The federal government’s decision, announced this morning, to purchase the existing Trans Mountain pipeline and the pipeline expansion project from Kinder Morgan for $4.5 billion is politically risky, economically perilous and, as we’ve said many times before, impossible to justify on environmental grounds. It all looks even worse when you include the $7.4 billion (minimum) in expected construction costs for the pipeline expansion. Spill response costs would add even more to the bill.
All told, the feds may be on the hook for an additional $12 billion in fossil fuel infrastructure at precisely the moment we need to make a decisive shift to a cleaner economy.
No good way to sell this purchase
First, the political decision to champion the Trans Mountain Expansion (TMX) is a direct affront to the First Nations who have so bravely and persistently fought the project, not to mention the government of B.C. and environmental activists across the country. Popular opposition to TMX will only be strengthened by this capitulation to the oil industry, and it won’t win the Trudeau Liberals many new supporters outside Alberta oil country.
Second, the government’s economic rationale is based on a series of risky assumptions that may very well backfire. In purchasing the pipeline, the federal government is betting that:
- All ongoing First Nations court challenges to the project will fail;
- On-the-ground activists will back down and allow the expansion to be built;
- Global demand for Alberta oil will drive an expansion of the oil sands sufficient to fill the new pipeline capacity; and
- A private sector buyer will emerge that is willing to recoup the government’s sunk costs in the project.
If the federal government is wrong on any of these fronts, then Canadian taxpayers are stuck with a giant financial liability.
Third, the project is fundamentally incompatible with Canada’s climate policy ambitions. In purchasing an oil pipeline, the federal government is betting against its own climate policies, such as the carbon pricing backstop, that are designed to discourage long-term domestic fossil fuel investments.
As Marc Lee has explained, the Trans Mountain Expansion will facilitate an additional 84 Mt per year in extracted carbon even as Canada—and the world—tries to dramatically reduce greenhouse gas emissions. Those emissions aren’t free. The more carbon we pump into the atmosphere, the greater the cost of extreme weather events, negative health consequences and other climate change impacts.
Even in a “best case” scenario where the federal government recoups its costs by selling TMX to a private investor, we’ll still be paying the price from the pipeline’s downstream emissions for decades to come.
A better way to spend $12 billion
Perhaps the most damaging and disheartening aspect of today’s announcement is that the billions of public dollars going toward new fossil fuel infrastructure could be doing the exact opposite: helping Canada transition to the zero-carbon economy of the future.
Eventually, Canada will have to stop extracting and burning oil if we’re serious about mitigating climate change. The transition will not be easy or inexpensive, but the longer we wait the greater the cost will be.
With $12 billion we could expand the Low Carbon Economy Fund seven-fold to dramatically accelerate greenhouse gas emission reduction initiatives across the country.
With $12 billion we could invest in renewable energy infrastructure and create a comprehensive just transition program to support fossil fuel workers and communities.
With $12 billion we could invest in an ambitious retrofitting program for multi-unit residential homes and double our climate financing commitment to help developing countries mitigate and adapt to climate change.
In addition to supporting the transition to a clean economy, each of these initiatives would create far more jobs than going ahead with the pipeline expansion.
Investing in a green future, rather than the emissions-intensive status quo, is the smarter choice—politically, economically and for the environment. The sooner the federal government recognizes that, the better off we’ll be.
Hadrian Mertins-Kirkwood (@hadrianmk) is a researcher at the Canadian Centre for Policy Alternatives, where he focuses on climate policy and international trade. More information on the Trans Mountain pipeline project from the CCPA-BC office can be found online here. To learn more about the fiscal and environmental policy options available to Canada, see the 2018 Alternative Federal Budget.