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http://www.nationalpost.com/news/story.html?id=599732

Western Canada in the crosshairs of Liberal 'Green Shift'

End result could look a lot like the National Energy Program

Kevin Libin, National Post Published: Thursday, June 19, 2008

CALGARY -- It appears the Conservative party's cheeky nickname for Stéphane Dion's carbon tax plan can no longer be considered accurate. The "Green Shift" policy platform released on Thursday will not, it turns out, be a "tax on everything," as the government claims. Quebec's hydro powered electricity will, by all accounts, go untaxed. Ontario's nuclear power, too, appears to be in line for none of Mr. Dion's proposed penalties. A more appropriate title might be to call the Liberals' scheme a tax on everything made or fuelled using energy resources produced in Western Canada, and possibly Newfoundland.

This is not, to be sure, anything like the last bold Liberal energy realignment project, maintains University of Calgary economist Frank Atkins - though he's certain that suspicions of another National Energy Program are, as always, bound to surface here. Coal, natural gas and oil dug out of Alberta, Saskatchewan and B.C. soil are, after all, just as vital to the productivity of Ontario factories and Quebec's truckers (nor will either be soothed by the insinuation in the "Green Shift" handbook that goods traded between Canada and its largest trading partner, the U.S., will "likely not" face tariffs under his plan, provided that the Americans are willing to impose comparable carbon taxes of their own).

And despite Mr. Dion's promises to exempt petrol at the pump from his carbon taxes - something Judith Dwarkin, chief economist at Calgary's Ross Smith Energy Group presumes is a nakedly political move, since automobiles count among the country's largest CO2 source - drivers across the country are bound to pay more, as gasoline production costs rise. "It will get into the equation, though not directly," Ms. Dwarkin says. "The cost to make the gasoline, to transport it, to sell it, those costs are all going to go up to the extent that at retail, that's all going to get folded into the price."

Mr. Dion assures us that low-income consumers and businesses will see that money again in the form of tax cuts. The tax burden falls most heavily on three groups, Mr. Atkins figures:

"They're going to tax upper income Canadians and large [emitting] firms and the oil industry," a list overrepresented by Western, particularly Alberta-based corporations. "And they're going to redistribute this money to people at the lower end of the socioeconomic status," who just happen to exist in the largest concentrations east of here. As a political plan, it may have some merit, he suggests. "There are a lot of people in Ontario who think that ‘it's about time we stuck it to the oil companies,' and that's how they'll view this."

Environmentally, though, the outcomes may not be what the Liberals envision. Reducing profitability and with it production in the oilsands will not alleviate the world's energy consumption, Alberta's treasurer Iris Evans points out, but merely displace production and revenue to other jurisdictions - particularly those with much lower environmental standards - driving investment away from Western Canadian resources. Besides, it remains to be seen how much elasticity the Liberal experiment will find even here, notes Ms. Evans: Roughly 99% of Albertans heat their homes using natural gas; its energy sector is wholly reliant on fossil fuels to make more fossil fuels. Given the lack of waterfalls in the vicinity, there is little on offer that might prove suitably substitutable - no solar powered hydraulic shovels are on the horizon - regardless of federal penalties, at least until someone erects a nuclear facility nearby. If that's what Mr. Dion has in mind, there is no mention of funding transfers to encourage such a thing in his Green Shift report.

Instead, the projected $15 billion the Liberal plan will generate, largely from this region that is home to a considerable grouping of the country's 700 largest industrial CO2 emitters, is earmarked for low-income tax cuts and credits, child care benefits and handouts to Northern Canadians. Where Alberta's own greenhouse gas penalties, imposed last summer, stay within the province and are spent primarily within the energy patch on projects aimed at cutting emissions, Ms. Evans explains, the "Green Shift" looks to her like dollars shifting from the pockets of Western industry to other parts of the country. "Obviously, Mr. Dion is not looking for votes in Alberta," she says. While this may not be another National Energy Program, if Mr. Dion gets his way, the political and economic results could end up looking awfully similar.