The Canadian Supreme Court ruled the federal carbon tax is constitutional, allowing the federal government to impose national pricing standards. Anthony Okolie speaks to Hussein Allidina, Head of Commodities, TD Asset Management, about the implications for the Canadian energy sector.
- The Canadian Supreme Court just ruled the federal carbon tax is constitutional, allowing the federal government to impose national pricing standards. With more on this and the implications for the Canadian energy sector, it's Hussein Allidina, Managing Director and Head of Commodities at TD Asset Management. Hussein, was this ruling a surprise to you? What's your take?
- Thanks for having me. Look, I don't think it was a surprise. When I look at the price action of the Canadian energy equities today, not too dissimilar from their counterparts in the US or globally. Most of the people that I've spoken with have concurred that this doesn't come as much of a surprise.
So no, I don't think it was a surprise. And, in fact, I think it reduces uncertainty in the marketplace, whether it's for oil and gas producers and also for consumers. So I think, ultimately, it helps reduce uncertainty.
- So I think the big question is, how does this ruling impact the Canadian energy sector?
- Look, I think they sort of knew it was coming. This is something that has been discussed in Canada for several years. Globally, even without a carbon tax, you're seeing investors in these oil and gas companies push for increased sort of awareness and reduced emissions.
So look, ultimately, I don't think it's a great thing for Canadian oil and gas. But I do want to highlight that when we have kind of a discussion around ESG, even on the E component, the environmental component, Canadian oil and gas producers have reduced their greenhouse gas emissions pretty materially in the last 10 years, in the last five years.
And on a social and governance, the other two sort of items in ESG, Canada ranks number one or number two on those scales. And that's coming from studies done by the World Bank, Yale. So look, it's not a positive, but I think it's something that is kind of coming regardless and something that was baked in, so not much of a surprise.
- Great perspective there. Now, when it comes to Canada's carbon tax plan, are we in left field when you compare us to other countries?
- No, no, I don't think so at all. I think that if you look over the Atlantic in Europe, they've had a cap-and-trade EU ETS system for several years that's, I think, helped industry and consumers sort of see what's coming. California has had a program for many years. Quebec and other provinces have also had programs. So this federal program definitely not out of left field. I think we're on the train now and headed in the direction that the market has wanted, I think, for some time.
- And do you see this decision accelerating a transition to cleaner energy in Canada?
- I think so. I think it will. Again, reducing uncertainty, we know kind of what the rule set is now, which I think is positive. And I think when we look at emissions in Canada, the oil and gas sector is responsible for roughly 25%, 26% of total emissions. Transportation is responsible for a similar share, about 25%.
And then you've got buildings, agriculture, waste management, and other sort of small industries that are responsible for this. And this just provides, I think, more clarity, more transparency. We know what kind of the speed limit is now, and we just need to abide by it.
- Hussein, thank you very much for your time.
- I appreciate it. Thank you for having me.