FRASER INSTITUTE -- Bills C69 and C48 further damage investment climate of Canada’s energy sector while US investment soars
VANCOUVER—The ability of Canada’s energy sector to
attract investment has been weakened by several government policies in recent
years, all the while investment in the United States has soared, finds a new
collection of essays released today by the Fraser Institute, an independent,
non-partisan Canadian policy think-tank.
“While Canada’s energy sector has suffered from insufficient pipeline
capacity, increased regulations and taxation, the
U.S. energy sector has enjoyed sweeping tax reforms and a significant reduction
in red tape,” said Robert P. Murphy, Fraser Institute senior fellow and
co-author of the essay Policy and Regulatory Framework
Changes in the U.S. and Canadian Oil and Gas Sector.
For example, Bill C-48, which bans oil tankers off British Columbia’s
northern coast, and Bill C-69, which makes the approval process for major
resource projects less certain and more complicated, became law last month.
And Canada continues to suffer a lack of pipeline capacity. Moreover,
the federal government has also introduced new methane emission and ethanol
regulations, and Alberta’s oilsands emissions remain capped.
On the tax front, while the U.S. recently lowered federal taxes (in part
to encourage capital investment), governments across Canada have raised or
maintained already high taxes on the energy sector.
For example, Ottawa’s federal carbon tax came into effect earlier this
year. And Saskatchewan currently has the highest tax rate on new oil investment
in North America, while British Columbia has one of the highest tax rates on
new investment in natural gas.
Consequently, from 2016 to 2018, upstream oil and gas investment
(essentially, exploration and production) increased 41 per cent in the U.S. but
grew by only 15 per cent in Canada over the same time.
What’s more, oil and gas capital investment (as a share of all
investment in Canada) declined from 28 per cent in 2014 to just 13.9 per cent
in 2018.
“Given the importance of Canada’s energy sector to the economy,
policymakers should move quickly to create a more competitive investment
climate in the oil and gas industries,” said Elmira Aliakbari, associate
director of natural resource studies at the Fraser Institute and editor of the
essay series.
The Fraser Institute is an independent Canadian
public policy research and educational organization with offices in Vancouver,
Calgary, Toronto, and Montreal and ties to a global network of think-tanks in
87 countries.
Its mission is to improve the quality of life for
Canadians, their families and future generations by studying, measuring and
broadly communicating the effects of government policies, entrepreneurship and
choice on their well-being.
The Institute does not accept grants from
governments or contracts for research.
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