Energy and Climate Policies in a Time of COVID

Why has Canada been unable to achieve any of its climate change targets? This is the question Douglas Macdonald’s book, Carbon Province, Hydro Province, seeks to answer. Macdonald explains that the ultimate explanation for Canadian failure lies in the differing energy interests of the western and eastern provinces. The book was released back in March, and a lot has happened in the world since then. So we asked Douglas Macdonald to examine the last six months and the impact that COVID-19 has had on Canada’s climate and energy policies.

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Creator: INA FASSBENDER | Credit: AFP via Getty Images

The University of Toronto Press published my book, Carbon Province, Hydro Province: The Challenge of Canadian Energy and Climate Federalism on March 10 of this year. Two days later, I held a copy of the book in my trembling hands. Every author knows that moment. Years have been spent on research, writing, peer-review, revising, and finalizing the manuscript, followed by long months of copy-editing, proof-reading, formatting, sweating over the index – and finally the magic moment arrives. The book exists! For me that bit of magic came on the same day that all the major sports leagues announced they were shutting down. The world went into lockdown and now here we are, five months later, in a hesitant re-opening with a whole new bundle of cares and worries: Is it save to send the children to school? If they do go to school can their grand-mom still give them a hug? Is a second wave inevitable? In this new, upside-down world who has time to think about Canadian energy and climate change policy?

My book is based on research and analysis I have been doing since 2008. It asks why we have failed to meet all of our greenhouse gas emission reduction targets and how might we do better, with a focus on the challenge posed by the fact that emission increases in the oil-producing provinces, driven largely by expansion of oil-sands production, are undercutting reductions made elsewhere. The book draws lessons from all five energy and climate federal-provincial policy efforts to date, spanning the years from Pierre Trudeau in 1973 to Justin Trudeau in 2019. It then uses those lessons to draw a map for finding policy success, based on agreement among all federal and provincial governments on what portion of the total reduction effort each will provide. But is any of that still relevant in a COVID-19 Canada?

To answer that question, let’s take a quick look at how this country’s energy and climate policies have evolved since early March. In terms of energy policy, the first major event was the COVID-induced decline in demand for oil, as people around the world stopped driving cars and flying in planes. This added to the economic distress already felt in Alberta due to the previous decline in oil prices. After the October 21, 2019 federal election (which left Alberta and Saskatchewan shut out of cabinet) that distress, understandably, stoked a new round of western alienation and separatism. On March 31, Alberta Premier Jason Kenney sent out a clear message that he is counting on a renewed oil and gas industry to solve his province’s economic woes when he invested $1.1 billion in the Keystone XL pipeline, despite uncertainties as to whether it will ever be built. Construction of the Trans Mountain Expansion, on the other hand, is a sure thing. On July 2, 2020 the Supreme Court refused to hear an appeal by the First Nations which have been fighting against the project in court. With all legal means of blocking the project closed off and with some twelve billion dollars of taxpayer money available, the Expansion will be built.

Shortly after the lockdown started, the Canadian Association of Petroleum Producers asked Ottawa to suspend inspections for federal regulations, temporarily cancel the federal carbon tax, put new climate policies on pause, provide anywhere up to $30 billion in “liquidity support” through increased credit guarantees, and make fossil-fuel investments 100% tax deductible. In April, Ottawa announced it would spend $1.7 billion on abandoned well clean-up, taking that liability off the books of active companies, as well as paying for bankrupt firm clean-ups. The Trudeau government is also providing financial support through the Large Employer Emergency Financing Facility and taking other measures to provide liquidity support. A report in the National Observer on August 12 provided evidence that Canadian financial assistance to the fossil fuel industry is ten times higher than the G20 average. Like Premier Kenney, Prime Minister Trudeau is sending a clear message that he sees the oil and gas industry as an important part of the economic recovery.

In terms of climate change policy, an early event was postponement until September of the Supreme Court hearing on the constitutionality of the federal consumer carbon tax (after courts upheld federal jurisdiction in the Saskatchewan and Ontario cases, but ruled against it in Alberta). Until that is decided, the federal-provincial Pan-Canadian Framework program, for which the federal tax was the linchpin, remains in a state of suspended moral authority. Beyond questions surrounding the constitutional validity of the tax is the inconvenient fact that Alberta, Saskatchewan, Manitoba, and Ontario, which account for over half of the Canadian population and almost three-quarters of Canadian emissions, stand opposed. How can a program be called “national” when that many provinces want to kill it?

Rather than relaunching federal-provincial negotiations, however, the Trudeau government seems instead to be contemplating unilateral policy action using the instruments of spending and law. Until very recently, Ottawa was strangely reluctant to commit to funding for a green economic recovery in the way that Germany, France, and others are doing. Shortly after the start of the lockdown the federal Environment, Infrastructure, and Culture ministers began meeting to develop such plans. At the end of June, Corporate Knights called for $100 billion in green spending over ten years and a month later the Task Force for a Resilient Economy recommended spending $50 billion over five years on things such as building retrofits, clean energy, and electric vehicles. The Prime Minister, however, stayed mum, reportedly because intergovernmental affairs minister Chrystia Freeland was relaying opposition from “some provinces” and perhaps also due to opposition from Finance Minister Bill Morneau. Now, with Morneau gone, the Prime Minister is promising a September 23 Throne Speech which will lay out “bold new solutions” for a fairer, more green economy.

Those solutions will likely involve massive new spending, but also new federal law. The 2019 Liberal election platform included a commitment to enact “legally-binding five-year milestones” for emission reductions, something which was also included in the Minister of Environment’s December 13, 2019 mandate letter. On June 16, 2020 a coalition of six environmental organizations released a proposal based on the same principle and including an allocation of the total reduction among provinces. Given constitutional realities, the proposal says the allocation would not legally bind any province, but then suggests a province not willing to act would see federal regulation within its borders (a sure recipe for further conflict).

So where do we now sit at the beginning of September? Basically, in the same place we have been for thirty years, ever since Prime Minister Brian Mulroney announced Canada’s first greenhouse gas reduction target – pursuing contradictory energy and climate change policies. Ottawa is spending considerable quantities of money so that the oil and gas industry, Canada’s largest source of greenhouse gas emissions at 26% of the total, can continue to provide jobs and create economic wealth, something which can only happen if the industry’s greenhouse gas emissions expand even further. At the same time, it is pursuing policies, to be achieved through both new spending and new law, in an effort to reduce total Canadian emissions: the left hand is working to increase emissions, while the right hand is working to reduce them.

Carbon Province, Hydro Province examines precisely that contradiction, both within the federal government and within Confederation, as different regions pursue their very different energy and climate interests, with the rickety machinery of intergovernmental relations as the only means of finding a reconciliation. Is the book still relevant, now that the sports teams are playing in empty arenas? Yes, it is. COVID-19 has done nothing to change the basic energy and climate realities. Canada is a fossil-fuel exporting nation and thereby gains significant economic benefit. But that benefit is not evenly shared and the associated emission increases are cancelling out reductions made elsewhere. With all the money and federal law in the world, the Prime Minister cannot solve the climate problem by himself. The fundamental nature of Confederation means the provinces have to be involved. The Prime Minister has to resurrect his 2015 election promise and for the first time ever give the provinces a voice as we set a new reduction target. At the same time, he must lead negotiations on an equitable sharing of the cost of meeting it. Carbon Province, Hydro Province is very much relevant. I recommend it to you.

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Click here to find out more about Carbon Province, Hydro Province: The Challenge of Canadian Energy and Climate Federalism.