Cutting GHG emissions = less government revenue

Cutting GHG emissions = less government revenue

Brad Wall, the Premier of Saskatchewan, explaining why Western provincial governments were so committed to the exploitation of the tar sands, commented: the tar sands provided the tax dollars and resource royalties that these Provincial governments need to finance health care and other social benefits.

The price for Canadian tar sands oil has declined sharply, and is now slightly more than half the North American benchmark price for oil.  That means lower government revenues, which in turn is forcing an unattractive political choice on the Government of Alberta in particular:  either run a deficit budget or seriously cut social spending. 

What are the immediate causes of this decline?  First, there is a pipeline bottleneck that makes it very difficult to get output from the Alberta tar sands to international markets. Secondly, new discoveries of oil reserves in North Dakota and other US states mean that by 2017 the US will be a net exporter of oil.  Imports of oil from Canada will probably be very much reduced.  

Another longer term prospect is so obvious. The need to reduce GHG emissions will lessen the demand for oil and seriously impact oil prices. With smaller revenues from this resource, Canadian Governments, both Federal and Provincial, will have to reduce spending on the social benefits that Canadians almost take for granted.

Yet the question remains: why should governments promote long term investments in the tar sands where monetary returns are so uncertain?  The answer: governments only have to appeal to the electorate sometime in the next few years. Policies pushing for oil exports will be rewarded by voters who look at the short term.

Now of course the Canadian governments could accept the message of President Obama delivered in his inauguration day address:  the future is in sustainable energy sources.  There are no guaranttes that implementation of this policy will be either easy or without expense.  Developing renewable energy will only happen if the Canadian people make it crystal clear that this future is also for them.

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