Data from the World Bank is shown in a graph displaying regulatory quality for OPEC countries plus Canada, Norway, U.S., China and India.--SUPPLIED IMAGE COURTESY ERIC VAN ENK
We live in an age where perception matters more than reality and social media profiles are more important than daily actions. Politics mimic life, thus, it should be no surprise that most modern politicians are ‘all hat, no cattle.’ When viewed through this lens, Canadian energy policy begins to make sense.
From an economics standpoint, our national energy policy (or lack thereof) is completely illogical for a country blessed with far more natural resources than we could ever consume. Canada is a G7 country which has become wealthy for many reasons, including world-class education and health care, democracy and the rule of law, and being a world leader in the extraction of natural resources.
Despite the hugely positive impact this sector has had on our standard of living, the federal political pendulum has swung toward increasingly restrictive energy policies in the name of reducing our carbon footprint.
While most modern economists (myself included) believe we must attribute a cost to carbon, should we also not attribute a cost to virtue signalling?
Most of you will recall German Chancellor Olaf Scholz visiting Canada this past August to secure a long-term contract for LNG to reduce Germany’s dependence on Russian natural gas. You may also recall our government’s response – no interest in supplying LNG, but would love to supply green hydrogen if the industry becomes economic in the future.
As you might expect, Mr. Scholz agreed to continue discussions and then jumped on a plane to Qatar. On Nov. 29, Germany announced a multibillion-dollar, 15-year LNG supply deal with Qatar. The deal doesn’t start until 2026, which would have given Canada three years to build the required infrastructure. Ironically, Germany has been one of the most critical countries of Qatar’s treatment of LGBTQ people, as well as labor conditions of foreign workers, however, German economics minister Robert Habeck stated that, faced with a need to wean itself off Russian gas supplies, Germany must take its energy from a variety of sources.
This variety of sources has included restarting mothballed coal-fired electricity plants as reported by Forbes on July 8, 2022. Canada ranks second in the world behind only Norway in terms of the quality of our regulatory environment for oil and gas.
Chancellor Scholz ordered a Toyota and Mr. Trudeau tried selling him a Ferrari prototype. Germany tried buying LNG from one of the world’s most responsible producers but were forced to sign a deal with Qatar who will earn hundreds of millions in royalties which could have supported Canada’s health-care system.
We share the same planet and breathe the same air – China and India, who together represent ~35% of the world’s population continue to build new coal-fired electricity plants, yet Canada refuses to support additional LNG infrastructure which would reduce the world’s carbon footprint by displacing coal – only makes sense if viewed through the lens of virtue signalling.
Eric Van Enk is a Wealth Advisor & Associate Portfolio Manager with National Bank Financial in Medicine Hat. He is a graduate of the University of Calgary, as well as a CFA charter holder with 20 years of financial markets experience in New York, Toronto and Calgary
