The PBO is making itself political by refusing to see the obvious

For almost 20 years now, Canada has had a Parliamentary Budget Officer. Their job is to provide independent analysis to Parliament about federal finances, the government’s spending plans, and the estimated costs of proposals over which Parliament has jurisdiction. For the most part, the PBO has done good and useful work on that front. But when it comes to climate policy the PBO has done far more harm than good, repeatedly muddying the waters and confusing the public with its incomplete and occasionally erroneous analysis. It did that again with its widely criticized (and weaponized) assessment of the oil and gas emissions cap. 

Its analysis suggests the Liberal government’s proposed cap would require a 4.9 per cent reduction in oil and gas production between 2030 and 2032, which would come at an economic cost of $20.5 billion in GDP and 40,300 lost jobs. This is, to be clear, not a production cut from current levels — their analysis shows that production will still be 11.1 per cent higher than it is today. 

As ever, the PBO includes the caveat that their analysis should not be interpreted as an endorsement of a policy of doing nothing, and it assigns no value to emissions avoided or abated. But, as ever, that hasn’t stopped oil and gas enthusiasts like Alberta Premier Danielle Smith or Conservative Party of Canada leader Pierre Poilievre from twisting the report to serve their own political ends. Poilievre even referred to it as “Carney’s oil and gas production cap,” even though the new prime minister had nothing to do with its design or implementation. “Right in the middle of a trade war with the U.S.,” Poilievre wrote on social media, “Carney is attacking OUR jobs.”

First, let’s unpack what the PBO really said. Its analysis is premised on the notion that there will be no carbon capture and storage projects built by 2030, and that companies would rather reduce production than fund them. But as environmental economist Dave Sawyer pointed out, that assumes a level of economic illiteracy on the part of oil companies that doesn’t exist — and buckle up, because we’re about to do some math. “If you take the profit per barrel of oil from Statistics Canada, you’re looking at about $40 per barrel at today’s prices,” he wrote in a LinkedIn post. “Now, divide that by the tonnes of compliance emissions in a produced barrel of oil, and you get — are you ready for this? — $796 per tonne of emissions reduced." 

Here’s what that math looks like. According to most estimates, and assuming the industry makes the sort of progress on methane reductions that it and the Alberta government have committed to, the average barrel of oil sands crude should have approximately 50 kilograms (or 0.05 tonnes) of embedded carbon dioxide emissions by 2030. That means the effective cost of reducing emissions by cutting production is roughly $800 per tonne: $40 of foregone profit divided by 0.05 tonnes of emissions.

You can play with both of those numbers if you want. Maybe the profit per-barrel is a bit lower, or the emissions are a bit higher. But even at $30 of profit and 0.06 tonnes of emissions per barrel, we’re still looking at $500 per tonne of emissions reduced. Cutting production would be, by far, the most expensive way to reduce emissions. 

Just ask the Pathways Alliance of oil sands companies. According to their own data they can reduce emissions through their proposed carbon capture and storage project at a cost of between $130 and $165 per tonne — and that’s before factoring in both the huge subsidies the federal and provincial governments are offering and the revenue they can generate by selling emission credits. As Sawyer notes, “according to the PBO, the incredibly dim money managers in Calgary's office towers would rather cut production and lose $670 per tonne rather than invest in less expensive technology that is already more or less viable.”

They wouldn’t, of course. It’s entirely possible that said oil companies are betting on a Conservative government that will eliminate the industrial carbon tax entirely, which is why they haven’t given their much-ballyhooed CCUS project the green light. But the PBO’s analysis assumes that the Liberal government — or, at least, their oil and gas emissions cap — will still be in place over the next seven to 10 years. It also assumes that oil and gas companies will continue to filibuster and delay rather than build a project that would get their emissions under said cap — and then cut production at a far higher effective cost to them. 

In some ways, this is the very definition of a rearguard battle. Carney has said he’d move past the emissions cap and focus more on tightening up the industrial carbon pricing system, while Pierre Poilievre has promised repeatedly to scrap the cap entirely. The only politicians who really want to keep talking about it are the ones in Alberta who keep trying to use it as a distraction from their own flaws and failures. And with Donald Trump and his government threatening Canada’s sovereignty on a daily basis, the intricate details of climate policy are bound to get lost in the noise. 

Even so, it’s yet another unwelcome reminder of how challenging our current information environment is — and how ill-prepared some of our institutions are to handle it. If the PBO is to survive as a useful contributor to our public policy debates, it needs to adapt to the landscape upon which it finds itself. It may not want to get involved in politics, but Conservative politicians have shown time and again that they’re more than happy to involve it in their attacks on climate policy. At some point, refusing to acknowledge this is a form of endorsement.