Quebec's energy choices cost taxpayers $1.7 billion a year

MONTREAL, April 23, 2015 /CNW Telbec/ - If Quebec spent less money subsidizing uneconomical energy projects, all while authorizing the development of its resources—especially its oil resources—the province's taxpayers, and the government too, would be much richer, demonstrates the MEI in a Viewpoint on "Quebec's Energy Choices."

In this context, the seeming openness of the government to the development of oil resources is an opportunity to re-examine some of Quebec's energy choices, according to the authors, in order to determine which policies might enrich, rather than impoverish, Quebec taxpayers.

"Quebec is blessed in terms of energy resources, hydropower among them, but successive governments have too often used energy policy to sustain costly projects that are ostensibly eco-friendly but that have very little impact. At the same time, efforts to develop the province's oil reserves have encountered regulatory hurdles and delays, as well as opposition from activist groups," explains Youri Chassin, co-author of the publication.

The point is not that all of these energy choices have necessarily been bad, he adds, but rather to emphasize that these decisions come at a cost, and that Quebecers should be better informed about those costs.

For example, the MEI has calculated that Hydro-Québec indirectly subsidizes the wind power sector to the tune of $695 million a year. This amounts to some $200 per Quebec household to produce a tiny fraction of the province's energy. As for the electrification of personal transportation program, which offers among other things a subsidy of up to $8,000 toward the purchase of an all-electric or plug-in hybrid vehicle, it cost approximately $22 million in 2014. This amount will likely increase over the next few years, despite an MEI study released in November 2014 pointing out how little impact such a measure has in terms of reducing greenhouse gases.

"In contrast, oil development projects do not have to be subsidized; they need only be allowed," says Bradley Doucet, co-author of the Viewpoint, who points out that private companies are interested in developing Quebec's oil resources in places like the Gaspé region and Anticosti Island, whose potential is estimated at more than 40 billion barrels of oil.

Even at $50 a barrel, developing this resource would pump a minimum of $160 million a year in royalties into the Quebec treasury over a 30-year period. Under more realistic assumptions, the estimated royalties would amount to around $978 million a year. The savings in terms of abolished subsidies combined with the royalties from new oil development would represent an additional $1.7 billion a year for the Quebec treasury.

"By favouring energy sources that are competitive and abundant, not only would taxpayers not be required to pay for initiatives whose sole purpose is often to score political points, but in addition, the state would have more room to manoeuvre in balancing its budget. I invite everyone, including those opposed to 'austerity' measures, to give this some serious thought," says Michel Kelly-Gagnon, President and CEO of the MEI.

The Viewpoint on "Quebec's Energy Choices: For Richer or Poorer?" was prepared by Youri Chassin, Research Director at the MEI, and Bradley Doucet, Editor and Policy Analyst at the MEI. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

SOURCE Montreal Economic Institute

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