SNAPSHOT: Canada’s Contradiction: Low-Carbon Leader or Perpetual Petro-State?

Full Story: The Energy Mix

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Justin Trudeau/Twitter

2018 was the year Canada’s policy contradictions on climate and energy came home to roost, as the government of Prime Minister Justin Trudeau tried to square its enthusiastic embrace of the Paris Agreement with its equally avid support for the country’s carbon-emitting fossil industry. With the federal election coming up in October 2019, and an equally momentous vote in Alberta scheduled for May, the story intensified through the year, and the fault lines became ever more obvious.

Trudeau’s determined effort to chart a middle course between fossil dependency and climate responsibility earned him angry rebukes from both sides of the line, with a growing number of columnists and analysts concluding that he can’t have it both ways. The single biggest story of the year was the federal government’s decision to give in to an ultimatum from Houston-based Kinder Morgan Ltd. and spend C$4.5 billion to buy taxpayers a 65-year-old pipeline. That decision produced a sense of utter betrayal from Indigenous and other pipeline opponents—while fossils, incredibly, still accused the government of showing inadequate support for their failing industry.

In the end, analysis showed Canada falling massively short of its Harper-era carbon target under the Paris accord and unable to hit the target if it continued to insist on scaling up oil and gas production. One assessment showed carbon pricing eliminating 90 megatonnes of greenhouse gas emissions by 2022, but still leaving the country 90 megatonnes short of a Paris goal that Trudeau and Environment and Climate Minister Catherine McKenna had described as a floor, not a ceiling, for Canada’s climate ambition. Other analyses said Canada needed a higher carbon price and a wider suite of policy tools to get the job done, and the federal “backstop” price on carbon was on track to add 100 megatonnes to Alberta coal emissions.

Yet the strongest assurances the government offered had to do with the certainty of new fossil projects. Even after Canada signed on to a new high-ambition declaration, McKenna declined to strengthen the country’s carbon target. Earlier in the year, she attributed the country’s emissions gap to economic growth and expressed her continuing commitment to the Paris target.

Then-natural resources minister Jim Carr’s energy transition advisory council anticipated a future of wind, solar, energy efficiency, and the world’s “cleanest” liquefied natural gas (LNG) production; British Columbia welcomed a C$40-billion LNG megaproject; three new B.C. LNG projects neared approval; and Energy Mix correspondent Greg Allen said a 1.5°C future would require Canada to phase out natural gas. A new Ontario cement plant was expected to emit one megatonne per year, analysis placed the social cost of carbon from the Trans Mountain pipeline expansion as high as $8.7 billion up front and $4.1 billion per year, and doctors asked Trudeau for an independent health assessment of Trans Mountain.

In November, Canada posted the G20’s highest per capita GHG emissions, as a study showed average global warming would exceed 5.0°C if the whole world followed Canada’s, Russia’s, and China’s lead.

Climate Action Network-Canada (CAN-Rac) said it was time for fossils to pull their weight on Canada’s climate commitments. CAN-Rac Executive Director Catherine Abreu and Environmental Defence National Program Manager Dale Marshall called for a more robust accountability mechanism for Canada’s Paris commitments, and Clean Energy Canada cited skepticism about post-carbon solutions as the new climate denial. “We didn’t have time for climate denial, and we have even less time for solutions denial,” asserted Executive Director Merran Smith and Policy Director Dan Woynillowicz.

Opinion research showed Canadians backing strong climate leadership despite concerns about cost, opposing fossil fuel subsidies by a two-thirds margin, and supporting Ottawa’s backstop price on carbon. The latter poll also showed a smaller gap between the views of Albertans and those of British Columbians than most pundits and politicians believed. Veteran climate advocate and organizer Tzeporah Berman received a vicious response, complete with death threats, when she accepted a speaking engagement from a branch of the Alberta Teachers’ Association. Berman delivered an impassioned call for dialogue, foresight, and collaboration to help the province prosper in a post-carbon world. Alberta Premier Rachel Notley arranged to follow Berman’s speech with one of her own and came back with unicorns—literally. “We are better than this,” Berman said.

Pipeline to Tidewater: A False Narrative Props Up a Fading Industry

The battle over Canada’s energy future was driven in large part by the shaky proposition that a prosperous future awaited Alberta, if only the stars aligned to build new pipeline capacity to tidewater. As the year progressed, it became ever clearer that that storyline was false at worst, woefully incomplete at best.

The basic claim—repeated and repeated again by industry executives and Notley—was that the Alberta and Canadian economies were losing many millions of dollars per day because of the deep discount oilpatch producers had to offer for the Western Canadian Select crude oil they sell into world markets. Just get a pipeline built, they claimed, and a price differential in the range of C$50 per barrel would be cleared, or at least mitigated, bringing new benefits to the industry and the provincial economy that depends on it.

The intensity ratcheted up through the fall, as falling world oil prices drove the discounted Alberta market to the point of crisis. By mid-November, major tar sands/oil sands producers were berating each other for taking “windfall profits” by grabbing all the available pipeline space they could, and the “swashbuckling free marketeers” in the oilpatch were doing precisely what you might expect: losing patience with governments for not stepping in with a fully baked solution to their problems, warning of a new wave of western Canadian separatism, accusing/not accusing Ottawa of treason, even risking the appearance of insider trading by participating in a meeting with Notley to discuss measures to restrict production volumes. Cenovus Energy urged governments to impose production cuts to drive up fossil revenue, and Notley complied.

“The grade of oil that Alberta sells into world markets, Western Canadian Select, hit a rock-bottom price of US$13.46 per barrel,” The Energy Mix explained at the height of the industry’s mid-November hyperbole, “its lowest since Bloomberg began keeping track in 2008. They’re producing at a loss, and they want a solution right now. And they imagine that faster federal action to approve the intensely controversial Trans Mountain pipeline extension—a project that would be years away from delivering an ounce of heavy crude if construction restarted tomorrow—will somehow give them relief from today’s problem.

“They also imagine that they have anything less than the federal government’s full-throated support.”

Later, Canadian Association of Petroleum Producers CEO Tim McMillan pivoted from complaints about pipelines and oil prices to an attack on Canada’s proposed new impact assessment act, Bill 69.

‘People Will Die’ to Get a Pipeline Built

But the harshest attacks from fossils and their supporters were reserved for campaigners on the front lines of the Trans Mountain fight. While Berman may have been the highest-profile target, she wasn’t alone. Former Bank of Canada governor David Dodge casually and chillingly suggested that “people will die” on the protest lines at Burnaby Mountain, asserting that killing off a few “extremists” might be the price Canada would have to pay to get the Trans Mountain expansion built. British Columbia’s Dogwood Initiative reported that “the hate mail is piling up” after investment banker and former Dragon’s Den panelist Brett Wilson suggested pipeline protesters should be hanged for treason. Wilson later doubled down by offering to pay B.C. New Democrat legislators to cross the floor and support the project.

A more sober assessment by senior economist and former insurance CEO Robyn Allan showed it was Alberta’s inferior tar sands/oil sands product, not the lack of market access, that was driving down the price the province could charge for its product. Later in the year, analysts at BNN Bloomberg agreed that a new pipeline would not eliminate the price discount on a lower-quality form of crude oil that is tougher for refineries to process. A rating agency warned that Alberta was still relying on new pipeline-related revenue to balance its budget in 2023–24, and tar sands/oil sands operations were on track to break through Alberta’s lifetime emissions cap.

In an exclusive, six-part series for The Energy Mix, award-winning investigative reporter Paul McKay pointed to global competition as a fatal flaw in Alberta’s tar sands/oil sands export plans, traced the business partners Ottawa might have to sign on with to get the pipeline built, assessed the impact of new emissions controls for international shipping on Alberta production, calculated the starkly unfavourable math Canada had accepted by buying the pipeline, and made the case that Teck Resources’ proposed new tar sands/oil sands megaproject is a “dead mine walking.” Some observers speculated that Teck may not even plan to build the mine—it just wants a plausible enough appearance of that plan to set the stage for a Kinder Morgan–style bailout.

Analyst David Hughes said it’s poor strategy to sell off fossil resources at bargain basement prices, BNN Bloomberg debunked the myth that a new pipeline would clear the price discount for poor-quality Alberta crude, and Oil Change International’s Adam Scott called Alberta production cuts a vision of what a managed decline could look like. Veteran Vox.com climate columnist David Roberts gave a hat-tip to supply-side campaigns that fall one step outside the climate mainstream, after economists Fergus Green and Richard Denniss made a “cogent argument that the activists are onto something—that restrictive supply-side (RSS) climate policies have unique economic and political benefits and deserve a place alongside carbon prices and renewable energy supports in the climate policy toolkit.”

Some 50,000 people rallied in Montreal to demand provincial climate action, days before 6,000 protesters closed five London bridges in Extinction Rebellion’s first major action.

Alberta’s oil and gas royalties plummeted while production increased, even though the province’s fossil companies remained incredibly profitable through a sustained oil price crash. A few months of higher oil prices fueled optimism but not euphoria in the oilpatch before prices crashed again; labour-saving efficiencies wiped out thousands of Alberta fossil jobs; and declines in investment, jobs, and tax revenue pointed to the end of the tar sands/oil sands era.

The head of the Alberta Energy Regulator resigned after revealing the province could face up to $260 billion in unfunded oilpatch liabilities. The carbon liabilities facing the province’s five biggest fossils were calculated at $2 trillion. Équiterre said a spike in pipeline incidents showed up the industry’s safety claims as “meaningless marketing mantras,” and Albertans were set to bear the clean-up costs for 155,000 abandoned oil and gas.

Conservative Party leader Andrew Scheer was looking forward to making carbon pricing a ballot issue in the 2019 federal election, but was expected to pay a price at the polls for opposing carbon pricing and supporting pipelines. The federal backstop price earned support from a conservative-led think tank, the Globe and Mail, a normally critical climate hawk, and public opinion for promising a carbon price rebate in almost every mailbox.

Ottawa was set to remit $420 million directly to Ontario climate initiatives after the Doug Ford government dismantled the province’s successful carbon cap-and-trade program, cancelled 758 renewable energy contracts, and stopped construction of the White Pines wind farm as it neared completion.

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