Julio Mejia and Elmira Aliakbari are analysts at the Fraser Institute.As the summer winds down and Parliament prepares to reconvene next month in Ottawa, some massive questions remain unanswered. A premiers meeting in June ended with no clear plan to realize Prime Minister Carney's vision of "decarbonized barrels" of oil, nor any concrete plans to make energy more affordable for Canadians. But one thing is certain—if the Carney government doubles down on Trudeau-era regulations, it will keep driving up energy costs..FLETCHER: How can island tribes claim ancestral territory on the mainland?.This uncertainty is striking for a country widely regarded as a global energy powerhouse. Canada ranks third worldwide in oil reserves and fourth in oil production, behind only the United States, Saudi Arabia and Russia. We’re also the fifth-largest natural gas producer globally and hold the third-largest natural gas reserves in the Western Hemisphere. Yet many Canadian households, particularly lower-income ones, struggle to afford basic energy needs, ultimately pushing them into “energy poverty—when households spend at least 10 per cent of their total budget on basic energy needs such as transportation, lighting, home heating and powering appliances. According to a recent study, in 2021 (the most recent year of available data) 11 per cent of Canadian households lived in energy poverty. That’s more than one in 10 households spending at least 10 cents of every dollar earned on energy..To make matters worse, energy poverty disproportionately affects lower-income households. More than 22 per cent of households earning less than $31,200, and nearly 21 per cent of households earning between $31,200 and $55,000, were in energy poverty. In contrast, only 1.6 per cent of Canadians earning more than $124,100 spent more than 10 per cent of their budget on basic energy needs. Unfortunately, rather than easing this strain, some federal polices will likely increase energy poverty. For instance, Canada currently has an industrial carbon tax, which requires businesses to pay for their greenhouse gas emissions that exceed a specified limit. .LYTLE: Do we really want to double oil production?.During the recent election campaign, Prime Minister Carney pledged to increase this tax. Of course, businesses subject to this tax will pass the costs on to consumers through higher prices, increasing energy poverty for many households. Similarly, Ottawa's new electricity regulations, which require fossil fuels such as coal and natural gas to be phased out of electricity generation by 2050 and replaced by “renewable” sources (e.g. wind and solar power), will further drive up energy costs. Why? Because wind and solar only generate power when the sun shines or the wind blows, these sources require backup power—typically from fossil fuels—which in turn increases the overall costs of electricity generation..Ontarians are familiar with the consequences of mandating a transition to renewables in the electricity grid. Between 2008 and 2016, the provincial government's decision to eliminate coal from electricity generation and increase reliance on renewable energy sources produced the fastest-growing electricity costs in Canada and among the highest prices in North America. In 2016, residents of Toronto paid an additional $60 per month for electricity compared to the rest of the country.Finally, perhaps if Canadians were seeing their incomes grow, energy price increases would be more palatable. But that’s not happening. Canadian incomes have largely stagnated in recent years, with Canada’s per-person GDP (an indicator of incomes and living standards) growing by an average of just 0.6 per cent annually between 2014 and 2022 (after adjusting for inflation). In fact, Canada's per-person GDP was equal to only 72.3 per cent of the U.S. level in 2022 (the latest year of available data), down from 80.4 per cent in 2014..CARPAY: Neither freedom nor democracy is destined to live forever.Without clarity on what "decarbonized barrels" actually means, and without a concrete plan for energy infrastructure including pipelines, the energy policy landscape in Canada will remain wildly uncertain. In this environment, the potential for cost increases looms large. Due to the prevalence of energy poverty, particularly among low-income households, policymakers should move quickly to create an affordable energy agenda, which includes avoiding new cost-driving policies and scrapping existing ones.Julio Mejia and Elmira Aliakbari are analysts at the Fraser Institute.
