Canada & Climate Competitiveness: A Strategy that Meets the Moment?
Canada’s federal budget was released yesterday, and I spent the last day or so poring through and reflecting on its climate competitiveness strategy (1.3) in particular.
The fact, as it stands, is that climate is not in the driver’s seat for Mark Carney’s government.
It is still in the car, though - and that’s important to recognize. Minister of Foreign Affairs Anand’s and Prime Minister Carney’s press releases from recent trips to India and across Asia, respectively, both show that as well.
A quick summary of the strategy:
A clear focus on industrial carbon pricing, strengthening its structure(s) across the country, and working towards a provincial/territorial agreement for a long-term trajectory for pricing out to 2050
As previously announced, ‘targeted modifications’ to the Clean Fuel Regulations
Similarly, targeted adjustments to Canada’s Electric Vehicle Availability Standard
As expected, the removal of the federal oil & gas cap
Confirmation and expansion of tax credits for both clean electricity and CCUS
Bolstered financial support for critical minerals production
Amendments to Bill C-69, also known as Greenwashing Legislation
On industrial carbon pricing:
My initial reaction to the industrial carbon pricing sections was “I wish there was a timeline.” Thinking it through further, I think this is a thoughtful and tactical way forwards. With several heavily vocal provinces & territories having right-of-centre governments today, the idea of creating consensus around stringency and a long-term price trajectory in the near term will - presumably - lead to a politically resilient long-term signal for industry to invest in GHG emission reductions.
Reasonable consistency in provincial/territorial systems across the country is important to enable emissions reductions. One small example of today’s disparity - BC’s system regulates industrial operators in excess of 10,000 tonnes; AB’s system regulates operators in excess of 100,000 tonnes. Clearly this needs to be addressed.
On the modifications to the Clean Fuel Regulations:
I’m waiting in the wings to see what this really looks like…stay tuned.
On the changes to the Electric Vehicle Availability Standard:
I’ve stated before, and I’ll say it again: we should dramatically reduce our tariffs on Chinese EVs.
These tariffs were meant to afford our North American integrated automotive sector the time to research and retool to produce EVs domestically. The US has turned its back on that. Asia, Europe, Africa, and Oceania are ramping up their demand and supply of EVs. Australia and New Zealand have tariffs, but far lower ones than 100% - and their canola sectors are not targeted by the Chinese government. We should be working with Asian EV companies to develop a manufacturing base in Canada using Canadian resources and Canadian labour. The removal or dramatic reduction of these tariffs could possibly result in the redundancy of the Standard.
In the simplest terms - EV technology is better (and can withstand Norwegian winters).
On the oil & gas cap:
These regulations as proposed were duplicative, addressing the same sources of emissions through multiple regulatory means. I don’t think any conceivable ‘phase-out’ of oil and gas in any country will be driven by constraining supply.
On support for expanding clean electricity generation and critical minerals production:
Yes, 100%.
On the greenwashing legislation changes:
I was surprised - positively - to see this. I’ve only seen one instance of greenwashing legislation resulting in a genuine change within a company, and this was in Australia. My experience with many industrial players (and even ENGOs) is that the legislation was reasonably well-intentioned, but poorly executed, and has prevented public conversation about decarbonization taking place. The real beneficiary of it seems to have been law firms. If a company wants to wax poetic about their climate plans, and they’re making things up - we (the public) should hold them accountable. I don’t think this is a role for government.
On the broader argument that the removal of the oil & gas cap and the increase in CCUS support constitutes ‘tacit support of the oil & gas sector’:
The sector is still regulated by the industrial carbon price, effectively producing emission reductions. Importantly, 1 tonne reduced is 1 tonne reduced - sector agnostic.
We (meaning Canada) need to take a good look around the global room, especially in today’s moment. The prolific growth in the LNG industry in the US and Australia over the past decade has been one of many signals indicating that conventional energy is still here and still in demand, and if we don’t leverage our own resource advantages, other countries will (this is aside from the fact that there are economic issues with LNG that should continue to be investigated; Australia, for example, seems to have experienced an uptick in domestic gas prices to the benefit of its exporters and detriment of its citizens). This doesn’t by any means absolve us of the emissions from ramped up production. But as that Canadian emissions intensity lowers, it does position Canada as a supplier of choice for markets seeking low(er) carbon energy products, which today and for the foreseeable future are at least Europe and Asia, our two largest target markets for export diversification.
If the sector can’t plug its profits into furthering exploration and production, it will plug its profits into dividends or share buybacks. This is what’s happened over the last several years. Absent a global movement to address this (global meaning includes addressing both OPEC+ countries and the United States, as the world’s largest producers), I don’t think it’s an effective strategy for Canada’s government to try and force the sector to invest into business models they’re not familiar with.
In this moment, we cannot and we should not let perfect be the enemy of the good.
Many of those leaning on the more progressive side of things will be disappointed with Carney’s Climate Competitiveness Strategy. We’re in a climate emergency, and there’s no denying that - but if there’s a full house on fire, you’re probably going to prioritize putting out the fire in the room you’re in before dealing with the other rooms.
No one in Canada asked for the crisis we’re in today. But this strategy may position us to emerge from it a stronger, diversified, low carbon producer for the world.
