Five Big Questions On Energy And Climate Emerge From Ottawa’s Speech From The Throne
When it comes to energy and climate, the highly anticipated Speech from the Throne was a bit of a letdown.
Many were expecting — some worrying—that the government would lay out an ambitious ‘green recovery’ plan to ‘pivot’ the Canadian economy away from fossil fuels. The weeks leading up to the speech saw multiple groups advocating for green recovery and resilient recovery. And in August newly-minted Finance Minister Chrystia Freeland said ‘all Canadians understand that the restart of our economy needs to be green.’
But the days leading up to the speech saw some changes of tone. In a radio interview in Vancouver, Environment and Climate Change Minister Jonathan Wilkinson said ‘in the next number of decades it’s important that Canada continue to extract value for its resources — we would be silly not to.’ On CBC Radio’s The House, Natural Resources Minister Seamus O’Regan stated ‘there’s no question net zero [emissions by 2050] needs oil and gas.’ And Prime Minister Justin Trudeau’s messaging at last week’s cabinet retreat focused squarely on addressing the health and economic impacts of the pandemic, not climate action.
Growing case numbers across the country likely account for the change. The growing spectre of a second wave shifts attention back to the immediate health and economic needs of Canadians. The government may also be looking to its future electoral prospects by taking a more balanced path. At a summit last week on economic recovery, former principal secretary to the prime minister Gerald Butts warned that the progressive movement risks losing governments if they lose the support of ‘the broad middle class and regular people’ including if they ‘repurpose pet projects as urgent and necessary responses to the crisis at hand.’
Regardless of why Ottawa seems to have downplayed the green recovery in the speech, there are nonetheless significant energy and climate objectives on the government’s agenda. The speech has four pillars, two that focus on the short-term — protecting Canadians from the coronavirus and helping them through the pandemic — and two that focus on the medium to long term — building back better and strengthening values.
Short term measures include extending financial support to businesses and Canadians with the Canada Emergency Wage Subsidy, which the government will keep in place until next summer, and support to the provinces for things like testing capacity, health systems and the return to school. Medium to long term measures include sweeping reforms to health and social programs like childcare, long-term care, and pharmacare, creating one million new jobs, prioritizing reconciliation with Indigenous peoples, and addressing systemic racism in Canada.
For energy and climate, the speech outlines multiple commitments, ranging from support for electric vehicles, building retrofits, climate adaptation, clean tech, electricity interties and transforming the oil and gas sector, to ramping up climate ambition by exceeding Canada’s 2030 targets and legislating the government’s goal of net zero emissions by 2050, to introducing legislation to implement the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP).
The oil and gas sector is scarcely mentioned (the words ‘oil’ and ‘gas’ appear nowhere in the text), except to say that the government will provide support to transform the sector. The speech also notes that ‘the energy sector will be key to innovating and reducing Canada’s emissions going forward.’
Like most speeches from the throne, the document is light on specifics about how any of this will be done and how much it will cost. The forthcoming fiscal update will shine light on the latter, and government departments will create the programs that put flesh on the former.
While it is possible that the opposition parties could bring the government down over the speech, most analyses consider this unlikely. Instead, we may see minor tweaks to the document based on demands from the parties, notably the NDP.
Assuming the speech receives the confidence of the house, five big questions need to be answered as the government moves forward with its agenda.
The first relates to cost. What is the price tag for all of this, what is the government’s fiscal plan to pay down the resulting debt and what role does it see for the oil and gas sector in the mix? As former Bank of Canada Governor David Dodge highlights in a recent analysis, Canada has two fiscal mountains to climb: paying down its mounting public debt and attending to its current account deficit. As he notes, the oil and gas sector plays — and can play— a vital role in tackling both challenges. Other forms of energy provide neither the tax and royalty revenue nor the balance of payments contributions that come from oil and gas.
The second question relates to climate. The government commits to ‘immediately bring forward a plan to exceed Canada’s 2030 climate goal.’ By how much does the government plan to exceed it? And how does it plan to do that? Ottawa’s current greenhouse gas emissions reduction plan falls close to 80 megatonnes short of the country’s Paris target. And every passing year underscores how difficult it is to bend Canada’s emissions curve downwards. It is far from obvious that the country can meet its current 2030 target, much less exceed it.
The third question is legislating UNDRIP. The government committed to this in the 2015 election campaign but has yet to act on the promise. Former Minister of Justice and Attorney General Jody Wilson-Raybould expressed concern about legislating UNDRIP early in the government’s first mandate, calling it ‘unworkable.’ Legislating UNDRIP raises a whole host of questions about the decision-making process for energy projects, notably how the concept of ‘free, prior and informed consent’ relates to the duty to consult and accommodate as articulated in Canada’s constitution and jurisprudence.
How will the government ensure that legislating UNDRIP will strengthen clarity and predictability in Indigenous involvement in decision-making for major projects, something that Moody’s Investors Service recently identified as a major weakness in Canada’s investment climate? How will the government deal with situations were an Indigenous group, despite the best efforts of all involved and support from other Indigenous communities, is not supportive of a project? Looking to the experience to date in British Columbia, where the provincial government legislated UNDRIP without clear answers to these questions, could be a useful first step in thinking through the issues prior to tabling legislation.
The fourth question relates to oil and gas. The speech notes that ‘Canada cannot reach net zero without the know-how of the energy sector, and the innovative ideas of all Canadians, including people in places like British Columbia, Alberta, Saskatchewan, and Newfoundland and Labrador.’ Ottawa also commits to supporting the energy sector to ‘transform to meet a net zero future.’ These are important statements that speak to the ‘and’ conversation many have been advocating for energy and climate. But what, precisely, does the government mean?
What place does Ottawa see for oil and gas in the country’s energy and climate future? Does ‘transform’ mean reducing emissions from traditional production or does it mean shifting away from traditional production to new materials and products (bitumen beyond combustion, hydrogen, etc.)? The distinction is not a small one and will have an important bearing on investor confidence and the ability to attract capital for innovation and projects for everything from the oilsands to LNG.
The fifth question relates to ‘clean energy.’ The government commits to infrastructure investments in ‘clean energy’ and ‘renewable energy and next-generation clean energy and technology solutions.’ But how does the government define ‘clean energy’? Does it include all infrastructure and technologies that reduce GHG emissions (including for oil and gas) or only technologies in the electricity sector? The terms ‘energy’ and ‘electricity’ are often used interchangeably in debates over energy and climate, but the difference is not inconsequential. As with defining oil and gas ‘transformation,’ the answers will shape the investment environment.
The Speech from the Throne gives crucial insight into how Ottawa views Canada’s energy future in an age of climate change, but it raises many more questions than it answers. The coming weeks will no doubt begin to provide further details, and the fiscal update will start to put some dollar figures on commitments, along with the impacts on the country’s fiscal situation. For the country’s energy and climate future, the stakes couldn’t be higher.