Trump introduces serious headwind to Canada’s competitiveness

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Appeared in National Newswatch, April 5, 2017

To the predictable howls of environmentalists, President Donald Trump has finally turned his pen on Barack Obama’s climate change policies. Signing an Executive Order (EO) titled “Promoting Energy Independence and Economic Growth,” President Trump, surrounded by coal miners at the EPA headquarters in Washington, commenced the unravelling of a significant part of his predecessor’s climate legacy, and introducing a headwind to Canadian competitiveness.

The executive order involves multiple actions touching on numerous Obama executive orders and other regulatory actions. The most visible, and most seized upon by opponents of Trump’s policy, is his order to the EPA to review the agency’s “Clean Power Plan,” a group of three EPA rules intended to lead to the elimination of coal-power generation in the United States. This is indeed a big deal (although it’s also likely to be slower in having an impact than other elements of Trump’s climate EO) and will almost certainly go straight to the courts for litigation, as the rules derive from EPA’s authority to implement long-entrenched regulations such as the Clean Air Act, which the agencies are legally required to implement.

But other elements of Trump’s climate EO can be unilaterally imposed by the executive branch of the U.S. government, and will likely face far less pushback from courts. For example, the Trump EO calls for re-calculating something called the “Social Cost of Carbon.” This is an estimate of the future damages of emitting greenhouse gas emissions today. If this recalculated value is lower than that used by the EPA under Obama, new cost-benefit calculations could lead to the re-evaluation and possible repeal of a number of regulations currently on the books.

Another element of the EO orders the heads of agencies to review all rules, regulations or similar measures that may hinder development of American energy resources. The Trump EO calls for the revision or revocation of any such rules that are found burdensome. This is a massive undertaking involving every agency of the U.S. government as such revisions/repeals would be subject to public notice and comment periods. Even if it doesn’t result in many rollbacks, it’s hard to see how any agency has the resources to both complete this task while seeking to issue new regulations. Paralysis by analysis is the game here.

And there’s more to see in this EO: an end to a coal-leasing moratorium on federal lands; reviews of rules that regulate hydraulic fracturing on federal and aboriginal lands; reviews of rules regulating the production of oil and gas on federal lands; termination of a plan to regulate methane emissions on oil and gas producers, and more.

But as interesting as all this is, what’s most interesting is that it confirms that the U.S., at least federally, won’t pursue a greenhouse gas reduction agenda for at least four years, and even if Trump loses the next election to a climate-activist democrat, it would be more years before his successor could reinstate aggressive greenhouse gas controls. And that has major implications for Canada.

Canada is pursuing exactly such actions, with both new carbon taxes and regulations coming on the books. These actions, by design, will make the costs of goods and services, manufacturing and mining, etc. more expensive in Canada without any comparable action being taken federally in the U.S. Add on possible tax reform and broader deregulation, and the U.S. is starting to look a lot more competitive than Canada.

Of course, there are uncertainties. Trump’s EO did not mention withdrawal from the Paris Climate Agreement, or repealing the EPA “endangerment finding” that classifies greenhouse gases as a threat to human health, both of which could be grounds for Trump-opposed courts to hinder the implementation of Trump’s EO. Still, even stasis is a significant change in the status quo climate.

Prudent Canadian governments would do well re-examine their climate policy pathway in light of the movement of that 320 million-person trading partner to our south. If nothing else, tapping on the brakes of our current rush to carbon pricing and regulations might save Canadians from a world of economic hurt.

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