Published in The Hill Times, December 7, 2020
The state of energy policy in Canada, as it relates to fossil fuels, is defined by two major issues: the stalling out, with the possible exception of Quebec, of meaningful progress on climate change; and distress in the Alberta oil and gas sector, a product of weak demand and low commodity prices – trends that pre-dated the COVID-19 pandemic.
The federal government’s newly proposed climate change legislation, Bill C-12, would only establish emission reduction targets for 2030 and beyond, and although requiring planning and reporting, does little to advance the achievement of what targets might be set. The government’s initiative on low-carbon fuel standards seems to be faltering. Although there are strong expectations that the Supreme Court will uphold Ottawa’s carbon pricing system in the face of provincial challenges, the federal government seems to have little appetite for moving its backstop carbon price beyond the $50/tonne plateau it is set to reach in 2022.
Despite a great deal of spilled ink over the impacts of the federal government’s recently adopted Impact Assessment Act (Bill C-69), and its climate change policies, neither has significantly affected the situation in Alberta. The new Impact Assessment Act remains a shadow of the pre-2012 Bill C-38 federal environmental assessment process, and the federal government has done nothing so far that meaningfully constrains the expansion of the oil sands, the principal source of GHG emissions growth in Canada. Quite the opposite, Ottawa bought the Trans Mountain pipeline for the specific purpose of facilitating the access to new markets for oil sands oil.
While boom-bust cycles are all too familiar in the oil patch, the issues the sector is now facing look more structural. Alberta’s traditional US markets have declined significantly over the past decade with the dramatic growth in the availability of “fracked” oil and gas in the United States. Part of the reason then-President Obama could say no to the Keystone XL pipeline was because the US didn’t need the oil it would carry. The incoming Biden administration may take a similar view. More widely, while the Canadian Energy Regulator recently suggested markets for Canada’s oil exports might continue to rise for another decade or two, long-term capital is already moving away from fossil fuels. Climate change driven divestment campaigns are emerging among pension fund and institutional investors, and other long-term players in financial markets are looking well beyond fossil fuels. New investment in the oil sands, a relatively high-cost source of production, has dried up.
Where all this leads for Alberta is an open question. In recent weeks, Jason Kenny’s UCP government has come to a belated acknowledgement of what its predecessors, under Premiers Lougheed, Stelmach, Redford, Prentice and Notley had all recognized – that a continuation of an overwhelming dependence on fossil fuel commodity extraction and export was to not really a long-term option for the province. Rather, Alberta needs to diversify its economic and revenue base. Rachel Notley’s NDP government’s carbon tax on transportation and heating fuels, quickly dismantled by the UCP government, was in some ways a polite effort at introducing a sales tax in the cause of revenue stabilization and diversification.
To its credit, the Kenney government has continued with the phase-out of coal-fired electricity set in motion by the Notley government, and some renewable energy development. And it has recognized the need to upgrade and move towards value-added processing the outputs of the oil and gas industry. But its directions in other areas remain retrograde, particularly its failures to take the environmental problems and growing legacy of wastes and landscape disruption associated with oil sands development, seriously.
The signals from the incoming Biden administration in the US are again highlighting the need for Alberta to re-engage constructively and seriously on the climate change file. If Canada remains committed to making significant progress on reducing its greenhouse gas emissions, then it will require difficult conversations between those provinces whose economic strategies anticipate continued growth in fossil fuel development, and by implication in the associated GHG emissions, and those provinces who do not. While technological developments may slow the growth in emissions from the oil sands emissions and other types of fossil fuel extraction, they are unlikely to halt them completely. Rather, in a carbon constrained world, those jurisdictions who plan to increase their emissions will have to acknowledge that they are implicitly asking others to reduce their emissions even further in compensation.
Those will be difficult conversations. But they will be essential if Canada, after falling short of the original 1992 UNFCC stabilization goal, and its 1997 Kyoto and 2009 Copenhagen targets, is to avoid a fourth failure to meet its international climate change commitments, this time under the 2015 Paris Agreement. They may also present an opportunity to address the need for the diversification, already being propelled by forces far beyond the control of any province, of regional economies that have become overly dependent on a limited range of commodity exports. Whether Canada’s leaders will have the courage and capacity to engage in such conversations remains an open question. Canada’s economic and environmental future depends on their choices.