Future is going down drain
Politicians must unify stance on climate
As Canada goes down the drain, its political leaders are arguing about the size of the plughole.
An Alberta Court of Appeal decision that rules that the federal carbon tax is unconstitutional and erodes provincial jurisdiction is merely the latest blow to Canada’s brand as a safe and reliable investment haven.
Why would any sentient investor put money into energy projects in a country where environmental policy is so erratic?
Justin Trudeau’s political opponents were quick to exploit the decision by Teck Resources to shelve the giant Frontier oilsands project.
Andrew Scheer, the Conservative leader, said Trudeau’s “weakness and fear” in dealing with his “left wing’ caucus and “radical activists” persuaded him to kill the mine by means of delay and constantly moving the goalposts.
There’s no doubt the Trudeau Liberals deserve their share of the blame for casting into doubt the fate of a project that had already been deemed in the public interest by a federal-provincial review panel, after a nine year approval process.
But the letter from Teck chief executive Don Lindsay took aim at a broader target than the federal government’s environmental zealotry.
Lindsay said Canada’s potential will not be realized until governments (plural) reach agreement on how climate policy will be framed.
“Without clarity on this critical question, the situation that faced Frontier will be faced by future projects and it will be very difficult to attract investment, either domestic or foreign,” he said.
This is the crux of Canada’s dilemma. As Lindsay pointed out, global capital markets are changing and increasingly looking to invest in jurisdictions that have gotten their act together on climate change.
As a devastating article in the New York Times detailed earlier this month, some of the world’s largest financial institutions have stopped putting their money in the oilsands. Blackrock, the world’s largest asset manager, is the latest financial giant to say one of its funds would stop investing in companies that get revenue from the oilsands. Black Rock joins banks like HSBC and insurers such as AXA in refraining from involvement in the oil sector in Canada because of the relatively high greenhouse gas emission levels. (Research from Stanford University places Canada behind only Algeria, Venezuela and Cameroon in GHG emissions per unit of energy).
Alberta Premier Jason Kenney’s response has been combative, threatening firms like HSBC with a boycott for refusing to finance oilsands development.
Domestic banks and insurers have been similarly cajoled, said one financial source, with the result that they remain willing to lend.
The governments of Alberta and Canada have ignored this backdrop, preferring to fight a myopic internecine feud, made all the more bitter by the personal history of their respective leaders.
The premier blamed the “devastating” Teck news on “federal regulatory uncertainty and the current lawless opposition to resource development”, rather than an investment chill in international markets.
Kenney has accused the prime minister of trying to phase out the oilsands. “The factors that led to today’s decision include federal politicization of the regulatory process, further weakening national unity,” he said.
“This deepens Alberta’s resolve to use every tool available to fight for greater autonomy, including the right to develop our own resources.”
In the wake of the Alberta Court of Appeal’s decision, he said he agrees with the need to reduce emissions but said he would not tolerate Ottawa deciding Alberta’s future.
Doubtless it helped his domestic political agenda but it did nothing to repair the brand damage Canada has sustained.
For partisan reasons, the Trudeau Liberals and Kenney’s United Conservatives have accented their differences on carbon taxes and resource development. They bashed one another during the fall general election campaign and continue to try to score points for partisan gain.
Ottawa claims Kenney’s government has been negligent by not preparing Alberta for a low carbon future.
“The Conservative Party of Canada and its provincial counterparts are standing against climate action and hurting our economy,” Trudeau said during question period on Monday.
Many members of Trudeau’s caucus will hail Teck’s decision as a triumph. But it is a hollow victory. The Liberals trumpeted the reduction in the number of children living in poverty on Monday, a result of the government’s signature child benefit policy. But social programs are only affordable when the economy is churning tax dollars.
Reconciling resource development, Indigenous voices and the environment is Canada’s existential challenge, said David Mcgown, head of the nascent organization Canadian Business for Climate Policy, a group of major companies concerned at the lack of political consensus in climate policy.
Mcgown’s group is intent on convincing Canadian governments to speak with one voice on climate policy — as successive British governments have done — providing international investors with some assurances that rules will be consistent and reliable. “The first victims of uncertainty are investment and innovation,” said Mcgown.
It’s hardly impossible to dial back the rhetoric and reach agreement. Ottawa recently accepted Alberta’s equivalency plan to tax greenhouse gases from large emitters at $30 per tonne. Kenney talked about an “energy transition” for the first time earlier this month, acknowledging Alberta has to go green.
If Trudeau is sincere in championing Canada’s resource sector, he should enlist Kenney and jointly make the case that a stable democracy with clear climate policy and high environmental standards should be the preferred source of oil as the world economy transitions away from fossil fuels.
Canada’s emissions are high but the amount of energy used per barrel has fallen markedly, down 20 per cent since 2011. Drawing a line round Canada is unfair, since half of the crude extracted in the United States has emissions similar or higher than the average Alberta crude. The sector in Canada is tightly regulated with limits for flaring and venting, and an absolute cap on emissions growth.
Provincial and federal governments have their differences but if their focus remains on one another, there will soon be no oilpatch to phase out — and no money to pay for poverty-reduction.
Much more of this and Venezuela is going to look like an attractive investment alternative.
THIS DEEPENS ALBERTA’S RESOLVE TO USE EVERY TOOL AVAILABLE TO FIGHT FOR GREATER AUTONOMY.