Shifty business

It's remarkable how virtually every Lib attempt to explain away a problem with their carbon tax plan either contradicts an argument being made to try to sell the tax to a different audience, or implies an even greater unintended consequence which the Libs apparently haven't considered. And so it goes with Ralph Goodale's explanation as to why Saskatchewan and Alberta shouldn't be concerned about the effect of the carbon tax on their oil and gas industry:

"A significant portion of our oil and gas production in this province will end up being exempt from a carbon tax because it is largely put into a pipeline and exported right out of the country without ever being burned on the Canadian side, so there are no emissions on the Canadian side and therefore about two thirds of our oil and gas industry would be exempt from a carbon tax proposal" Goodale said.

Which is well and good in terms of avoiding the effect of the carbon tax. But let's consider the implications of the Libs' plan if Goodale is right.

Remember that under NAFTA, Canada is prohibited from taking any steps to reduce the proportion of its oil and gas exported to the U.S. even in the event of an energy shortage at home. As a result, Canada is currently bound to make 63 percent of its production available to the U.S., up from 49 percent when NAFTA was signed. And the floor only rises as the proportion of Canadian production diverted to the U.S. market increases.

So what happens if a carbon tax is put in place? The effect would be to increase the price of oil and gas in Canada, but not in the U.S. - giving U.S. buyers a comparative advantage in buying oil and gas produced in Canada. That in turn would serve only to further drive up the percentage of Canadian oil and gas which gets exported - pushing the floor for U.S.-dedicated production even higher, and leaving Canada even more vulnerable to domestic energy shortages.

And to add insult to injury, the plan would do nothing to actually reduce emissions from the Canadian oil and gas industry to the extent it could avoid the effect of the tax by sending its production elsewhere.

As a result, if Goodale's statement can be taken at face value, then the Libs' carbon tax looks to do far more to harm Canada's energy security than it would do to reduce greenhouse gas emissions. And if not, then there will be simply one more reason to disbelieve the Libs in general as they try to sell their carbon tax scheme.