The free flow of energy between the two countries benefits suppliers and consumers alike as the arrangement takes advantage of differing demand levels among jurisdictions so that rates remain consistent. But this relationship is changing rapidly as President Donald Trump unleashes a barrage of trade threats and tariffs.

Suddenly, the direction in which Canada’s electricity moves is top of mind. For the first time in recent memory, provincial governments are expressing a shared interest in dismantling interprovincial trade barriers, including those that apply to energy.

Several sub-national governments have already announced plans to allow for unimpeded movement of goods and services between provincial jurisdictions, and some premiers have raised the prospect of increasing interprovincial trade in energy – a proposal that had been put forward in years past but had yet to gain traction until very recently.

B.C. Energy Minister Adrian Dix told The Globe and Mail that since the White House first declared its intention to impose steep tariffs on Canadian goods, he has been in discussions with Alberta’s Brian Jean, minister of energy and minerals, to figure out how regulatory red tape between the two provinces’ energy sectors can be reduced.

On the east coast, Newfoundland and Labrador announced a historic agreement with Quebec to generate more hydropower at the Churchill Falls power plant in Labrador and install more transmission lines to transport the additional power load.

For many business leaders, reducing internal obstacles will be key to surviving the economic fallout of U.S. tariffs on Canadian goods.

Canada’s trade agreement with itself

The Canadian Free Trade Agreement (CFTA), signed by the federal, provincial and territorial governments in 2017, is intended to either eliminate or reduce trade barriers within Canada. But governments are allowed to name exceptions.

Ottawa has said that it will reduce its 39 federal exceptions to 19 in addition to the 17 federal exceptions the government removed last June. Provincial governments, in turn, have vowed to do more to liberalize domestic trade.

Nova Scotia Premier Tim Houston declared that his government will introduce legislation that would ease trade and labour mobility with other provinces, so long as they do the same.

Ontario Premier Doug Ford promised to look at similar legislation. Ford also pledged to remove all of Ontario’s exceptions in the CFTA.

Even a partial removal of interprovincial barriers could deliver considerable savings to Canadians. An RBC report released in February references an International Monetary Fund study that found that the cost of non-geographic interprovincial trade barriers was roughly equivalent to an average tariff of 21%.

Interprovincial grids make electricity cheaper and cleaner

The Pembina Institute, a clean energy think tank, released a report in 2021 on how Canada’s surging energy needs coupled with its decarbonization targets makes the case for constructing electricity interconnections and allowing provincial neighbours to buy and sell clean energy from one another. The report states that interprovincial grids are essential to maximize clean electricity resources, allowing renewable energy to be generated in one jurisdiction and distributed to another.

The cheapest option is to use the infrastructure we have in better ways.

– Kate Harland, research lead, Canadian Climate Institute

According to the Canadian Climate Institute, to achieve net-zero carbon emissions Canadian electricity demand will grow to be 1.6 to 2.1 times larger by 2050 relative to 2022. And to meet that demand, Canada’s electricity generation capacity will need to be 2.2 to 3.4 times bigger than it is today.

Not only would a nationwide grid network deliver more energy; it would also make energy cheaper. A North American Renewable Integration Study released in 2021 concluded that a continent-wide transmission grid, along with storage and flexible operation of different generation technologies, in particular hydropower, could deliver system-wide net benefits of $12.6 to $38 billion.

Ultimately, however, it falls to provinces and territories to determine whether and how much they want to integrate their energy systems. Under a functioning U.S.–Canada free trade arrangement, the path of least resistance has been to buy and sell energy with our U.S. trading partner, and provincial governments have been in no rush to change that arrangement.

Additionally, governments balked at the price tag of big infrastructure projects. On that point, Kate Harland, research lead with the Canadian Climate Institute, says that before making major capital investments in new transmission lines, provincial governments should take a close look at the infrastructure that’s in place now.

“The cheapest option,” Harland argues, “is to use the infrastructure we have in better ways. There are interprovincial connections in place now, but they aren’t used to capacity due to regulatory and political challenges. So step one would be to use what we have. Until recently, north–south trade was so beneficial there was little incentive to break down barriers to east–west trade. This has changed.”

Atlantic Canada leads on interprovincial clean energy

The benefits – as well as the difficulties – of interprovincial trade in energy can be seen in Atlantic Canada. The Muskrat Falls project, an energy trade arrangement through which hydropower generated in Newfoundland and Labrador is sent to Nova Scotia, has helped Nova Scotia Power increase the proportion of clean energy in its grid supply from 9% in 2010 to 35% today.

Nevertheless, warns Brendan Haley, senior director of policy strategy with Efficiency Canada, the Muskrat Falls project can be seen as a cautionary tale. Haley points out that in Newfoundland and Labrador, the cost of the Muskrat Falls project nearly doubled from the initial 2012 forecast of about $7 billion to more than $13 billion by 2021. Fear at the time that electricity rates would also double resulted in two bailouts from the federal government totalling $5.2 billion in 2021. The federal support was part of the province’s rate-mitigation plan limiting annual electricity rate increases to 2.5% until 2030.

RELATED

Trump’s tariffs threaten Canada’s food security. It’s time to go local.

Utilities may soon pay you for your power

Farmers and solar panels are finally uniting

As Nova Scotia Power waited for clean electricity to start flowing its way during the long project delays, the province spent $1.6 billion in replacement fuel costs. “Be wary of technological optimism,” says Haley, who argues that a better approach is to combine microgrid technology and efficiencies with macrogrid build-outs within and between provinces.

Haley notes that making sure buildings are well insulated and instituting demand-side management strategies that reward customers for using electricity during off-peak hours, such as charging an electric car overnight, are the sorts of inexpensive solutions that can be deployed almost immediately. Establishing robust microgrids does not diminish the importance of and need for more infrastructure, he adds, nor does it contradict the upside of more interprovincial trade.

While the Muskrat Falls project suffered from cost overruns, multiple delays and, at times, vigorous opposition among local Indigenous communities, the Atlantic provinces continue to push ahead with interprovincial clean energy projects. New Brunswick and Nova Scotia are set to begin construction of the first phase of a large joint project they say will help them keep their commitment to phase out coal by 2030.

Sometimes referred to as the Atlantic Loop, the project includes building an interprovincial electricity transmission line that will span 160 kilometres. Construction is expected to start in both provinces in 2026. In 2023, the estimated cost was tagged at $1.4 billion.

“There is no question that as demand rises, we will need more interconnections in the future,” Harland says. But it should be done judiciously, she adds, understanding how to minimize new builds, maximize existing lines, smooth out energy demand peaks and enforce energy efficiencies.

The post What a nationwide grid network would mean for clean energy in Canada appeared first on Corporate Knights.

Now, Claudia Sheinbaum’s pronouncements on the presidential campaign trail suggest a “Frankenstein” energy strategy that promotes gas power plants alongside solar and sustains the influence of state oil company Petróleos Mexicanos (Pemex), while boosting private investment in renewable energy.

Prime Minister Justin Trudeau spoke to Sheinbaum hours after she defeated renewable energy advocate Sen. Xóchitl Gálvez with an estimated 58 to 60% of the vote. Trudeau committed Canada to working with her on climate change, international security and trade, gender equality, and reconciliation with Indigenous peoples, The Canadian Press reports.

Either Sheinbaum or Gálvez would have been the first woman elected to Mexico’s highest office.

Sheinbaum spent four years at California’s Lawrence Berkeley Lab analysing energy consumption in Mexico and other industrialized countries, and was a lead author for the fourth and fifth assessment reports of the Intergovernmental Panel on Climate Change. (The IPCC published its sixth assessment report.) Her ResearchGate profile lists 70 publications on topics like sustainable building programs in social housing, energy efficiency in Mexico’s iron and steel industry, a transition to renewable energy for Mexico’s power grid, the impact and social implications of wind projects, and carbon dioxide demand analysis.

“Some view her as Latin America’s Angela Merkel: a politician with the rigorous mind of a scientist,” Bloomberg wrote last year. “Like Merkel, Sheinbaum holds a Ph.D. (Merkel’s is in quantum chemistry; hers is in energy engineering) and began her career in academia.”

Sheinbaum’s Jewish maternal grandparents immigrated to Mexico from Bulgaria fleeing the Nazis, the British Broadcasting Corporation reports.

Attention to Detail

In her five years as Mexico City mayor, Sheinbaum “oversaw the electrification of Mexico City’s buses and covered the huge Central de Abasto food market with solar panels,” the news agency added. During those years, she “rarely let her attention to detail slip. While being driven to meetings in her Chevy, she’d snap photos of traffic jams or clogged taxi ranks and send them to the city’s mobility chief, Andrés Lajous, asking him to sort them out. She once urged him to visit the site of a planned bus line extension, insisting he had to see it himself to manage the project.”

On the campaign trail, Sheinbaum pledged a US$13.6-billion, 3.3-gigawatt energy plan that would “boost her country’s use of renewable energy while still adding gas-burning power plants,” Bloomberg reported in April. “We have the possibility and potential to develop Mexico in a way that generates investment with well-being,” she told a business audience. “At the same time, that development does not have to negatively impact the environment.”

But the politics of taking office as what Bloomberg called the “ideological successor” to left-leaning President Andrés Manuel López Obrador (aka AMLO) will be complicated. Mexico is the world’s 11th-biggest oil producer, its 15th-biggest climate polluter, and the only G20 country without a net-zero target, where renewable energy financing has declined since 2018 and experts say climate policy has moved backwards in recent years.

López Obrador “prioritized ‘energy sovereignty’, which has manifested in support for Pemex, the most indebted state oil company in the world, while building a $15-billion oil refinery in Tabasco and closing off options for private investment in renewable energy,” Climate Home News reported last year. Bloomberg says AMLO’s Morena government directed billions of dollars to prop up Pemex and “tried to dissolve the National Institute for Ecology and Climate Change as an austerity measure.”

‘Energy is Energy’

“Energy is energy,” New Climate Institute analyst María José de Villafranca told Climate Home shortly after Sheinbaum was nominated last summer. “They could invest public money in renewable energy and this wouldn’t take away from the sovereignty. But we haven’t seen this from the government. It’s a missed opportunity.”

At the time, Climate Home reported “some hope” that Sheinbaum would take a different tack in response to the climate emergency.

“She has been very careful not to go against the current president’s vision, but she has suggested that her vision for renewables energies is somewhat distinct,” said political analyst Carlos Ramírez. “And this has created some hope that her policies as president would be different.”

But not fundamentally different—as the campaign was getting under way, Sheinbaum was set to accelerate renewable energy development, invest in lithium extraction, and build solar plants in the northern state of Sonora, while maintaining that Pemex and the Comisión Federal de Electricidad (CFE), the national power utility, “should be architects of the country’s energy policy,” Climate Home wrote.

In their HEATED newsletter, climate journalists Arielle Samuelson and Emily Atkin contrast the delight in some circles at the election of a “leftist” Mexican president with Morena’s history of supporting a “fossil fuel-heavy” status quo. During the campaign, “Sheinbaum praised AMLO’s pro-Pemex—and therefore pro-fossil fuel—agenda,” Samuelson and Atkin write, citing an Associated Press report. “She said she ‘supports [ALMO’s] goal of keeping 54% of Mexico’s electricity generation under state control, a vision that effectively casts aside more renewable energy production in favour of dirtier fuels’.”

Sheinbaum’s pledge to increase Pemex’s refining capacity is “hardly a recipe for a concerted move away from fossil fuels,” AP added.

In her own past research, Sheinbaum was “a PhD engineer who specializes in determining how much energy industries and countries use, and how fossil fuels harm the planet,” HEATED writes. “In 2015 and 2018, she co-authored papers laying out strategies to transition Mexico’s electric grid to 100% renewable energy,” and her “scholarly work encompasses so many sectors—cement, transportation, iron and steel, and agriculture, to name a few—that it’s hard to imagine an industry whose climate impact she hasn’t studied. She also published papers on how to expand non-fossil fuel energy, while also considering the social and economic impacts of the energy transition.”

When it comes to the politics, “I want a leftist woman climate scientist for president, too,” said one social media post quoted on HEATED. “But please, English language viewers, take a look at Morena’s uniquely destructive environmental policy before celebrating the identity politics.”

A ‘Frankenstein’ Energy Policy

“The technocratic Sheinbaum is a protégé of the president, who’s so popular in Mexico that vendors sell dolls, balloons, and mugs with his grinning face,” Bloomberg added. “She’s unlikely to deviate from her mentor’s policies as the race gets under way. And it’s not clear she would make climate and clean energy top priorities even if she beats her competitor from a centre-right coalition, the entrepreneur Xóchitl Gálvez.”

Around the same time, Sheinbaum told a group of avocado and lime growers: “We are going to keep advancing with renewable energies and with the protection of the environment, but without betraying the people of Mexico.”

The upshot: “I think she will try to do something in between, giving more weight to renewables while also maintaining the policies around Pemex and CFE,” Ramírez said. “What will become of this Frankenstein, I’m not sure.”

The same news story cited Gálvez putting the shift to renewables at the heart of her platform and pledging to end Mexico’s “addiction to fossil fuels”.

In the immediate aftermath of the vote, analysts said Canada can expect a stronger bond with Mexico with Sheinbaum at the helm.

“I think we’ll see a friendly relationship,” Carleton University professor Laura Macdonald, who specializes in Mexican politics, told CP. “And if Trump is re-elected, I think Mexico and Canada will really need each other more than ever, in order to confront the bully in the North American relationship.”

Compared to AMLO, “she’s probably less likely to engage in inflammatory rhetoric,” Macdonald added.

Wilson Centre Vice-President Duncan Wood, the Washington think tank’s senior advisor on Mexico, told CP that Sheinbaum has talked about stabilizing trade and might repeal some restrictions on foreign investment, while strengthening environmental regulation and steering clear of policies that would lead to accusations that Mexico is violating trade agreements.

“The relationship with Canada has been difficult over the last six years for a number of reasons, in part because of the bluster of López Obrador,” he said.  But also, because there are real issues in the bilateral relationship to do with investment disputes.”

This article was first published by The Energy Mix. Read the original story here. 

The post Mexico’s new president is a climate scientist – what will that mean for its energy policy? appeared first on Corporate Knights.

As an energy-exporting nation, Canada has long neglected a crucial element of meaningful climate action: reducing fossil fuel production. While the federal government has implemented some measures designed to lower fossil fuel demand, including a price on carbon, policies to transform our energy sector for a low-carbon future are lacking. At the UN climate summit in Egypt last month, Canada received backlash for its failure to commit to a managed phase-out of fossil fuels. Although we’ve promised to introduce a cap on energy sector emissions, this cap will not address Scope 3 emissions (those up and down a company’s supply chain), which account for around 88% of total emissions from the oil and gas industry.

Canada’s refusal to implement policies that tackle the supply of fossil fuels is at odds with emerging global realities. The clean energy transition is happening faster than predicted, with renewable deployment rates growing in line with the International Energy Agency’s scenario for reaching net-zero by 2050. This is due to the exponential rate at which renewable technology is being adopted, coupled with accelerating climate policy ambition. Researchers at Oxford University’s Institute for New Economic Thinking found that a rapid transition to 100% clean energy is the cheapest of all possible energy futures, yielding US$12 trillion in savings by 2070.

Our country has not woken up to this pace of change, as outlined in the new report from Re_Generation, Canada’s largest youth organization advancing sustainable business. Canadian energy firms and financial institutions are doubling down on fossil fuel expansion at a time when the world is moving in the opposite direction. While European firms like TotalEnergies, BP and Eni plan to curtail production by 2030 and dramatically increase their capital expenditures on renewables, Canadian energy firms plan to expand production by 30% by 2030, growing at a rate that would overshoot Canada’s 2050 target for the oil and gas sector’s emissions by 94%. And while European firms predict future oil prices will be between $25 and $45 per barrel by 2050, Canadian firms project prices of around $80 a barrel into the indefinite future. At the same time, the five largest Canadian banks have provided $700 billion to the fossil fuel sector since 2015 and doubled their year-over-year financing in 2021.

The inability to prepare adequately for the energy transition will come with significant economic costs. A study published in the journal Nature found that Canada alone will face $100 billion in stranded assets by 2036, representing 35% of the book value of oil and gas properties for all oil and gas issuers listed on the Toronto Stock Exchange. Crucially, this study introduces a new and more accurate form of climate modelling that can account for trends that have been historically underestimated. This could have enormous implications for the energy transition – particularly in Canada, where the country’s oil will likely be the first to become stranded as it is comparatively expensive and emissions-intensive.

While Canadian energy majors have paid lip service to the idea of becoming “net-zero,” their current climate strategies amount to delay tactics. Promoting carbon capture, utilization and storage (CCUS) technologies as the road to a low-carbon future is a way to prolong fossil fuel dependence while doing nothing to address Scope 3 emissions. Data from the Intergovernmental Panel on Climate Change shows that CCUS is the most expensive decarbonization measure with the lowest potential for emission reductions at a global level. Carbon capture also has a long history of failure; a review of 200 studies on CCUS projects found them to result in net CO2 additions, not reductions. At a time when renewable energy costs are declining precipitously, building expensive CCUS facilities will only cause Canadian energy to become even less competitive globally.

There are a number of policy options available to address these gaps. For a start, Canada must stop support for fossil fuel financing and implement measures to align our financial system with limiting global warming to a threshold of 1.5°C. The Climate-Aligned Finance Act is a landmark piece of legislation, introduced by Senator Rosa Galvez, that would create the regulatory certainty necessary to guide investment toward a climate-safe future. The government can also use other forms of economic planning to accelerate a rapid transition, combining green central banking tools with a coordinated green industrial strategy. All of these measures must be combined with a robust framework for a just transition, embedded in a federal Just Transition Act, to ensure that all Canadian communities reap the benefits of the energy transition.

The post Canada is sleeping on the energy transition appeared first on Corporate Knights.

Now Canada is seeing yet another promised resurgence for the nuclear industry. And this time, it comes in a size small. On December 1, Ontario Premier Doug Ford participated in a groundbreaking at Darlington nuclear facility, where provincially owned Ontario Power Generation (OPG) plans to build a small modular reactor (SMR).

If the Darlington project gets a green light on the final investment decision, the unit will be the first new reactor built in Canada in nearly 40 years, as other companies are pursuing plans to build SMRs across the country. (The nuclear sector has, however, been buoyed by massive reactor refurbishment projects at Darlington and Bruce Power’s eight-reactor site on Lake Huron.)

The industry’s latest hope, SMRs have a capacity of up to 300 megawatts and modular design features that are meant to keep construction costs under control (nuclear projects are notorious for their multibillion-dollar cost overruns). Micro reactors can be as small as five megawatts and are touted as an energy solution for remote communities and industrial sites like mines.

That’s in sharp contrast with the 1,000-megawatt behemoths that were marketed around the world in the first decade of the century by reactor manufacturers, including then federally owned AECL, Westinghouse Electric Co. and others.

The federal government and four provinces – Ontario, New Brunswick, Saskatchewan and Alberta – are lining up to support the commercial deployment of SMRs as low-carbon sources of electricity.

However, big questions remain about SMRs as the technology is largely untested. It’s unclear what the electricity from SMRs will cost and whether the technology can compete with cheap renewable sources like wind and solar backed up by storage. The prospect of micro reactors dotting remote Canadian landscapes also raises serious issues around safety and management of highly radioactive wastes.

Corporate Knights does not consider new nuclear power projects to be “green” in its Sustainable Economy Taxonomy. In July, the European Union overturned a draft proposal and included nuclear in its taxonomy for the purposes of green investing, though that controversial decision is being challenged in court by Austria, backed by several environmental groups.

In its fall fiscal update, the federal government introduced an investment tax credit of up to 30% for clean energy technologies, including SMRs. Ottawa has also committed $970 million in low-interest financing through the Canada Infrastructure Bank for the Darlington SMR project.

A bad day to go nuclear

Last decade was not kind to the nuclear industry, as Japan’s Fukushima meltdown after a tsunami in 2011 was the worst nuclear disaster since the Chernobyl accident of 1986 and led to the shutdown of all the country’s reactors. Those safety threats loom large today as Russia has attacked Ukraine’s nuclear energy site.

As well, the economic case for large new reactors has taken a beating over the years, as projects have been plagued by delays and cost overruns. Two signature projects in recent years have been particularly poorly managed: Areva’s plant in Finland and Westinghouse’s effort to build an advanced power reactor in Georgia. Westinghouse, which was then owned by Japan’s Toshiba Corp., was forced to declare bankruptcy in 2017 and was purchased by Toronto-based Brookfield Business Partners in 2018 for US$4.6 billion for its ongoing maintenance business.

But industry hopes are rising again, as the energy crisis in Europe has pushed Germany to extend the life of three nuclear plants it was set to close. And even Japan is looking to restart around 30 decommissioned reactors in pursuit of decarbonization.

And then there are SMRs. At the National Energy Roundtable’s conference at the end of November, several speakers argued for the inclusion of nuclear in Canada’s strategy to electrify the economy. Energy ministers from Ontario and New Brunswick touted the benefits of SMRs, saying the technology can provide affordable, continuous, non-emitting power.

The two provinces – in addition to Alberta and uranium-rich Saskatchewan – have agreed to work together on the commercialization of SMRs.

Ontario Energy Minister Todd Smith said the province is facing an energy supply shortage toward the end of the 2020s and sees SMRs as one of several generation technologies that will be needed to address it. (This expected electricity crunch in Ontario is in large part due to the Ford government ripping up contracts for more than 700 renewable energy projects.)

“It’s going to take an all-hands-on-deck approach to meet the demands of the future,” Smith said. And he urged the federal government to ensure that projects don’t get stalled in lengthy environmental assessment hearings.

SMRs have been a decade away from deployment for the last 30 years, while wind and solar are actually being deployed.

-Keith Stewart, senior energy strategist with Greenpeace

At Darlington, OPG expects to receive a construction licence in 2024 and will release detailed cost estimates as design and regulatory work proceeds, OPG spokesman Neal Kelly said in an email.

Former mayor of Iqaluit Madeleine Redfern said at the roundtable discussion that SMRs can help northern communities and industry end their reliance on expensive, dirty and often unreliable diesel generators. Small reactors, she said, would be more reliable than intermittent electricity production from wind or solar projects. (Redfern is also chief operating officer of CanArctic Inuit Networks and an Indigenous advisor to nuclear energy developer USNC-Power, which is partnering with OPG on a demonstration reactor project, as it seeks approvals from the federal nuclear regulator.)

Critics argue that SMRs pose the same problems of safety and waste disposal that have bedevilled the nuclear industry for decades. The future “lies in capturing the sun and wind, not in splitting atoms,” Greenpeace campaigner Keith Stewart said in an email. “SMRs have been a decade away from deployment for the last 30 years, while wind and solar are actually being deployed.”

Still, Ontario is betting heavily on nuclear to decarbonize the electricity grid even as demand for power could double or even triple as we move to electrify transportation, home heating and industrial energy needs.

Ontario will continue to rely on natural gas in the medium term to keep electricity costs down while the refurbishments at Darlington, Bruce and possibly Pickering can be completed. The Ontario plan anticipates that SMRs would also help end the reliance on natural gas. The Progressive Conservative government is even reviving conservation programs after killing them when Premier Ford first came to power in 2018.

Smith said Ontario is committed to electrification but will need the federal government to be a reliable partner to help keep costs down. “If the price of electricity soars, we’re not going to see electrification unfold,” he said.

However, whether SMRs can be a timely source of cheap and low-carbon electricity for Ontario and beyond remains to be seen.

The post Will small modular reactors seed a nuclear renaissance? appeared first on Corporate Knights.

But its home won’t be in progressive California or liberal New York. It’s being built in conservative Wyoming, maybe the most beet-red state in the country. In the 2020 presidential election, Wyoming favoured Donald Trump by 43 percentage points – the largest margin for the former president in any state. The Cowboy State is known for its enormous wide-open spaces, national parks such as Yellowstone, ranchers and lots and lots of coal.

And yet, the energy transition is quietly happening here. According to S&P Global Market Intelligence, Wyoming had more wind-energy project capacity in advanced development or under construction than any other state in the second quarter of 2022, with 6.5 gigawatts (Chokecherry will contribute almost half of this). Wyoming isn’t alone in this regard among conservative states that have historically had fossil-fuel-focused economies. Oil-friendly Texas had the second-highest wind project capacity in advanced development or under construction, with around four gigawatts. Massachusetts – a blue state with a Republican governor since 2015 – came in third.

“It’s not really whether we’re going to transition or not. It’s what are we going to transition to,” says Jonathan Naughton, a co-director of the Wind Energy Research Center at the University of Wyoming.

When it comes to solar, Texas leads the nation in projects under advanced development or under construction, with 7.9 gigawatts of capacity in these late stages, according to S&P. California came in second, followed by Ohio and North Carolina.

Part of the reason that rural – and more conservative – parts of the country are attracting investments in renewables is geography. Rural states simply have the space to install new infrastructure. Texas has huge tracts of undeveloped land, an arid climate and plentiful sunshine for solar panels. In south-central Wyoming, where the Chokecherry project is being built, there is also a notch in the Continental Divide, which creates a funnel of constant high-speed wind. The Department of Energy built some of its first wind turbines here in the 1980s.

But while renewable energy projects are being built at record levels in Wyoming, the state’s government is having a hard time letting go of its dependency on fossil fuels.

A hard habit to break

The first coal deposits were found in Wyoming around 1840, before it was even a state. Union Pacific built its railroad through Wyoming in the 19th century and had major interests in the area, as it powered its locomotives with coal. Around the turn of the century, oil production started in the region. Ever since, fossil fuels have been a significant part of the state’s economy, though the numbers are sliding. In 2011, there were more than 25,000 workers in the state employed in mining (including oil and gas), which made up about 15% of Wyoming’s workforce at the time. Last year, mining accounted for 5.6% of jobs.

Today, Wyoming is still the country’s largest coal producer and is one of the 10 largest oil and gas producers. Since the state’s roughly 580,000 residents can burn only so much, most of its fossil fuels are shipped out of state. For decades, Wyoming has taxed that exported energy, riding the booms and busts of these commodities, using the revenue to pay its bills and keep taxes low for its residents. Over the years, revenue from coal has gone to building schools, recreation centres and other public infrastructure. The state is now collecting hundreds of millions of dollars less a year in taxes from coal than it was in 2011. Rebounding oil prices help – for now – but with coal prices facing long-term collapse, some economists in Wyoming say it’s time to diversify the state’s economy to avoid the worst of the potential economic hardship that could accompany the eventual sunsetting of fossil fuels.

Robert Godby, an energy economist and a professor at the University of Wyoming, estimates that a family of three in Casper, Wyoming (one of the state’s largest cities), pays an average of US$3,000 in taxes a year but receives about US$28,000 to $30,000 in state services. “In terms of the public services people get, they’re getting in the order of 10 times what they pay for. And that’s a circle that’s hard to square. When revenues are declining, you’ve got some tough choices,” he says, adding that replacing those revenues might eventually mean taxing residents, which is a political non-starter in Wyoming. “Politically, it’s a losing game.”

The Chokecherry wind project is expected to bring in US$850 million in taxes over a 20-year period, but Godby isn’t convinced that the revenues from coal can be replaced by wind alone. Unlike coal reserves, if the state raised taxes on wind electricity generation, economists say it could push energy companies simply to build wind farms elsewhere. They fear that there is less of a premium on Wyoming’s wind than there was in the past, since technological advances have enabled turbines to function in more places than they used to.

It’s not really whether we’re going to transition or not. It’s what are we going to transition to.

-Jonathan Naughton, co-director of the Wind Energy Research Center at the University of Wyoming

Coal mines have also been big employers for small towns in Wyoming for decades. They still employ around 4,300 people in the state. And as of June, oil and gas jobs totalled 8,600. It wouldn’t be possible to replace all those jobs with wind ones, says Naughton, as most of the labour needed for a wind project comes upfront with its development and construction. After construction, Chokecherry is expected to provide only 114 jobs in operations and maintenance once up and running. However, Naughton sees the wind industry as one part of Wyoming’s future economy.

Because of its cheap electricity, Wyoming is a good place for energy-intensive industries, such as data centres, which also require colder temperatures. Naughton also sees potential in smaller industrial operations, such as aluminum smelting facilities that would employ a few hundred.

Economists are hopeful that some coal plants could be converted into demonstration plants for carbon capture or green hydrogen production facilities. There are signs that new industries are already moving into the state. Bill Gates’s TerraPower is set to build a demonstration sodium-cooled nuclear reactor in Kemmerer – a small community where a coal-fired power plant is set to close. TerraPower says it plans to employ former coal workers from the area.

In September, cleantech company CarbonCapture announced a partnership with Frontier Carbon Solutions that will build the world’s largest direct air capture (DAC) carbon removal and storage facility in Wyoming, promising “well-paying energy transition-related jobs.” Wyoming Governor Mark Gordon, who has been an avid supporter of both coal and carbon capture technology, sees carbon removal as a way of preserving the fossil fuel industry while achieving net-zero carbon emissions.

“We’re really trying to get ourselves positioned to be the place of first choice for industry as they emerge with new climate technologies,” Gordon told Reuters.

Blow the coals

Gordon is also the same governor who has championed legal attempts to keep coal-fired power plants from shutting down. Last year, state lawmakers passed legislation that would force utilities to take extra steps before retiring coal plants. The state legislature also passed a law that set up a US$1.2-million fund the governor can use to sue other states that want to use electricity powered by renewable energy instead of Wyoming’s coal.

Energy experts say this is largely just a way to delay what is bound to happen, as the energy transition picks up steam. “We cannot self-determine whether people continue to buy our coal or not. That’s up to others. But we have a hundred percent control over whether we install wind or not,” says Naughton, who adds that the transition from fossil fuels to clean energy is occurring whether the state likes it or not and that Wyoming needs to respond. “The fear is that if we don’t choose, it’s just going to happen to us.”

Godby says that he understands why politicians are trying to delay the closure of these plants, since “when you’re pushed up against a cliff, you don’t just allow yourself to be pushed off,” but that it’s “just a matter of gaining time. You’re delaying the inevitable and hoping that something changes.”

Moving past partisanship

While elected officials are doing all they can to breathe life into a dying industry, public opinion in Wyoming is not unfavourable toward renewables. According to a 2020 poll by the University of Wyoming, around 69% of respondents said they support solar, and 66% said they support wind. Natural gas received 83% support, oil received 71% and coal, 63%.

Michelle Moore, the CEO of non-profit Groundswell and the author of Rural Renaissance, says that the renewable energy projects happening in states like Wyoming, Texas and Tennessee show how “practicality can triumph over politics.” She adds that the benefits both red and blue states are seeing from the Inflation Reduction Act, which was passed by Congress this summer, demonstrate how out of sync some partisan politicians are with the experience of most Americans.

“Though not a single Republican in Congress voted for the Inflation Reduction Act, Republican-led states including Georgia, Tennessee and North Carolina are seeing the benefits of the bill’s Made in America electric vehicle provisions, which are driving billions in new manufacturing investments and thousands of good-paying jobs into the states,” says Moore, who was also a sustainability official in the Obama White House.

The bill included $369 billion for climate and clean energy policies, with $9.7 billion specifically for rural cooperative electricity utilities to expand local renewables. It also provides tax incentives for building new renewable-energy projects in communities whose economies have historically depended on fossil fuels. As well, the act has raised the federal tax credit for direct air capture projects like CarbonCapture’s venture in Wyoming from $50 per ton to $180 per ton, making it more financially palatable.

So, the clean energy transition is already well underway in red America. Energy experts agree that it’s time for states like Wyoming to get behind it and move forward toward a more sustainable future, instead of clinging to the past.

“After all, we’re all in this together,” says Moore.

The post When red states go green appeared first on Corporate Knights.

The provincially owned utility is pursuing two of the continent’s largest decarbonization projects, that would supply hydropower to Massachusetts and New York City, displacing natural gas in those markets. In both cases, the transmission projects needed to complete the deals have run into local opposition that could derail Hydro-Québec’s export plans.

It’s also participating in talks on a project called the Atlantic Loop. The regional grid would bring hydropower to the Maritimes to displace coal-fired power and avoid the need for new natural gas plants to complement growing supplies of wind power.

If all parties can agree, new transmission lines would flow electricity from Quebec to the south and the east to provide baseload power and to back up intermittent generation of renewables. They would, in turn, allow American and Atlantic Canadian producers of renewable energy to sell to Quebec when there is a surplus of wind power.

However, even as it looks to increase electricity trade with its neighbours, Hydro-Québec faces a huge challenge in serving as the linchpin for the province’s ambitious decarbonization plans, which could result in as much as 50% more electricity demand in 2050.

The utility’s original focus was on selling hydroelectric power to Quebecers and keeping rates low for the province’s industrial and residential consumers. While that core mandate remains, Hydro-Québec chief executive Sophie Brochu says, the corporation is now determined to advance regional co-operation in decarbonization while investing more heavily in energy efficiency, wind power, and new, smarter grid technology.

The “North Star” for all electricity systems operators and utilities in North America is to deliver the low-carbon energy transition at the lowest cost possible to their customers, Brochu says.
“We have a responsibility to, obviously, serve our respective markets,” she said. “We [also] have a collective responsibility to see how we can work in common with our respective infrastructures and means of production to access this North Star.”

For the third year, Hydro-Québec ranked first among the Corporate Knights Best 50 Corporate Citizens in Canada. Its ranking was based not only on the low-carbon nature of its immense electricity business, but on water productivity, taxes paid, CEO-to-average-worker pay, executive and board gender diversity, and clean revenue.

Brochu herself is the personification of both Hydro-Québec’s progress and its deep connections with the province’s business culture. When she took over in 2020, she became Hydro-Québec’s first female CEO. The appointment interrupted the sabbatical she had planned for herself when she resigned after serving 12 years as chief executive officer at Montreal-based Énergir, the former Gaz Métro.

Keeping the home fires clean-burning

In March, Hydro-Québec released its strategic plan for 2022 to 2026. It laid out the challenges ahead and warned that pricing structures would have to change to encourage energy efficiency and conservation. In other words,  if Hydro-Québec is to succeed in its ambition of becoming the renewable “battery” for a large swath of North America’s northeast, it would have to restructure its rates, especially at peak hours, to get Quebecers to stop wasting so much power.

Between 2020 and 2029, it projected that Quebec’s own demand for clean power would increase by 20 terawatt-hours (TWh), or roughly 10% of current levels. By 2050, decarbonization efforts – including a dramatic increase in electric vehicles – would result in an increase of 100 TWh, or a 50% rise.

Brochu says they expect to meet that 2029 demand through an aggressive energy-efficiency program; the refurbishment of existing hydro facilities; and growth in wind power, including as much as 3,000 megawatts of capacity provided by a recently announced partnership between Hydro-Québec, Énergir and Borealis.

Even with that higher demand in Quebec, the utility is pursuing deals to increase exports by some 20 TWh annually to the United States under firm contracts. (By way of comparison, Nova Scotia’s power demand was 10 TWh in 2019.)

Eyeing expansion to the south

American politicians and systems planners – and a number of power sector analysts – are looking to Quebec to provide relatively low-cost, low-carbon power to help drive states’ own decarbonization plans. Hydro-Québec is moving on two separate deals: the 9.45 TWh New England Clean Energy Connect, to serve Massachusetts, and the New York City–bound Champlain Hudson Power Express, with a capacity of 10.5 TWh. The US$4.5-billion New York project was approved by state regulators in April, but further legal fights are possible.

A study from the Massachusetts Institute of Technology in 2020 concluded that increased reliance on hydropower from Quebec provides the most cost-effective route to decarbonization for northeastern states, especially when coupled with a bidirectional trade in which the Canadian province purchases surplus renewable power when generation is high but demand is low.

In the longer-term, Quebec could serve a battery function, recharging its reservoirs when there is a surplus of renewable power and flowing hydropower when intermittent renewables cannot fill demand, the author of the MIT study, Emil Dimanchev, said in an email.

Brochu says Hydro-Québec is eager to expand the combined benefits of wind and hydro. However, the current agreements with Massachusetts and New York are for a set capacity, which would flow regardless of the availability of wind power.

Proposals for Quebec to expand power exports to Ontario have long failed to materialize, in part because Hydro-Québec wants to sell firm capacity and its neighbour wants a more flexible purchase of energy to backstop renewables. The Quebec utility could face a better reception in the United States if it “reframed” the New England and New York projects “along the lines of the battery concept by bundling new transmission with large-scale renewable expansion in the U.S.,” Dimanchev says.

Opposition to U.S. expansion plans brewing

As it is, Hydro-Québec is facing tough opposition to the massive transmission projects needed to complete the American deals.

In Maine, voters rejected a US$1-billion transmission plan to bring power from Quebec in a referendum last November. Hydro-Québec’s contractor is continuing with some site preparations as the utility and its partners seek a court ruling that would allow completion.

Several groups unsuccessfully opposed the New York transmission line that would be buried under the Hudson River. They include the environmental group Riverkeeper, which submitted a brief arguing that Quebec’s hydropower is not as low-carbon as Hydro-Québec claims and that the utility is disregarding Indigenous concerns.

Damming and flooding large areas can indeed cause the release of methane and carbon dioxide as vegetation dies off. Hydro-Québec argued that the Riverkeeper analysts cherry-picked data, in part by focusing on near-term effects, while for the life of the project, its hydropower has among the lowest carbon intensity in the world.

The Riverkeeper submission included statements from a handful of Indigenous representatives, who complained that Hydro-Québec’s hydropower has damaged their traditional territory.

Brochu acknowledges that Hydro-Québec has had longstanding problems in acknowledging and addressing Indigenous concerns but says the utility is working to address its faults.

“Things need to improve, and we are improving them,” she says, while adding that there are many different perspectives within the Indigenous communities. Brochu recently participated in a ceremony marking Hydro-Québec’s commitment to bring power to the village of Kitcisakik, the last Indigenous community that was unconnected to the grid. “It is as thrilling to bring power to Kitcisakik as it is to [bring it to] Queens in New York,” she says.

Hydro-Québec is also working with a Mohawk community that wants to invest as partners in a transmission line that traverses their traditional territory on its way to New York. However, Hydro-Québec faces myriad lawsuits and other challenges from Indigenous groups stemming from its long history of damming rivers across the province and in Labrador dating as far back as the development of Churchill Falls in the 1960s and ’70s.

The Indigenous complaints have so far not derailed Hydro-Québec’s export plans.

Pierre-Olivier Pineau, an energy expert at the HEC business school in Montreal, says rejection of Quebec power would only hurt American consumers. At the same time, the loss of export sales would mean less supply pressure and lower prices at home, he says.

The post Canada’s top corporate citizen of 2022 wants to become North America’s battery appeared first on Corporate Knights.

At the time, the Canadian CEO and water technology expert was 63 years old and hoping to retire to academia. Benedek took a job at Scripps Research in San Diego, where he was briefly a professor. But while at Scripps, he quickly became passionate about the next problem he wanted to tackle through the private sector: climate change.

“Governments around the world are failing to protect us from catastrophe,” he says. “And things will change, as they usually do, when the catastrophe gets unbearable.” Benedek hopes that things won’t get to that point and that his current company, Anaergia, can be part of the solution in weaning the world off fossil fuels. The corporation is one of Canada’s fastest-growing sustainable companies.

In 2007, Benedek left his academic job and founded Anaergia, which converts organic food waste into biofuels, such as renewable natural gas. This technology reduces the amount of methane, a potent greenhouse gas, being emitted into the atmosphere from landfills. The company went public last summer, and in March, Anaergia announced it planned to raise $60 million by offering 4.8 million subordinate voting shares.

A current that flows through both Benedek’s old venture and his new one is his pursuit to solve environmental problems using technology. He worried that the world would face some nasty water shortages and sought to put a dent in water pollution through ultrafiltration membranes he developed with Zenon.

Governments around the world are failing to protect us from catastrophe. And things will change, as they usually do, when the catastrophe gets unbearable.

-Andrew Benedek

Benedek came to Canada from Hungary in 1956 during the Hungarian Revolution. He became a professor at McMaster University, before fleeing academia a first time to start Zenon in 1980. During that first stint as a professor, he grew restless to make an impact on big problems.

That drive led him to found the company that topped our first list of the 50 Best Corporate Citizens 20 years ago (Zenon ranked first in 2002 and 2004). Back then we wrote, “Zenon provides one of the most basic of human needs: clean H2O, while conducting itself in the most chivalrous of fashions. Is it the Ideal Corporate Citizen? For 2002, it’s King of the Castle.”

Benedek came from a long line of shoemakers in Hungary, an occupation he was expected to fall into, but he was bound for bigger things. He hopes that his company will be part of a larger constellation of corporations that will help solve humanity’s greatest challenge.

“I get up every morning with the hope that I [can] find a new way, [and] I think about … how to get there. And then I also go back in history and I find examples where, [against] impossible odds, [problems were] resolved and humanity survived,” he says.

The post Return of the original Corporate Knight appeared first on Corporate Knights.

Raphaël explained that he lived outside of Paris, and the spike in gas prices was too much for his family to bear. “The tax is nothing for people living in Paris. They all have the metro. All my family in the countryside felt this immediately.”

“Yes, we care about the climate, but justice, too,” he explains. “It’s the same battle.”

During the French protests that began in response to a rise in gas prices in 2018, I spoke with Raphaël and 30 other “yellow vest” activists over a few months at protests, meetings, homes and cafés. The activists were from all walks of life in France: I interviewed electricians, teachers, artisans, students, factory workers, janitors, nurses, retirees, veterans and more. Why are they called the “yellow vests”? All motorists in France are required to keep a yellow vest in their car to wear for emergencies. For Raphaël and millions of others, wearing the yellow vest became a symbol of protest. In interviews, I was interested in what drove them to mobilize and their views on climate change. Coming from the United States, a country that’s politically polarized over the topic of climate change, I expected the yellow vest activists to be right-wing opponents to climate policy. Yet I found something entirely different.

Like Raphaël, everyone uniformly supported climate action and was truly concerned about rising greenhouse gas emissions; however, they disagreed with the French government’s carbon tax approach, which they felt was unjust. In other words, they agreed on the “why” of climate action but disagreed on the “how” of chosen solutions – the very crux of decarbonization for the world at large.

Yes, we care about the climate, but justice, too. It’s the same battle.

More than 80% of global energy is sourced from fossil fuels. With increasing pressures to decarbonize and incentivize a “green transition,” some governments are raising taxes on fossil fuel energy. The crux of this solution is that energy costs (electricity, heating, cooling and gasoline) compose a significantly larger portion of lower-income household budgets. Increasing energy prices disproportionately burdens lower-income groups. France, a country that collects more carbon tax revenue than any other in the world, experienced this the hard way. In the fall of 2018, the French carbon tax rate took a scheduled increase, and, by proxy, national fuel costs rose as much as 23%. In response, millions took to the streets all over the country, blocking roads, roundabouts and gas stations. At their most contentious, certain groups vandalized national monuments, tore up streets and clashed with the police. The world watched, shocked, as the country faced its most hostile protests in decades.

Today, global energy prices are rising for a number of reasons, including a rebound in demand since the beginning of the pandemic, when fuel use plummeted. This increase in energy prices has governments around the world contending with backlash. A dwindling supply of coal in India is causing power cuts, sparking protests. Energy price protests and truck driver strikes in Spain have caused the Spanish government to secure emergency support funds. Many other governments across Europe, such as Greece, are subsidizing energy prices to support struggling households. In France, smaller yellow vest protests started breaking out over fuel-price spikes this fall.

This time, the French government responded quickly by capping gas prices and promising to send €100 “energy cheques” to roughly six million lower-income households. Since the original yellow vest protests, the French government has altered its decarbonization strategy. After President Emmanuel Macron froze the contentious fuel tax in late 2018, he announced the government would spend more than €5 million to create a citizens’ assembly on climate change that would advise the president on climate policy. Ten of the assembly’s proposals were adopted into law; another 36 were included, but in watered-down form.

France’s housing minister has since said the country is going to greater lengths to consider the social consequences of climate policies and to include workers who might lose their jobs in the energy transition.

Can climate policy be implemented with less conflict? In a world where fossil fuels have been pivotal in driving development, prosperity and, indirectly, progressive reforms, it is difficult to answer this question. When it comes to carbon taxes, the increasingly favoured design is the “tax-and-dividend” approach. In this model, rather than raising general government revenue or financing environmental programs, carbon tax revenues are redistributed to households in routine payments. Cheques can be graduated so that lower-income groups receive more money, making the system more socially just. Canada is already using a tax-and-dividend approach, and while opposition to the national carbon tax still percolates, it’s generally dwindling. Like Canada, France’s carbon tax had abundant exemptions for carbon-intensive sectors, but it saw much of the revenue going to corporations as a tax credit rather than back to the people, which further fuelled discontent among average consumers.

Carbon taxes will not solve climate change, however, as they are “market-fixing,” not “market-shaping.” They attempt to fix a market failure (by putting a price on emissions), rather than reshape the market to be inherently carbon-free. There is nothing wrong with market-fixing; it’s simply that market-shaping is more effective at transforming economies.

Fossil fuels were historic forces. Tapping them powered the industrial revolution and delivered many years of economic growth and prosperity. Fossil fuels shaped the very fabric and design of our modern world. As a fundamentally transformative force, their elimination will require fundamentally transformative market-shaping solutions, public investment that’s coordinated between multiple governments and the private sector, with the ultimate goal of shifting paradigms. Crucially, these policies must place the well-being of everyday people and workers whose livelihoods would disappear with decarbonization at the centre of these transitions or decarbonization may never happen. What might this look like in practice?

The French government recently bailed out a struggling French car company, Renault. Contingent upon receiving the funds, however, Renault is required to move toward EV battery production and keep certain factories in France open to support key jobs. Though small-scale, this kind of public–private sector coordination is necessary; the private sector receives capital to innovate, but it is conditional upon their moving toward carbon-free technologies and including workers in the process.

An economics of decarbonization must include an economics of inclusion to be successful. The good news is that many aspects of the transition (such as retrofitting buildings and constructing public transport) are labour intensive and will require abundant skilled workers. Small steps that support households struggling with increased energy costs and guarantee greener jobs for those in carbon-intensive sectors offer some hope.

With reports of energy price protests flaring up around the world and challenges with global economic recovery, I think back to the activists I met in Paris in 2019. For decarbonization to succeed, it must support average citizens like Raphaël. If not, they will continue to take to the streets. As Raphaël noted, “They cannot tax our walking.”

Daniel Driscoll is a political economist and PhD candidate at the University of California San Diego.

The post What I learned from France’s energy protesters on how to transform the economy appeared first on Corporate Knights.

I’d like to thank Corporate Knights for providing a public forum to examine issues surrounding pollution pricing in Canada, particularly as it relates to major industrial emitters. For too long, Canada delayed pollution pricing across the economy using the rationale that it would put us at a competitive disadvantage to our trading partners. This effectively gave a veto on climate action to the slowest movers.

No more. Since 2019, the Government of Canada has implemented a price on pollution that entrenches the polluter pay principle while ensuring industry does not relocate to jurisdictions with weaker environmental regulations. These two imperatives – polluter pays, and a level playing field that protects Canadian jobs – are at the heart of the regulations that make up the federal Output-Based Pricing System and the minimum criteria we have set for similar provincial and territorial systems.

The average price per tonne of emissions, which headlines your assessment, misses the point of the exercise. 

Under the federal Output-Based Pricing System, every tonne of carbon reduced by an industrial facility is worth the full carbon price, or close to it – currently $50 per tonne. Facilities that are more efficient than the industry average earn the carbon price in saleable credits for every new tonne of reduction, while less efficient facilities pay the full price for every extra tonne. That means the worst emitters have the biggest incentive to reduce the amount they pollute during production. All revenues remain in the province where they were collected and are re-invested into technologies that achieve greater emissions reductions from the same industries. And businesses stay competitive as opposed to simply pushing to jurisdictions without environmental regulation. 

The key to this system is predictability and consistency over time. Having established the benchmark price that we consistently enforce, we are providing industry and investor certainty with a very public reassessment of pricing out to 2030.  Updated criteria that provincial systems must meet (the benchmark) for 2023-2030 were published on August 5, 2021. A public consultation period on proposals to strengthen the federal Output-Based Pricing System ends January 24, and proposed regulations will be published in the first half of this year, with final regulations coming into force next January. 

The updated benchmark criteria are designed to ensure that carbon pricing drives significant reductions throughout the economy and will require both broader coverage of greenhouse gas emissions and an escalating minimum price through 2030. New rules for industrial systems will make sure that the carbon price gives a strong incentive to all of their emissions.

As the International Energy Agency stated this month in its 2022 five-year assessment of Canada:  “The proposed carbon pricing trajectory is undoubtedly one of the most ambitious in the world.”

It is also important to note that the pricing system not only incentivizes technological innovation up to $170 per tonne by 2030, but will be complemented by other investments and measures designed to encourage innovation, including the Clean Fuel Regulations and tax incentives for CCUS. 

As the authoritative IEA report states, “Since the IEA’s last in-depth review in 2015, Canada has made a series of international and domestic commitments, putting it on a path toward achieving an ambitious energy system transformation and climate transition by 2050.”

I welcome the thoughtful examination of Canada’s pollution pricing systems, as predictable, steady improvement will be the key to reducing emissions while growing a healthy, innovative and sustainable economy.

Steven Guilbeault is the Canadian minister of environment and climate change. 

The post Letter to the editor: There’s more to the carbon pricing story appeared first on Corporate Knights.

The Liberals’ 2021 campaign pledges would undoubtedly provoke renewed battles with conservative-led provinces, and potentially more court challenges from them. The climate plan that Trudeau laid out on August 29 would reach deep into provincial jurisdiction over the electricity system and natural resources in order to impose regulations aimed at moving Canada to net-zero emissions by 2050.

The headline promise was a get-tough approach to the oil and gas industry, which accounted for 26% of Canada’s greenhouse gas (GHG) emissions in 2019. And to be clear, it is not just the carbon-intensive oil sands that are targeted, but conventional and offshore oil as well as natural gas production and processing.

The more ambitious strategy would face a backlash in provinces like New Brunswick Ontario, Saskatchewan and Alberta where governments have resisted federal climate policies and unsuccessfully challenged carbon pricing in the courts. 

Since 2015, the Liberals have attempted a balancing act with the oil and gas sector, which had contributed mightily to the country’s economic growth over the previous 15 years and is heavily concentrated in western provinces, where distrust of the central government and especially the Liberal Party is endemic. 

Today’s Liberal campaign talk promises a more muscular approach to the industry. It’s vague about how a future government would actually implement the platform. But it is anchored in the overarching pledge to reduce GHGs by up to 45% by 2030 and put the country on track to achieve net-zero emissions by 2050.

That’s in line with the Paris climate agreement’s goal of limiting the increase in global average temperatures to well below 2°C, preferably to 1.5°C. 

With the election only two weeks away, the Liberals are trailing slightly in the polls and need to generate some momentum if they are going to return to power, even with a minority government. The climate crisis remains one wedge issue on which they hope to blunt the Conservatives. 

The Conservative Party, led by Erin O’Toole, says it would roll back Canada’s GHG target to the 30% reduction originally pledged under the Paris Agreement, despite a requirement in the treaty deal for countries to adopt more ambitious targets after their initial commitment. More importantly, the Conservative plan is not in sync with the goal of limiting the increase in average global temperatures to well below 2°C. Even at that level, people in Canada and around the world can expect costly and painful disruptions, with droughts, floods and rising sea levels, as witnessed last week by the flooding that inundated U.S. cities like New York, New Orleans and Philadelphia.

For its part, the NDP has set a GHG reduction target of 50% by 2030 and proposes an even more aggressive emissions reduction plan than the Liberals’, one that would also face challenges from provinces. 

Trudeau’s climate platform says GHGs from the oil and gas sector must stop growing this year, and have a clear path to reach net-zero emissions by 2050. To meet that goal, the industry would face a series of five-year targets, though it’s not clear who would set them or whether they would have the force of regulations.

The Liberal government passed legislation this spring to enforce its net-zero goal and set up a “net-zero advisory committee” that will recommend how to get there, including how much each sector should be expected to contribute. That recommendation would form the basis of enforceable standards, one Liberal strategist said, speaking off the record.

Provincial pushback would be expected 

The governments of Alberta and Saskatchewan have set no broad emissions targets – including for their energy industry – and have not endorsed the net-zero goal. Those governments unsuccessfully challenged the Liberals’ carbon pricing plan with the Supreme Court of Canada and would almost certainly balk at any federal regulations that forced industry to either curtail production or invest huge sums to cut emissions on existing facilities.

The Supreme Court ruling made it clear the federal government does not have carte blanche in setting climate change policy. University of Calgary law professor Martin Olszynski says Ottawa would be able to rely on criminal law of the Canadian Environmental Protection Act (CEPA) to regulate industrial emissions. However, the federal government could open itself to a provincial challenge if it allows too much regulatory flexibility in the rules, Olszynski says.

The party’s climate platform contains other notable pledges that would raise hackles in certain provincial governments.

It vows to cut methane emissions from the oil and gas sector by 75% from 2012 levels by 2030. That goal is a significant increase from the target of 40% by 2025 that was set by Trudeau and former U.S. President Barack Obama in 2012 and was largely supported by industry and provincial governments at the time.

The move would require a massive, industry-wide effort to improve detection and capture of methane, especially in the gas fields of northwestern Alberta and northeastern British Columbia, where the process of hydraulic fracturing, aka fracking, results in large methane leaks.

Methane is a powerful GHG. It’s roughly 80 times more powerful than carbon dioxide but also has a shorter-term impact in the atmosphere. In a dire assessment published on August 9, the UN’s Intergovernmental Panel on Climate Change said the world must dramatically reduce methane pollution to slow the rate of global warming in the short term. 

The three western provinces have their own regulations aimed at achieving the 40% reduction that Ottawa set in 2012, but environmental groups argue the provincial approaches are insufficient to meet that goal, let alone achieve a 75% cut by 2030.

Brawl brewing over electricity regulations

While the oil and gas industry is the usual battleground between Liberals and provinces on climate change, Trudeau’s most recent plan sets up a potential brawl over regulation in the electricity sector. 

The Liberal platform promises to enforce a “clean electricity standard” that would result in an emissions-free power grid by 2030. Ottawa has set pollution standards for power plants in the past, but it is the provinces that regulate the electricity system. Often, the provinces actually own the generation and transmission assets that comprise the grid.

An “emissions free” grid would not only require the complete phase-out of coal-fired power by 2030 (which Canada committed to doing in 2018), but either end use of natural gas in power plants or force utilities to adopt expensive technology to capture and sequester carbon dioxide emissions. Carbon capture and sequestration (CCS) is technically feasible but is not currently widely in use.

That would leave several provinces, including Ontario, that are looking to use gas to replace coal in a bind. They’re planning to use natural gas to provide an uninterrupted supply of power and to back up renewable electricity generation, which can be intermittent.

The federal government already sets emissions standards for new power plants that burn gas, but its pledge to force a zero-emissions standard would likely provoke a battle with several provinces. Quebec, too, would likely join a provincial revolt – more to defend its provincial jurisdiction in the electricity sector than to protect its natural gas assets.

The Liberal commitments for reducing GHGs in the oil and gas sector and on the grid are aggressive and controversial, but they illustrate the depth of effort that the country would require to meet the more ambitious targets that line up with global climate change goals.

Absent an about-face by provincial governments, a less pugnacious approach would avoid renewed tensions in the federation but leave Canada as a laggard in the effort to avert catastrophic global warming.

The post Liberals’ climate platform sets up renewed battle with conservative premiers appeared first on Corporate Knights.