CAPP Lobbies Government to ‘Recycle’ Carbon Tax Revenues Back to Oil Industry

The Canadian Association of Petroleum Producers (CAPP), Canada’s largest oil and gas lobbyist group, asked the federal government to introduce a carbon pricing scheme that would “recycle” revenues back into oil and gas operations, documents released via Freedom of Information legislation reveal.

The documents, released to Greenpeace Canada, contain an August 2016 submission CAPP provided to the federal government in which the group argues a price on carbon should be revenue neutral for industry.

“One of the decisions governments need to make is what to do with the revenue generated from the carbon pricing mechanism,” the document reads. “There are many options available to enable innovation for distribution of this generated revenue; CAPP recommends that to enable innovation, revenue generated by industrial emitters is best recycled back to industry for technology and innovation.”

Keith Stewart, senior energy strategist for Greenpeace Canada, says, “The oil industry formally supports action on climate change (in exchange for pipeline approvals) but wants to shape how the policy is implemented so as to minimize the impact on its own operations.”

In a summary piece for Policy Options, Stewart says the recommendation to channel carbon taxes back into industry operations “dramatically weakens the effectiveness of the federal policy.”

“The primacy advantage of a carbon price is that it sends an economy-wide signal to investors and consumers, leading to a shift to lower-carbon options. If the largest share of the revenue goes back to the oil industry, the signal to investors to switch to low-carbon energy is muted.”

Pressure from CAPP comes as the federal government is preparing to release the first Gazette I version of greenhouse gas emissions for the oil and gas sector later this month.

Industry lobbying efforts successfully staved off greenhouse gas emission regulations for the oil and gas sector throughout the entirety of former Prime Minister Stephen Harper’s 10-year rule. Further lobbying efforts also stymied a European effort to label fuel from the Alberta oilsands as more carbon intensive than other fossil fuels.

Under the international Paris Agreement and the Pan-Canadian Framework on Clean Growth and Climate Change, Canada has committed to a 2030 target of reducing greenhouse gas emissions by 524 megatonnes of carbon dioxide equivalent, a 30 per cent reduction from 2005 emission levels.

Environment and Climate Change Canada estimates new oil and gas regulations will reduce emissions by 20 megatonnes (MT), greater than Nova Scotia’s total emissions at 17 MT.

The upstream oil and gas sector is Canada’s fastest growing source of greenhouse gas emissions.

In addition to imposing a nationwide carbon pricing mechanism — provinces have until 2018 to implement one or have one imposed — the federal government is also implementing regulations to reduce methane emissions from the oil and gas sector.

CAPP Lobbies Government to ‘Recycle’ #CarbonTax Revenues Back to Oil Industry https://t.co/U6ydduAMfn #ableg #cdnpoli @carollinnitt pic.twitter.com/JEtq49vlNk

— DeSmog Canada (@DeSmogCanada) March 3, 2017

CAPP’s Fight Against Methane Regulations

Additional internal documents released to Greenpeace Canada show CAPP overestimated the cost of implementation and argued the new rules will damage industry’s competitiveness.

“Canadian production is already at risk of being displaced by U.S. competition,” a CAPP presentation made to the federal government in September 2016 reads.

It is “not a good time to impose additional costs on industry,” a slide states.

In March 2016, former president Barack Obama and Justin Trudeau announced an ambitious plan to nearly halve methane emissions from the oil and gas sector by 2025.

In Canada the reductions would be the equivalent of removing every passenger car from the roads in both B.C. and Alberta.

Canada’s forthcoming methane regulations are expected to outline how the sector will achieve those reduction targets.

CAPP, however, recommended the federal government delay implementation of methane regulations beyond the currently proposed 2020 and argued some aspects of the rules, such as mandatory retrofitting of all equipment or regular equipment inspections, should be voluntary.

CAPP’s argument that the new rules are too costly is simply a negotiating tactic, Stewart says.

“CAPP says that the cost to industry of implementing the federal methane regulations would be roughly triple what Environment Canada calculates: $4.1 billion over eight years, compared with Environment Canada’s estimate of $1.3 billion,” Stewart writes.

“Industry push-back on environmental regulations is to be expected and is most effective when conducted behind closed doors.”

Image: Machinery operates in the Alberta oilsands. Photo: Kris Krug/DeSmog