Budget might signal shift to specifics on climate change
The era in which the 2015 Paris Agreement represented the holy writ of climate change action is fast drawing to a close — not because it has failed, but because it has so spectacularly set the stage for policy-makers and markets to move toward the finish line together.
Five years on, nobody — well, almost nobody — is arguing whether climate change is real. The fruitless “targets and timelines” debates of past — the problem phase — have given way to a new solutions orientation leading to net zero emissions by 2050. This netzero endgame, of which 2030 reductions now represent a way station, is driven as much or more by investors and innovators as scientists and governments. Anxiety about costs has been joined by anticipation over opportunity. Next week’s budget will indicate the extent to which Canada is shifting from regulator to enabler.
The new net-zero change agenda is increasingly embedded in larger global currents of competitive and strategic advantage, as witnessed by jockeying over supply chains for zero-emission vehicles. Governments are scrambling to work with their private
sectors, including oil companies, to craft industrial policies that will confer national benefits from the transformation underway.
Canada’s recent Supreme Court decision on carbon taxes has catapulted our domestic debate beyond the denial and anger stages of loss into the critical bargaining stage — the how, not whether, to decarbonize our energy system. Saskatchewan Premier Scott Mo e quickly signalled he is moving on. In Alberta, the oil and gas industry has acknowledged the utility of carbon pricing and the government appears ready to join key companies in declaring its own net-zero undertakings.
Acceptance, the final stage of loss, is in the air. The one-time leader of the resistance, ExxonMobil, has declared “it plans further reductions in greenhouse gas emissions over the next five years to support the goals of the Paris Agreement.” The long recalcitrant American Petroleum Institute has called on the U.S. Congress to legislate a price on emissions.
The next several months can, at long last, bring Canada to a unifying national strategy to decarbonizing the economy. Don’t be surprised if net-zero Alberta joins Quebec and California in their cap-and-trade system. And don’t be surprised to see the federal budget provide tax incentives for major carbon-reduction projects aimed at reinventing highemitting industries, oil and gas included. These investments will also undergird a future hydrogen sector.
The new “how” proposition involves identifying the best solutions pathways for arriving at net zero expeditiously and advantageously. The trick is to reduce and remove emissions while strengthening innovation and promoting inclusive growth, particularly for Canada’s long-excluded Indigenous peoples.
Some next steps are obvious; others will be contentious; none will be easy. Supply and demand need to move in tandem. The transition cannot be rushed in a manner that destabilizes the economy and risks alienating popular support. Among the requirements:
> Canada needs to bring coherence to a balkanized electricity system, which is a model of cleanliness but provides just 20 per cent of our energy needs. This will entail added generation from clean sources and investments in modernization and grid integration. The least-costly gains will come from efficiency — strictly enforced building codes, enlisting an army of retrofitters, allowing innovators onto the grid and stepping up east-west and northsouth inter-ties that move clean power from places of abundance to places of scarcity;
> As the global auto industry moves to put the age of the internal combustion engine on ice, production and adoption of zero-emission vehicles must accelerate. Canada is falling behind the detailed game plans of other jurisdictions. We have much to lose if we don’t quickly develop our niches in new supply chains and if electricity and transportation pathways fall out of sync;
> Even as auto companies embrace zero-emissions products, 19 out of 20 new vehicles sold in Canada still run on gasoline. Therefore, demand for refined oil will persist for some time even as it begins to decline. The budget will signal whether Canada plans to remain competitive through major public-private investments to decarbonize a sector that almost singlehandedly keeps our chronic current account deficit from crashing through the floor. Watch for measures to get back into carbon-capture technologies, which extends the time horizon for oil exports, helps other high emitters to net zero and opens up an eventual hydrogen-export market;
> Hydrogen represents the Holy Grail of clean energy and Canada enjoys advantages thanks to our natural-gas and hydroelectric endowments. There are those busily trying to divide the country on energy lines again, arguing green hydrogen (from water) is climate superior to blue hydrogen (from natural gas). This misses the point that blue hydrogen is cheaper and more advanced and therefore needed to seed the market for other hues. In this, Quebec, Alberta, B.C. and others share interests.
On the heels of a treasure chest of policy initiatives over the winter and the Supreme Court decision, the budget and the response of industry should definitively tell Canadians whether the country now is prepared to build the transformative pathways to net zero.