Tuesday, December 15, 2020

Why Hydro-Québec has to turn down public money

It is an unfortunate aspect of globalization that local economies can suffer through no fault of their own, but purely as a result of international economic forces. Perhaps the most obvious example is the way political and economic turmoil on the other side of the world can affect oil prices here in oil-producing Canada. It is the cost of doing business with the modern world.

Another such example has reared its head as electricity provider Hydro-Québec has felt obliged to turn down a substantial amount of public money to expand its electricity exports into Ontario and other Canadian provinces. The Canada Infrastructure Bank is offering $2.5 billion over the next 3 years for low carbon initiatives, including new transmission lines that would transmit clean hydroelectricity from Quebec (which has a glut of it) to other provinces, including Ontario and coal-reliant provinces like Nova Scotia. This would be a great boon to Canada's international climate change obligations under the Paris Agreement, and a large element of the federal government's plan for stimulus spending for a green, clean, post-pandemic revival

However, Hydro-Québec feels it has to reject the offer because most of its current exports (about three-quarters) go across the border to neighbouring US states, and only a quarter goes to other Canadian provinces like Ontario and New Brunswick. The company worries that accepting federal government subsidies would contravene the terms of trade treaties with the American states, eliciting accusations of unfair competition, and thereby threaten its existing (lucrative) business with the US.

It's a bit of a ridiculous situation, but there is no obvious way out of it. 

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