Carney and Hodgson's Energy Economic Fiasco

Prime Minister Justin Carney and Minister of Energy and Natural Resources Tim Hodgson are making economic claims about Canada's energy sector that defy basic laws, according to a commentary by the Fraser Institute. Both leaders have argued that increasing costs through 'carbon capture' and a higher industrial carbon tax will make Canada more competitive in the energy market.

The authors point out that Prime Minister Carney has an impressive background in economics, having studied at Harvard and Oxford Universities, and working at Goldman Sachs and the Bank of England. Similarly, Minister Hodgson has an MBA from Western University and spent two decades with Goldman Sachs. Despite their credentials, they are making claims about higher costs leading to more demand and competitiveness that contradict well-established economic principles.

The commentary highlights the case of carbon capture, a technology that captures CO2 emissions and buries them underground. However, this process is expensive, with RBC Economics estimating that decarbonizing oil in Alberta via carbon capture would cost between $17 to $23 per barrel. This added cost cannot be passed on to consumers, as international prices set the market for oil and natural gas.

The prime minister has also advocated for increasing the industrial carbon tax to $170 per tonne, which would add significant costs to the energy sector. Professor Ian Brodie of the University of Calgary estimates that a $120 per tonne tax would mean roughly $20 per barrel in added costs for the oil industry.

The commentary concludes that these policies will make Canada less attractive for investment, not more, as higher costs reduce profitability and deter investors from allocating their funds to the country. It is unclear why two knowledgeable leaders are peddling economic nonsense about the benefits of higher costs.