Safety in Numbers: Evaluating Canadian Rail Safety Data

After the horrific and deadly train explosion at Lac-Mégantic, Que. in the summer of 2013, there are serious questions being raised publicly about the safety of Canada’s rail-transport system. Unfortunately, Canada’s public rail-safety data are currently in no shape to provide the answers to those questions. When Canadians ask, as many have in recent months, whether the rail-transport system is “safe,” they surely want to know whether the accident record is low — compared to other countries and to other forms of transport — and whether it has been improving or getting worse over time. Yet, the statistics that might provide the answers are worryingly inaccessible, sometimes conflicting, and in certain cases not available at all. The inability to publicly monitor airline safety statistics would be considered unacceptable. Yet trains transporting volatile goods across Canada arguably expose entire communities, as in Lac-Mégantic, to potentially catastrophic dangers. How is it, then, that the Transportation Safety Board, Transport Canada and Statistics Canada do not even publicly report something as basic as the number of train trips made every year in Canada? Nor do their statistics distinguish between incidents and accidents involving passenger trains and those involving freight trains. And how is it that the total number of accidents in some years is reported differently by these various monitoring organizations? If Canadians are, as it appears, destined to see increasing volumes of goods, specifically dangerous goods, transported by rail, it is that much more important that the federal government significantly improve the reporting of rail-safety data. It is not only vital that our railroads are safe; it is just as vital for the public to have information showing exactly how safe they are

Comment on ‘Reducing Canada’s landfill methane emissions: Proposed regulatory framework’

Regulating methane emissions is an important policy tool for Canada because it offers a way to effectively limit near-term global warming. Environment and Climate Change Canada published a document in April 2023, proposing a regulatory framework for reducing landfill methane emissions. New regulations will set a much-needed standard for policy consistency across the provinces and territories, and this paper provides feedback on the framework. In 2021, Canada’s waste sector methane emissions were 14 per cent of total emissions, representing an 11 per cent increase since 1990. Waste sector emissions include municipal solid waste landfills, industrial wood waste landfills, solid waste biological treatment and incineration, and wastewater treatment and discharge, among others. Extending regulations to landfill methane will fill an important gap in Canadian emissions policy. With a federal framework in place, up to 90 per cent of municipal solid waste landfills and 19 per cent of all methane emissions would be regulated, compared to the current scenario in which 58 per cent of landfill methane is directly vented to the air. Currently, most provinces require only capture for use over flaring,or flaring over venting and these emissions are only indirectly regulated via offset markets. Potential improvements include: Expanding the regulation’s applicability to all landfills; Building benefit-cost analysis relying on social damages from emissions into threshold determination; Providing guidance on best-in-class options for compliance and increasing the stringency of the performance standard; Prioritizing capture for use over capture and destruction, and creating incentives for the same; Allowing for offset credit generation where facilities exceed the performance requirement; Ensuring provincial or territorial equivalency is granted only in the case of more stringent regulation; and Addressing the current inconsistency in regulation of industrial landfills. Environment and Climate Change Canada’s proposed framework is a crucial first step in eliminating a nationwide gap in emissions policy, but there is still much work to do to fine-tune the regulatory design

Grasping at Straws: Comments on the Alberta Pipeline Safety Review

The release last month of the Alberta Pipeline Safety Review was meant to be a symbol of the province’s renewed commitment to environmental responsibility as it aims for new export markets. The report’s authors, Group 10 Engineering, submitted 17 recommendations covering public safety and pipeline incidents, pipeline integrity management and pipeline safety near bodies of water — and many of them run the gamut from the obvious to the unhelpful to the contradictory. That the energy regulator ought to be staffed to do its job should go without saying; in fact, staffing levels were never identified as an issue. The recommendation that record retention and transfer requirements be defined for mergers and acquisitions, sales and takeovers is moot. There is no reason a purchasing party would not want all relevant documents, and no real way to enforce transparency if the seller opts to withhold information. Harmonizing regulations between provinces could reduce companies’ cost of doing business, but could also prove challenging if different jurisdictions use performance-based regulations — which is what the Review recommended Alberta consider. This very brief paper pries apart the Review’s flaws and recommends that the province go back to the drawing board. Safety is a serious issue; a genuine statistical review linking pipeline characteristics to failures and risk-mitigation activities would be a better alternative by far

Energy and Environmental Policy Trends: Carbon Tax Costs Vary Widely Across Households

Since January 1, 2017, Albertans have paid a carbon tax on combustible fuels. The costs to households will be a central issue in the upcoming provincial election. Eliminating Alberta’s carbon tax will mean the federal government imposes its backstop. This has implications for the distribution of net costs to households

The Importance of Policy Neutrality for Lowering Greenhouse Gas Emissions

The drive by Canadian governments, at the provincial and federal level, to lower greenhouse gas emissions has resulted in a hodgepodge of different policy approaches. Some governments have opted for energy taxes, others for regulated limits on total emissions or emission intensity. Unfortunately, not all policy solutions are created equal; some are more effective than others in lowering total emissions and, worse still, may exact a heavy price on the economy. Policy-makers require a better understanding of how various policies affect the health of an economy and of how to mitigate the most pernicious costs. Key to gaining this improved understanding is to recognize one simple fact: some firms are more productive than others. As a consequence, it matters how workers, machines, energy, and other inputs are distributed between these firms. More productive firms should be larger — it is that simple. Some policies, however, increase input costs differently across firms and create costly distortions. Energy intensity targets are a clear example of a policy that disproportionately burdens lower productivity firms, changing firm sizes for the worse and even leading some to shut down altogether. Using a detailed model of production and energy use that matches the Canadian economy, we explore the consequences of the several forms that energy intensity regulations can take. We find the best approach to lowering greenhouse gas emissions is one that is neutral across firms — one that affects the cost of energy for smaller firms no more, or less, than larger ones. The only policy that fulfils this criterion is a flat energy tax. However, a flat tax on energy could well be politically unsellable in Canada, leaving governments to resort to politically palatable but economically risky intensity targets instead. Recognizing this, we explore a number of ways to improve the performance of intensity targets. First, governments should allow firms the option to pay a fine if an intensity standard is violated. Second, we propose a compensation scheme to firms covered by the regulation to prevent bankruptcy. These modifications can bring the cost of intensity standards closer to flat energy taxes. In short, policy-makers seeking an approach to lower greenhouse gas emissions, with minimal impact on economic efficiency and productivity, should look no further than the flat tax on energy. If this is off-limits politically, a combination of intensity standards, fines and compensation comes very close to having the same effect and may well be the policy approach they can persuade the public, and industry, to accept

Energy and Environmental Policy Trends: The Growing Opportunity for LNG in China

THE GROWING OPPORTUNITY FOR LNG IN CHINANatural gas consumption in China has been growing rapidly since 2006 and was 237 billion cubic metres in 2017. Domestic natural gas production has not kept pace, leaving substantial opportunity for LNG importers.In 2016 the Chinese National Development and Reform Commission released the 13th Five-Year Plan for the Natural Gas Industry, which set a goal of natural gas accounting for 10% of total primary energy consumption by 2020. China’s total energy consumption in 2016 was equivalent to 3,053 million barrels of oil; natural gas accounted for 189.3 million barrels of oil equivalent, 6.2% of total energy consumption

Assessing Policy Support for Emissions Intensive and Trade Exposed Industries

Jurisdictions implementing emissions pricing often face concerns arising from emissions-intensive and trade exposed (EITE) industries. These industries face higher costs than counterparts in other jurisdictions without emissions pricing. There is also risk of emissions leakage, where economic activity from EITE industries in a jurisdiction with emissions pricing leaves for jurisdictions without pricing, leading to lower economic activity and no net reduction in emissions. As a result of these two concerns, jurisdictions implementing carbon pricing often implement complementary policy to mitigate the cost impacts on EITE industries. In this paper we provide an overview of the EITE definitions and support policies in place in Canada and compare those to definitions and policies in Australia, California and the European Union. We evaluate both domestic and international EITE support policies using the metrics of administrative costs, economic efficiency, emissions reduction incentive, and equity across and within sectors

Who is Getting a Carbon-Tax Rebate?

With its 2016 budget, the Government of Alberta laid out the basic details of the carbon tax rebate. The rebate is constructed to increase based on household size, and will decrease with income after a pre-set cutoff. The government has stated six in 10 households will be eligible for a full rebate, with an additional six per cent receiving a partial rebate. This paper examines the income distribution of Albertans, to determine how the rebate and income cutoffs affect different types of Alberta families. Using easily available data from Statistics Canada, we shed light on the question of who will receive a carbon-tax rebate. Based on 2013 data on median incomes, single-parent families, elderly families and single Albertans are all groups where a majority of households will receive rebates. In some cases, it appears well over 50 per cent of those groups will receive a full rebate. However, fewer than 50 per cent of Alberta families that are couples (with and without children) will receive a rebate. Still, even those that get a rebate will not necessarily exactly break even against the additional costs they incur from a carbon tax. Interestingly, the lowest-income households, which are most likely to qualify for a rebate, appear to be in a position where they will receive a larger refund than they will pay in carbon taxes. For households where incomes fall in the middle of the provincial distribution, the data suggest that the rebate will come close to compensating for additional costs of the carbon tax, although it may fall slightly short. The analysis presented below is a first pass at a very important question facing Albertans. When data from the 2016 census becomes available, we will be much better able to evaluate which Albertans will be eligible for the rebate. The census will enable a more precise evaluation of whether the rebate matches the government’s 66 per cent goal

The Case for a Carbon Tax in Alberta

In 2007, Alberta demonstrated that it could be a leader in the effort to reduce greenhouse gas emissions by becoming the first North American jurisdiction to put a price on carbon. Given that the province had long been criticized for its central role in the carbon-based economy, Alberta’s move was important for its symbolism. Unfortunately, the emissions policy itself has delivered more in symbolism than it has in actually achieving meaningful reductions in greenhouse gas emissions. The Specified Gas Emitters Regulation (SGER), as the carbon-pricing system is formally called, has only helped Alberta achieve a three per cent reduction in total emissions, relative to what they would have been without the SGER. And emissions keep growing steadily, up by nearly 11 per cent between 2007 and 2014, with the SGER only slowing that growth by a marginal one percentage point. Alberta’s carbon-pricing policy simply fails to combat emissions growth; the province needs a new one. Lack of progress in reducing emissions appears to be partly attributable to the fact that many large emitters find it more economical to allow their emissions to rise beyond the provincially mandated threshold, and instead are purchasing amnesty at a lower cost through carbon offsets or by paying the levies that the SGER imposes on excess emissions. But it is also partly attributable to the fact that the SGER only applies to large emitters who annually produce 100,000 tonnes of CO2-equivalent all at one site: mainly oil sands operations and facilities that generate heat and electricity. This excludes operations that emit well over that threshold, but across diffuse locations. The transportation sector, which is typically spread out in just such a way, is the third-largest sector for emissions in Alberta. Its emissions are also growing faster than those of the mining and oil and gas sector, even as emissions in the electricity and heat generation sector are actually declining. And if we combine the emissions from the transportation sector with those of the manufacturing and industrial sector, which can also be characterized by scattered operations, they substantially exceed those of the electricity and heat generation sector. Indeed, over 58 per cent of Alberta emissions come from places other than oil and gas and mining. There will surely be those who prefer strengthening SGER to a carbon tax; this is not likely to make enough of a difference for Alberta to meet its carbon-reduction goal of 218 Mt by 2020. The government would make far more progress by implementing a broad carbon tax, similar to the one in British Columbia, which applies to all emitters and consumers. The cost to the economy would not be steep: For a $20 per tonne tax, the cost would be 0.9 per cent of gross output (or 1.7 per cent at$40 a tonne). And the cost to households would be less than $700 a year. As in B.C., the proceeds would be better recycled in the form of reduced corporate income taxes, personal taxes, and subsidies to lowincome households, to offset the extra burden and distortions a carbon tax would create. But unlike the current SGER, a carbon tax would succeed in being more than a symbolic, largely futile gesture

Buying Anonymity: An Investigation of Petroleum and Natural Gas Lease Auctions

This paper examines how concealing the existence of private information affects winning bids in a large, well-functioning auction environment. Standard auction theory suggests firms should wish to advertise the existence of private information in order to reduce the bids of their competitors (Milgrom and Weber, 1982). There are a limited number of empirical studies on how concealing the existence of private information affects bids. Instead, most articles test for the presence of private information, rather than the effect of revealing or concealing its existence. An institutional feature of the auctions for petroleum and natural gas leases in Alberta is that firms can hire a broker to bid on their behalf, thereby hiding their identity. Anecdotal evidence suggests rms use brokers to conceal information from their competitors. In order to test the predictions of standard theory, I develop a model of bidding behaviour incorporating the choice to use a broker. The model provides an explicit relationship between broker usage, firms' private information, and equilibrium bids. Using a newly constructed dataset, I estimate this relationship. I find results consistent with standard theory: bids are higher when brokers are used to hide the existence of some private information.exhaustible resources; auctions; strategic behaviour; private information