B4| REPORTONBUSINESS O THEGLOBEANDMAIL| SATURDAY,OCTOBER19,2019
OPINION&ANALYSIS
DILBERTS
tep away from that marina,
sir. Put down the keys to the
Tesla, ma’am. Everybody
keep their money in their wallets
and nobody gets hurt.
In the current election cam-
paign, many of Canada’s leading
politicians sound like the cops
on a true-crime TV show. Except
they’re not policing the mean
streets of an inner city. They’re
cracking down on rich folk who
want to buy expensive baubles in
legitimate ways.
Liberals want to levy a 10-per-
cent luxury tax on those conspic-
uous consumers when they pur-
chase a car, boat or airplane val-
ued at $100,000 or more for per-
sonal use. The NDP has a similar
proposal, but aims to make the
luxury tax an even stiffer 12 per
cent.
Fundamentally, this appears
to be a fight to demonstrate each
party’s solidarity with the middle
class. Unfortunately, fine senti-
ments don’t make for good pol-
icy.
Why should people have to
pay a luxury tax on a $100,000
car but not on a lavish extension
to their house? Why hammer
someone who wants to purchase
a yacht or a plane, but leave un-
touched someone who wants to
buy an antique rug, or, for that
matter, a high-end condo in Van-
couver or Toronto?
The economic logic here is
hard to follow. If splashing out
money on big-ticket goods is
such a bad thing, Ottawa should
be taxing all varieties of high-end
spending, not just some. On the
other hand, if Canada wants to
encourage consumption to spur
the economy, cracking down on
some of the most popular types
of luxury spending seems like a
questionable idea.
The logic gets even murkier if
you try to think about how the
proposed luxury taxes might af-
fect people’s behaviour. Wealthy
consumers may decide to buy
two $99,000 cars instead of a sin-gle $200,000 car.
Or they may look for vendors
who can find ways to structure
deals as leases rather than sales.
Or they may simply decide to
shop for their big-ticket items
out of the country, and keep the
new boat or plane at their winter
place in Miami.
None of those likely outcomes
would do anything to help ease
inequality, create middle-class
jobs or spur Canada’s economic
growth. A luxury tax may not do
much for Ottawa’s bottom line,
either.
A review of the proposed Lib-
eral luxury taxes by the Parlia-
mentary Budget Officer con-
cludes it is hard to figure how
much money the levies might
raise.
“The exact magnitude is un-
certain,” the PBO declared in a
recent report, since the ultimate
figure all depends on how sensi-
tive consumers would be to
price.
The budget office’s best guess
is that the tax might raise $585-
million in its first year. To put
that into context, total federal
spending this year will come in
around $355-billion.
In the overall scheme of
things, even a successful luxury
tax would barely qualify as a
rounding error.
The only inarguable rationale
for the sudden interest in luxury
taxes is politics. Nothing demon-
strates a party’s loyalty to the
middle class more than a demon-
strated desire to crack down on
blatant displays of wealth. And
there is no more politically palat-
able tax than one that affects on-
ly a small group of voters who
are doing just fine anyway.
But the optics cut in both di-
rections. While luxury taxes may
send out a comforting message
to middle-class voters that every-
one is paying their share, they al-
so signal that Ottawa disap-
proves of the highly successful.
Never mind if these folks have
earned their money and paid in-
come tax on it. Now they will
have to pay extra to enjoy it.
There are better ways to do
things.
If Ottawa needs additional rev-
enue, perhaps the fairest way to
get it is through the income-tax
system – not through the govern-
ment passing moralistic judg-
ments on what is acceptable for
someone to purchase.
As it stands, a luxury tax is po-
litical theatre, not substance.PoliticiansarepromisingtolevyaluxurytaxwhenCanadianspurchasehigh-priceditems,suchasthis
BeneteauyachtseenattheTorontoBoatShowinJanuary.CHRISHELGREN/REUTERSLuxury-taxpromisesare
mostlypoliticaltheatre
Alevyonhigh-priced
itemswoulddo
nothingtohelp
easeinequalityIAN
McGUGANOPINIONIntheoverall
schemeofthings,
evenasuccessful
luxurytaxwould
barelyqualifyasa
roundingerror.
Theonlyinarguable
rationaleforthe
suddeninterestin
luxurytaxesis
politics.S
uncor Energy has an image problem that seems in-
curable. The Alberta oil sands giant produces vast
amounts of synthetic crude oil, a product that comes
with a rather frightening carbon footprint.
As the oil sands expand, Suncor will become an ever-big-
ger target for climate-change activists and green-tinged poli-
ticians.
Even Justin Trudeau, who may or may not survive as
prime minster after next week’s election, once said that Can-
ada should “phase out” the oil sands.
What can Suncor do?
Here’s a radical idea: Get into uranium.
Nobody talks much about uranium anymore. The natu-
rally radioactive metal is associated as much with disaster,
because of the 2011 Fukushima nuclear accident in Japan, as
it is with clean energy. The Fukushima nightmare rattled the
electricity-generation industry to the point that Germany
decided to end its entire nuclear-energy program.
Today, only a few courageous sustainable-energy advo-
cates in the Western world are calling for a nuclear-energy
revival.
Yet, nuclear energy has not been given a death sentence.
Germany aside, there is in fact a nuclear renaissance under
way, with China leading the charge. At last count, about 55
nuclear reactors were under construction in various parts of
the world, although mostly in Asia. And each of them is des-
perate for uranium supplies.
Which brings us to Canada. The world’s richest undevel-
oped uranium reserve lies just northeast of Fort McMurray,
Alta., the centre of the oil sands
operations, in Saskatchewan’s
Southwest Athabasca Basin. A
Vancouver company called Nex-
Gen Energy is developing the re-
serve. The uranium grades are so
high – 20 per cent or more in
some spots – that its Arrow mine
would have the potential to sup-
ply more than a fifth of the global
uranium market, based on world
production in 2018, according to
the company’s literature.
NexGen – market value $640-
million – is listed in Toronto, and
Hong Kong billionaire Li Ka-
shing, through his CEF Holdings,
a familiar name in Canadian en-
ergy investments, is the biggest
shareholder. NexGen’s board of
directors includes former Sas-
katchewan premier Brad Wall and Sybil Veenman, a former
senior vice-president and general counsel of Toronto’s Bar-
rick Gold.
The company plans to deliver its environmental assess-
ment statement this time next year. If it receives an oper-
ating licence, it will spend about $1.2-billion to develop Ar-
row, whose average production would be more than 25 mil-
lion pounds of uranium (U308) a year.
In an interview, NexGen’s Australian chief executive,
Leigh Curyer, called the Southwest Athabasca Basin a “ge-
ological freak” because of its unusually high uranium grades.
Its potential is enormous.
Canada traditionally has been one of the world’s biggest
suppliers of uranium; as late as five years ago, it was the
world’s top supplier. But weak uranium prices have crimped
global production. In Canada, the only uranium mine still in
production is Cameco’s Cigar Lake (the Saskatchewan com-
pany, one of the world’s largest uranium producers, also has
operations in Kazakhstan).
Global shortages are inevitable as new reactors open for
business and existing reactors replenish their stockpiles. The
United States alone consumes 50 million pounds of uranium
a year, almost all of which is imported. The reassessment of
nuclear energy as a clean-energy source is under way, driven
by the realization that solar and wind power alone cannot
bring down carbon emissions fast enough to prevent global
average temperatures from rising more than 2 degrees Celsi-
us over pre-industrial levels – the goal of the 2015 Paris cli-
mate agreement.
As far as anyone can tell, Suncor has zero interest in urani-
um. While it does have a small renewable energy portfolio –
it has four wind-power sites – it is an oil company that is
entirely dedicated to exploiting the oil sands as efficiently as
possible. But as the climate protests inspired by Greta Thun-
berg, who attended a rally in Edmonton on Friday, Extinc-
tion Rebellion and others expand, and as Green parties ev-
erywhere gain prominence, Suncor will come under domes-
tic and global pressure to green itself up.
If Suncor can dabble in wind energy, dabbling in another
form of clean energy – uranium – does not seem so far-
fetched. Note that Suncor calls itself Suncor Energy, not Sun-
cor Oil, implying that it’s open to projects other than goug-
ing oily guck out of the ground. Suncor is also a mining com-
pany – the oil sands are mining operations. Vancouver’s Teck
Resources, whose focus is coal, copper and zinc, has an oil
sands project precisely because it considers the oil sands a
mining business, one that happens to produce energy.
Mining uranium and mining oil might not require complete-
ly different skill sets.
Potentially catastrophic climate change is bound to pro-
duce a radical shift on how developed and developing econ-
omies produce energy. While the fossil-fuel era is far from
over, oil producers will be pushed into becoming broad-
based “energy” companies, just as electricity-generating
companies were pushed into ditching coal in favour of nat-
ural gas and wind and solar power. For some electricity pro-
ducers, the switch from black to green was remarkably suc-
cessful.
Imagine if Suncor were to invest in NexGen, partner with
it or launch its own operation in the uranium-rich South-
west Athabasca Basin. Some shareholders would be shocked
and sell their holdings. Others would welcome the diversifi-
cation into a source of clean energy that, out of necessity,
seems destined to play a crucial role in climate-friendly ener-
gy supplies.
For Suncor, such a move would be a credible form of
greenwashing that could extend its social and political oper-
ating licence well into the future.
Imagineif
SuncorEnergyused
Canadianuranium
tocleanupitsoilact
IfSuncorcandabble
inwindenergy,
dabblinginanother
formofcleanenergy
–uranium–does
notseemso
far-fetched.Notethat
Suncorcallsitself
SuncorEnergy,not
SuncorOil,implying
thatit’sopento
projectsotherthan
gougingoilyguck
outoftheground.
ERIC
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OPINIONROME