Canada shouldn't lose resolve for a carbon tax, says Shell exec

Amid calls for Canada to abandon its plans for a carbon tax, it's notable that none of the country's largest oil and gas companies are voicing their concerns. Instead, the head of Shell Canada, and other CEOs,want governments to push forward with putting a price on carbon.

We should stick to our values as Canadians to do something to protect the environment- MichaelCrothers, Shell Canada

There's a caveat though. Shell wants to make sure that the competitiveness of the energy sector is protected, by returning some of the carbon tax revenue to companies that have proven that they are managing their greenhouse gas emissions.

Competitiveness concerns

Since the U.S. election, criticism of Alberta's climate policy has intensified. The argument goes that Canada's oilpatch could become uncompetitive if the United States doesn't introduce its own carbon tax.

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The oil and gas industry is slowly emerging from a two-year downturnthat cost tens of thousands of jobs. Times are still tough and critics say now is not the time for added costs.

"Our fear and our concern is that a carbon tax, in the state the industry is today, is going to move capital away," said Mark Scholz with the Canadian Association of Oilwell Drilling Contractors.

Mark Scholz says a carbon tax will scare away investment

8 years ago

Duration 0:18

He says companies should want to invest in Canada to produce more oil, but the tax could persuade them to spend their money elsewhere.

Scholz wouldn't quantify how much the tax would cost his member companies, insisting his concern is more about investor confidence. He says companies should want to invest in Canada to produce more oil, but the tax could persuade them to spend their money elsewhere.

"If we want to continue to attract investment, if we want to continue to create jobs, we have to be sensitive to that," he said.

An executive with Enbridge echoed those same competitiveness concerns last week at an energy conference in Europe.

Large players behind tax

Shell's Michael Crotherssaidthe U.S. election shouldn't dissuade decision-makersnorth of the border.

"If Trump does not go down the path of a carbon tax, we should not lose our resolve," saidCrothers. "We should stick to our values as Canadians to do something to protect the environment."

Crothers would not put a number to cost of the tax to Shell.

"It's certainly material, but it's something that we feel is manageable depending on how the revenues are deployed," said Crothers.

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"How revenues are deployed" is the key part of that sentence. Alberta's carbon tax is not as straightforwardas it seems and the competitiveness concerns involvemany other factors.

The range of carbon intensity of producing oil in the province varies greatly as some heavy oils require four times as much greenhouse gases than some lightoils.

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For large industrial players, such as the oilsands and refineries, Alberta designed its policy to reward themost efficient when it comes to greenhouse gas emissions per barrel of oil and penalize those who produce much more pollution to produce the same amount of crude. The policy will produce winners and losers.

Shell is likely to be in the winner's column in that equation as it has had success with its carbon capture and storage technology at its Edmonton area refinery and upgrader.

The loonie and a level playing field

While the carbon tax will impactAlberta's competitiveness with places like Texas, by how much is not clear. Canada has a large advantage right now with a 75 cent loonieversus the American greenback. That means costs are lower north of the border, while the oil produced is sold in US dollars. The American oil industry could argueCanadahas the upper hand right now.

Companies also have to look at the royalty rates and market access, among other factors, to determine what province or state is the best place to invest money.

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More details needed

Alberta already has a type of carbon tax for its largeemitters, such asoilsandsfacilities, which charges $15 atonne of greenhouse gas emissions.That was introduced in 2007 and the rate will increase to $20 atonne in January.

The Alberta government will revamp the program next year and Crothers, with Shell, expects to find out more information in the spring.

He recognizes the concerns about competitiveness and says it's important how governments return some of the revenues a carbon tax would generate. He wants Alberta and Canada to keep moving toward a carbon tax withoutdestroying the oilpatch's ability to compete.

"Let's make sure we are careful how we deploy those revenues, especially early on, if the U.S. does not come along with us," he said.

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