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Commentary Ottawa and Ontario subsidize carbon-intensive activity — in Ontario

Mark Milke is a Calgary writer and keynote speaker. He is the author of multiple reports on the economics of government subsidies to business.

"Hypocrisy," said French author and moralist Francois La Rochefoucauld, "is the tribute which vice pays to virtue." A useful example of this activity is in federal and Ontario policy in attempts to reduce Canada's greenhouse gas emissions.

For two decades, successive federal governments have preached about the need to reduce Canada's CO2 emissions. So has the Ontario government, which upended its electricity sector in such an effort and even funded its own pet think tank, the University of Toronto-based Mowat Centre to regularly rail against the Western energy economy, including carbon emissions.

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One would think that governments so committed to that agenda would never subsidize any activity that could contribute to CO2.

But hypocrisy, thy name is corporate welfare – specifically for General Motors and Unifor, which just agreed on a deal to see more automobiles produced in Canada. Vehicles, of course, use gasoline, derived from oil, a substance attacked by some unbending activists and some in both governments as inimical to the Earth.

On the deal itself and taxpayers: Apparently, the federal government, as part of quietly promised government support, agreed to convert one of its many corporate welfare slush funds, the Automotive Innovation Fund, from loans into straight grants. The AIF, for those unfamiliar with the federal taxpayer-funded subsidy program, started in 2008 under the Conservatives with $1-billion committed to subsidies as of 2016.

By converting the fund into a grant program, as Globe reporters noted last week, auto makers will not have to pay back taxpayers, nor even pay tax on the grants.

As corporate welfare goes, the changes are in the interests of auto makers and Unifor – but not taxpayers.

Beyond that, the GM-Unifor deal was struck to ensure more automobiles are built in Canada – perhaps even SUVs, according to one report. That flies in the face of one AIF goal, where loans are to be given in part to ensure "reduced greenhouse gases."

Here's another bit of duplicity: What federal and Ontario governments actions communicate to Western Canada and those involved in the energy sector.

After all, it is not news that the Ontario and federal governments have on occasion been opposed to access to markets for Western oil and gas. Or in some cases throw up roadblocks, and in the case of the Trudeau government, drag their collective feet on approvals for pipelines while the prime minister personally calls into question the integrity of professionals in a professional agency, the National Energy Board.

The result of all this is that Western-based energy companies, which have not asked Ottawa for some equivalent of the AIF, are taking the hint and increasingly investing outside Canada.

Encana, for example, just raised $1-billion (U.S.), in part to invest in the Permian shale fields in Texas. Or ponder TransCanada, which tried for years to build its cross-border Keystone XL pipeline and also proposed Energy East. TransCanada has turned its attention to Mexico. There, it announced joint venture projects in June and August, investments worth $2.1-billion and $800-million, respectively.

Such investments mean that companies that once invested in Canadian exploration and pipelines, providing some of the highest-paying employment in the country, are now looking south, to the United States and Mexico. The rewards of private-sector investment will be reaped by workers there, instead of Canadians.

So here is the message these federal actions in particular send to the West: We will use tax dollars to subsidize industries that encourage greenhouse gas emissions. But we we will work to dissuade private capital from flowing into the Western resource economy, using greenhouse gas emissions as the excuse.

I grant that hypocrisy is expected in politicians, but one should not abuse the privilege.

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