Saturday, August 05, 2006

How to fund Kyoto programs without hurting Alberta

I recently spoke with a New Brunswick energy official about the possibility of the Harper Conservatives revisiting the Pt. Lepreau funding issue. (You will recall last summer’s announcement by then–New Brunswick minister Andy Scott that the federal Liberals would not provide funds for Lepreau’s refurbishment.)

We talked about a coalition of nuclear-power provinces—New Brunswick, Quebec, and Ontario—asking the federal government for help managing the early up-front financial risks of nuclear projects. During the discussion, I wondered if federal financial support for nuclear provinces could be based on the greenhouse gases (GHGs) avoided by generating power with uranium instead of fossil fuels.

My New Brunswick interlocutor pointed out that any funding would depend entirely on developments in Ontario’s nuclear power sector. This is where truly major projects are most likely to occur, and where truly significant amounts of money would be spent. Ontario is the reason New Brunswick’s Lepreau request was rejected: the federal Liberals took the $400 million for Lepreau (one reactor) and multiplied that by at least five (reactors in Ontario and Quebec requiring refurbishment or replacement). No wonder they said no.

The New Brunswick official then pointed out that whatever funding scheme was cooked up, it would ultimately be “Alberta money” paying for these projects.

Manning’s sermon on oil revenue shines light on Kyoto funding possibilities

He’s right. Earlier this week, former Reform party leader Preston Manning co-wrote an article (in the August 1 Globe and Mail) in which he laid out the extent to which Alberta’s oil sector contributes to Canada’s economy. The oil sector doesn’t just put billions of royalty and tax dollars into Alberta’s treasury, Manning points out. It enriches all of Canada, primarily because of its enormous capital spending but also because it sends $5 billion a year to the federal government in the form of taxes.

Cut to Kyoto. As I pointed out in my July 31 post, Alberta has a problem with Kyoto because Alberta’s oil and electricity generating sectors produce a disproportionate share of Canada’s GHGs. The problem for a federal politician is that Quebec loves Kyoto. Quebec has no energy intensive oilsands but it does have a huge amount of water running through it, with which it makes a huge amount of zero-emission electricity. Quebec can afford to love Kyoto.

A federal politician wondering what to do about Canada’s obligations under Kyoto might look at all this and see an impossible problem. But it’s not impossible.

My June 27 post described a push by Quebec sustainable development minister Claude Bechard to build a coalition of pro-Kyoto provinces. This coalition would collectively ask the federal government for money to implement Kyoto programs in the participating provinces. I pointed out that anti-Kyoto provinces like Alberta should be able to opt out without penalty.

Could such a scheme be funded from existing revenues? And would such a move pay electoral dividends? It would require a re-diversion of federal spending, and hence a battle, possibly in the cabinet. Politics is all about who gets what. To Stephen Harper’s minority Conservative government, it’s all question of whether a pro-Kyoto move will gain more votes than it will lose.

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