Green Shift, NEP and Canada

There has been a lot of chatter saying the Green Shift is the same thing as the NEP -- clearly it is not but the politics behind the NEP (which was a siginifcant factor in the rise of the New Conservative Party) makes the linkage politically useful, at least to some.

Let's look at what the NEP was.

Because of high oil prices and local shortages of oil in the 1970s (remember the oil crisis, President Nixon and the 55 mph limit, gas rationing in some parts of America?), the Canadian economy was in deep trouble. Inflation was out of control and interest rates were through the roof. Oil prices were hurting Canada as a whole.

The NEP was designed to promote oil self-sufficiency for Canada, maintain the oil supply, particularly for the industrial base in eastern Canada, promote Canadian ownership of the energy industry, promote lower prices, promote exploration for oil in Canada, promote alternatives to oil, and increase government revenues from oil sales through a variety of taxes and agreements. The government took a share of oil revenues directly as a sort of partner in business as well as more traditionally through taxation.

Among other things the NEP's Petroleum Gas Revenue Tax instituted a double-taxation mechanism that did not apply to other commodities, such as gold and copper; this mechanism was, arguably, the most problematic part of the NEP. The program would "... redistribute revenue from the [oil] industry and lessen the cost of oil for Eastern Canada..." in an attempt to insulate the Canadian economy from the shock of rising global oil prices. In short, the NEP was a national government's response to an international crisis.

The program was extremely unpopular in Western Canada, especially Alberta, and the poor performance of Alberta's economy was blamed, in large part, on the NEP and its wealth transfer mechanism.

Now, how does the lessons of the NEP apply today?

First, governmental programs trying to manage the economy on a non-economic basis, while attractive in theory, don't work in practice. The Green Shift is, and must be, revenue neutral -- it cannot be a way to raise new revenue but rather it must be a way to develop incentives to move from carbon based products to other sources of energy. Economic incentives work but government running businesses does not.

Second, policies must be equal, and seen to be equal, across the entire country. Alberta is not an object to be processed by Ottawa; Alberta is at the heart of Canada and holds the key to its future. Alberta is Canada.

That's why Stéphane Dion is right to insist that the Green Shift is nothing like the NEP
and why he was right to go across the country to explain it. That's why the revenue neutral nature of the Green Shift must always be emphasized -- all Canada needs a shift away from carbon.

The importance of the Green Shift is that it will benefit all Canadians. As Dion said in Alberta this week, “If we don't put a price on carbon, it will not be good for Alberta. It will not be good for Canada as a whole, but it will not be good for Alberta,” adding that a tax on greenhouse gases would bring “Canada closer to what the world expects from a rich economy like ours.”