The inauguaration of incoming U.S. President Donald Trump brings the prospect of change to Washington in ways that will affect almost every aspect of domestic and foreign policy. The implications for analysts in following and assessing the changing direction is also noteworthy for its potential outcomes for America’s close trading partners, Canada and Mexico.
From the standpoint of energy policy, the privatization of Mexico’s downstream petroleum sector and increasing reliance on America for natural gas and refined gasoline and diesel products–paid for in return by abundant heavy Mayan oil–doesn’t by itself invite potential conflicts with the incoming administration.
However on the Canadian side, the apparent enthusiasm to embrace and tax carbon may have, in part, been a premature step that did not anticipate the political earthquake last Novemeber which saw a no-carbon-tax candidate win the race to the White House.
For Canadians, part of the reason for going ahead with placing a price on carbon was a sop to the outgoing U.S. adminstration’s blocking of the Keystone XL pipeline. Alberta, the source of most Canadian oil and for whom pipelines are the only reasonable means to ship its stranded oil to markets, offered to mollify US environmentalists by placing a punitive tax on carbon on its sputtering fossil fuel-driven economy.
Beginning January 1, both Ontario and Alberta began taxing anything that emitted carbon dioxide at a starting price of about $15 a ton. Everything from gasoline to funeral cremations are now taxed, and the costs are not revenue neutral, as governments plan to use most of the revenue to fund green projects and renewables. Even natural gas and propane producers and users, once a fuel considered abundant and clean, doesn’t meet the environmental smell test and is taxed as a means of encouraging alternatives.
Born in the midst of the Paris Accord on Climate Change, the Canadian endorsement assumed U.S. concurrence, and accordingly consistency of both sides of the border in terms of a carbon tax and stringent environmental regulations.
Without Americans joining in, there is the potential that not only will consumers in Canada who use any product or service derived from or affected by fossil fuels be hit in their collective pocketbooks for everything from fuel and heating to food, but that the higher costs couls lead to many business cutting back or relocating to the U.S.
Bad timing, a lack of foreseability and environmental absolutism could see Canada facing potentially both small and significant economic disruptions.