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Capping energy sector emissions would cost the Canadian economy $44.8 billion a year

Montreal, November 10, 2022 – A new study from the Montreal Economic Institute (MEI) describes how the federal government’s proposal to cap the energy sector’s greenhouse gas emissions would cause substantial economic losses, without achieving any net reduction in global emissions.

“Each barrel of oil that is not produced here will simply be produced somewhere else, often somewhere with more lenient environmental standards than ours,” says Olivier Rancourt, economist at the MEI and co-author of the study. “Ottawa simply does not have the power to affect international demand, and reducing the local supply will do nothing but export jobs and tax revenue.”

The Canadian energy industry being largely an export industry, the authors state that our trading partners will turn to other producers, should Canada no longer be able to meet their demand.

The authors estimate that the decline in production required to achieve the target mentioned by Environment Minister Steven Guilbeault would cost the Canadian economy between $44.8 billion and $79.3 billion a year.

The Canadian energy industry is already very heavily regulated, and is subject to numerous environmental laws such as the federal carbon tax.

Moreover, there is no good reason for the government to decide to target this sector specifically, given that GHG emissions have the same impact wherever they come from and whichever industry produces them.

“Whether produced by Alberta’s energy sector or a Montreal manufacturer of private jets, the climate impact of a tonne of GHGs is the same,” says Rancourt. “Targeting a specific sector, as Ottawa is proposing to do, seems more like ideological obstinacy than evidence-based policy-making.”

The complete MEI publication is available here.

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The Montreal Economic Institute is an independent public policy think tank. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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