Article content continued

Canada’s petroleum production currently lacks pipeline capacity to reach international markets where it can fetch the world price. As a result, Canadian oil gets a lower price than it could. Stranding our oil deprives Canada’s economy of its full value on world markets. Building pipelines to link demand with supply maximizes the price Canadians receive for any oil that is profitable to produce.

Distorting prices by keeping oil from getting to world markets is not the efficient way to reduce Canada’s overall emissions. A gram of carbon dioxide has the same effect in the atmosphere whether it’s emitted from oil extraction or other activities. Canada’s goal must be to achieve our target emissions while minimizing the economic costs. This means reducing emissions most efficiently across all activities, not just particular industries or regions. There’s no reason to presuppose that each ton of carbon emissions generated by oil production in the Athabasca will yield less value for Canada’s economy than cement production in Quebec, steel manufacture in Hamilton or coal mining in Cape Breton.

Better than stranding oil is internalizing the cost of emissions through carbon pricing. Carbon pricing induces the most economically efficient reductions. Firms and households will cut back on any activity for which the carbon cost is greater than the value of the activity. Carbon pricing also avoids picking who can emit by regulatory fiat. That dodges the significant risk that a government gets it wrong – or favours certain industries and regions over others. If an oil producer remains profitable while paying the going carbon price, that oil should be produced, while other carbon emitters cut back. The converse is also true: facing a carbon price, certain oil producers will no longer be profitable.