Energy Fact & Opinion: Canada Moves On Climate

March 10, 2016

Facts:

• Canada’s new prime minister, Justin Trudeau, is taking steps to advance a more aggressive clean energy and climate agenda across Canadian provinces and with the United States.
• In January he announced an interim plan to expand an environmental review of oil and gas pipelines and export projects to include climate change impacts all the way to the upstream.
• On March 3^rd, Prime Minister Trudeau and the respective premiers of Canada’s provinces emerged from the First Ministers’ Meeting with a signed agreement entitled the “Vancouver Declaration on clean growth and climate change” which establishes a blueprint for the development of a pan-Canadian framework for transitioning to a sustainable, low-carbon economy.The framework, which is to be implemented in early 2017, directs action in four key areas, including: clean technology, innovation and jobs; carbon pricing mechanisms; specific mitigation opportunities; and adaptation and climate resilience. The most contentious area in this agreement was that related to the reference of “carbon pricing mechanisms”, which a number of premiers were opposed to the notion that this will culminate in a national tax on carbon.
• On the occasion of Trudeau’s March 10^th state visit to Washington, the United States and Canada jointly committed to take action to reduce existing methane emissions from the oil and gas sector by 40-45 percent below 2012 levels by 2025; reduce emissions of hydrofluorocarbons; and enhance cooperation in strengthening North American energy security and to accelerate clean energy development.
• The methane commitment was particularly significant because it went beyond previous efforts in the United States by requiring companies operating existing oil and gas sources to provide information to facilitate the development of new regulations.

Opinion:

The pace and nature of the changes in Canada’s posture are quite remarkable and there is no doubt that the Obama administration is using the opportunity to engage this new leadership to the north to catalyze action between the two countries (and Mexico, as was evident from the trilateral agreement signed last month). Despite all the focus on clean energy and climate change, Canada remains an abundant natural resources holder and produces significant amounts of crude oil, but also natural gas and hydroelectricity. As the world’s fifth largest energy producer, it is a net exporter of most energy commodities and maintains a relatively energy intensive domestic economy. Prime Minister Trudeau recognizes Canada’s economic dependence on natural resource production but has argued the economic benefit generated from that production should be utilized to fuel a low carbon economy.

Mr. Trudeau has quickly sought to establish federal leadership on climate change, an issue typically addressed by the provinces. While many longtime Canada watchers expected a great deal more pushback from the provinces on this issue, the provinces continue to be open to the idea of policy alignment (though carbon pricing will remain a sticky issue). Part of the ease can be explained by previous efforts laying the ground work for this approach but also the new government in Alberta, the largest oil producing province, which has also updated its own approach to climate change and the fact that many provinces, already equipped with their own climate policies, are quite willing to engage in a discussion of a more forward leaning climate strategy.