimate that circa 100,000 Alberta oil workers have lost their jobs in recent years as a result of industry downsizing, topped by an additional 15,000 projected to be lost as a result of the tax^{^[3]}, a figure which continues to prop up Alberta’s 8.5% unemployment rate^{^[4]} To top this figure, free cash from this year’s oil production will only be $17.1 billion, a nearly 20-year historic low which characterizes the shrinking sector. Evidently, that which hurts the industry, hurts the local economy, where in Alberta alone, there is a projected reduction in provincial GDP of 1-1.5 per cent by 2022^{^[5]}. Furthermore, reports estimate circa $4 billion of lost household income (1.3 per cent), which would likely hit the hardest on lower-middle income families.

It is in fact superfluous to stat how the discussion of energy policy, pipelines and taxes are fundamental for the streamlining of U.S. – Canadian economic interests. Be it Trudeau or Trump, we must await 2018 to have a clearer answer on the shift of the fossil fuel economy.

Economic information regarding the effects of the tax was taken from: