Four Priorities for Reviving Canada’s Energy Sector in 2016

January 7, 2016 – Canada’s energy sector will need to think about more than just low oil prices in 2016. There are numerous structural issues facing the sector that will need to be overcome, according to a new report from the C.D. Howe Institute. In “The Future of Canadian Energy Policy,” the second edition of the Institute’s National Priorities 2016 series, author Benjamin Dachis contends that getting elements of energy policy right should be made a national priority.

“Few in the Canadian energy sector – as well as the many Canadians who depend on it – are sad to see 2015 move into the history books. In 2016, the energy sector will be nervously watching government policies,” states Dachis.

The report classifies the policy issues facing Canada’s energy sector into four main themes, they are:

1. Global competitiveness of Canada’s energy industry: Top of mind for most stakeholders in the Canadian energy industry in 2016 will be the global competitiveness of its oil and gas and electricity sectors. With Alberta’s resource royalty review about to conclude in early 2016, it should recommend that the province adopt the international best practice of cash-flow tax design. As for competiveness in electricity, Ontario should consider the implementation of a capacity market, where generators would compete to offer supply at a lower price than they do now.
2. Social acceptance to enable market access for Canadian energy: Getting Canadian energy to world markets will remain a key priority in 2016. Having a robust regulatory approval system is critical for governments – and the energy sector – to ensure that Canada’s energy products get to world markets safely and in environmentally friendly, socially accepted ways. When it comes to the pipeline review process, however, the federal government should focus on minor changes, not major reforms, and should be especially wary of changing the review process for pipelines already underway. But social acceptance entails more than the regulatory process, and requires governments to take the lead in areas outside the remit of regulators.
3. Collaborative governance: Carbon pricing will likely be the key collaborative governance issue in 2016, and the new federal government will need to tackle a provincial policy patchwork on climate issues. Energy producers and transportation companies will also need to look at their own practices to improve their chances of getting project support. Both federal and provincial regulators will need to examine how their securities and competition policies will affect potential mergers in the energy sector.
4. Innovation: Rather than focus innovation and diversification policies on what is physically produced in Canada  and its provinces, governments should focus on how to enable Canadian companies to become global leaders in the specific technologies they are best at applying.

Dachis concludes that “in 2016, governments across Canada should act to provide a competitive resource tax and fiscal regime, competitive electricity prices, a robust but prompt regulatory review system, collaborative carbon policies, and an economy that encourages an innovative energy sector.”

Click here for the full report.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

For more information contact: Benjamin Dachis, Senior Policy Analyst; and Craig Alexander, Vice President, Economic Analysis, C.D. Howe Institute: 416-865-1904 or email: amcbrien@cdhowe.org