July 30, 2011 – In his regular column for the Ottawa Citizen, MLI Managing Director Brian Lee Crowley examines the claims made by Premier Dalton McGuinty that “the oilpatch is subsidized by Ottawa; that his own green energy initiatives are somehow equivalent to the oil industry, and that his energy efforts should be subsidized to the same extent.” An excerpt below:
So the oilpatch isn’t subsidized, but it creates real economic value, whereas McGuinty’s renewable energy initiatives are a costly failure already sufficiently subsidized. And has the premier considered what will happen if Alberta follows his thinking to its logical conclusion and asks for subsidies equivalent to the Ontario auto bailout?
Ottawa should ignore the premier’s pleas. As we know from long experience in other parts of the country, such transfers only relieve the recipients of the need to put their own house in order.
On August 10, 2011, the column was reprinted in The Windsor Star.
Even Ontario is now prone to region envy
By Brian Lee Crowley, The Ottawa Citizen, July 30, 2011
Envy is the most corrupting of emotions. That is in part because it focuses on what others have that you do not, instead of on what you can do to improve your situation through your own efforts. Too often the logical conclusion of envy is a demand that government take what others have and give it to us, or that we be “compensated” because of some advantage enjoyed by someone else.
We have been far too accommodating of envy, particularly between regions of Canada. Every region has some narrative that explains their failure to get ahead as the result of some conspiracy in favour of somebody else. The Prairies were done down by eastern bankers and railway interests. The Maritimes were robbed of their industry by tariff barriers put up to protect Upper Canadian manufacturers. French-Canadians were kept down by an English-speaking elite. Each part of the country has clung grimly to the grain of truth in these mythologies even long after they stopped helping to explain local differences in jobs and income.
Ontario, as the heartland of the Canadian economy, was perhaps the only part of the country not prone to such convenient historical rationalizations for envy. But clearly the provincial government is hustling to catch up. Unfortunately, the story Premier Dalton McGuinty tells to justify his envious sallies against Alberta and the oilpatch are just as distorted and exaggerated as the other narratives from the national grievance industry.
In his recent trip out west, the premier loudly made three complaints: that the oilpatch is subsidized by Ottawa; that his own green energy initiatives are somehow equivalent to the oil industry, and that his energy efforts should be subsidized to the same extent. Translation: Ottawa should stump up more cash for poor Ontario.
Let’s examine these claims.
The claim the oilpatch is subsidized seems to rely chiefly on a discredited report by an environmental NGO, the International Institute for Sustainable Development (IISD), which concluded that the Canadian oilpatch was getting nearly $3 billion in “subsidies” not available to other industries.
In fact, most of the measures the IISD identified as subsidies are available to other industries or, in the case of expensing exploration costs and accelerated depreciation, were misinterpreted as subsidies. On the contrary, they are policies designed to create attractive conditions for investments that generate major benefits, including significant tax revenues. In 2009, the oil and gas industry nationally accounted for $6 billion in corporate income tax revenues alone.
Jack Mintz of the University of Calgary, one of the country’s leading experts on business taxation, holds that “oil and gas investments … generally are not ‘subsidized’ but bear a higher fiscal burden than do other industries.”
At least, though, the oilpatch produces real measurable economic strength for Canada, and for Ontario. According to the Canadian Energy Research Institute, Ontario will be second only to Alberta in the economic benefits it will enjoy acting as a supplier for new oilsands investments over the next 25 years. Those projects will contribute $63 billion to the Ontario economy and generate over 850,000 person years of work. That’s not counting spin offs from existing oilsands work or the conventional oil and gas sector.
Let’s compare that to the premier’s “green energy” initiatives. Despite his brave rhetoric about green energy creating new jobs, you also have to take account of the job losses that occur as companies adjust to ruinously high electricity rates for example. We don’t yet have complete information on Ontario’s performance, but we do on Spain, which is a country that until recently tried to pursue policies very similar to Ontario’s. They had to stop because the damage those policies were doing to the economy was simply too great. The study that seems to have made the Spanish government reverse course found that for every “green job” created in renewable energy, 2.2 jobs were destroyed in the wider economy.
Now we see why McGuinty needs that subsidy.
Ottawa already gives lots of subsidies to the premier’s pet projects. It offered $500 million toward construction of a transmission line across northern Ontario to bring hydro power from Manitoba. Federal energy retrofit subsidies complement provincial ones. The federal ecoENERGY program is spending $1.4 billion to encourage the generation of electricity from renewable energy sources.
So the oilpatch isn’t subsidized, but it creates real economic value, whereas McGuinty’s renewable energy initiatives are a costly failure already sufficiently subsidized. And has the premier considered what will happen if Alberta follows his thinking to its logical conclusion and asks for subsidies equivalent to the Ontario auto bailout?
Ottawa should ignore the premier’s pleas. As we know from long experience in other parts of the country, such transfers only relieve the recipients of the need to put their own house in order.
Brian Lee Crowley is the managing director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.
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