Something dangerously subversive is happening in Canada under the guise of environmental responsibility: the return of the command economy.
In Alberta and Ontario, NDP and Liberal governments (both heavily infiltrated by environmentalists) are dictating how and what should be produced and purchased.
Alberta's accelerated closure of its few remaining coal power plants by 2030 has resulted, to date, in a $3 billion contractual penalty for taxpayers. The NDP government could have let those existing plants run to their end of their operational life-cycles and avoided this cost, but ideology came first.
In a desperate attempt to gain public support, the NDP even attempted to link health to energy production, stating that coal was a major pollutant affecting air quality of all Albertans. No such evidence exists.
The government’s plan is to have the entire province electrified by 70 per cent natural gas generation and 30 per cent renewable (wind and solar) energy in 14 years.
Natural gas plants need sources of water to produce steam, a pipeline to bring the natural gas to plant, transmission lines to connect to the grid, and the usual time-consuming environmental impact studies and First Nations consultations. Opposition can be expected at every stage of this process, which, from concept to first-on-steam, can take a decade or more to complete.
That leaves little time for energy providers to present proposals and get approval. Development could be accelerated if reviews were compressed and rationalized, but that is unlikely to happen. The NDP have made the regulatory process as convoluted as possible.
Renewable energy facilities will have to be expanded just as quickly.
Presently, Alberta has no commercial solar generating stations, and wind production accounts for only four per cent of total electrical capacity, impeded by high generation costs. The NDP proposes feed-in tariffs as one solution; that is, the government would sign long-term contracts at above-market prices, to cover the operator’s inability to compete. Recent studies of Europe’s experiment with this approach demonstrate that it doesn’t work.
Residential natural heating is to be phased out and all new homes to be heated by “something” other than fossil fuels by 2030. This commandment is particularly perplexing since residential natural gas furnaces are over 90 per cent efficient and provide heat at a lower cost than any other alternative.
The province’s proposed switch to electric heating will necessitate not only constructing new power plants (most likely natural gas power plants, which are at best 40 per cent efficient), but also upgrading and constructing transmission lines to carry the extra load.
A more reasonable approach would be to retain natural gas heating but encourage improvements in insulation and appliance efficiencies, something that the free market is already doing.
The Ontario Liberals have also proclaimed that the number of electric vehicles to be sold in Ontario is to be increased from only a few thousand a year to 36,000 a year by 2025. This milestone is to be achieved through heavy subsidies, up to $14,000 per vehicle, or enough to comfortably heat the average Ontario home with natural gas for 14 years.
Government should not tell people what to produce or what to buy. Rather, governments can set limits and parameters on undesirables -- such as emission levels -- and then leave it to the private sector to find ways to achieve those goals in a reasonable period of time. Failure to do so then results in penalties.
Alternatively, if governments wish to quickly motivate innovation aimed at reducing externalities such as green house gas emissions, then a gradually increasing carbon tax is acceptable.
But ordering producers and manufacturers to use solar or wind to achieve an arbitrary government target, or abandon natural gas as a source of heating, ultimately stifles innovation.
Subsidies fail because they draw capital away from other areas that may be worth investing in, and attract investment only as long as the subsidy remains.
How Canadian governments of the 21st century can return to the failed economics of the Soviet Union and China of the last century is incomprehensible.