Gattinger Part 4 — Federal-Provincial Relations Over Energy And Climate: Moving Forward Together Or Moving Further Apart?


This is the final part in a four-part series analyzing key pieces of Ottawa's energy and climate agenda. For earlier pieces in the series, click on the links below:

Gattinger: Federal Energy And Climate Policy, Part 1 — Can Government Wrap Its Arms Around So Many Things?

Gattinger Part 2 — Major Projects: Can We Build Enough Fast Enough?

Gattinger Part 3 — Who Pays For What, When And How For Ottawa’s Emissions Reductions Plans

The federal government has a bold energy and climate agenda. It’s pursuing ambitious targets with extensive regulations, unprecedented spending, numerous sectoral strategies, and multiple advisory and planning mechanisms.

But Ottawa can’t go it alone. Canada is a federation, so the federal government’s success will hinge on how well it works with the provinces. Provinces have constitutional jurisdiction over most aspects of energy after all.

How are things going so far? Progress is mixed.

New federal advisory and planning mechanisms: are all provincial interests at the table?

The federal government has created Regional Energy and Resource Tables to foster collaboration with the provinces. It’s also created new advisory bodies to inform its decisions on electricity and on net zero — and soon on sustainable jobs. And it’s created research initiatives and entities to inform its choices.

But how representative are these groups? The Regional Tables don’t include all provinces — namely Alberta — and advisory and research bodies don’t always represent the full breadth of provincial, energy and industrial perspectives.

Ottawa is trying, but more could be done to ensure these mechanisms give provinces and provincial interests a meaningful opportunity to shape federal decisions.

This is crucial. Ottawa is crafting multiple regulations that dive deep into provincial energy systems. Having provinces at the table — not fuming on the sidelines — is key.

New federal regulations: from conflict over oil and gas to conflict over electricity?

Up to now, the main fault line for federal-provincial friction over energy and climate has been oil and gas production. This has meant tensions primarily with the West. Now that climate action is moving into all parts of the energy system — notably electricity — opposition could extend to any province.

If we thought fights over oil and gas were bad, fights over electricity could be brutal.

Take Ottawa’s Clean Electricity Regulations. Designed to move the country’s electricity system to net zero by 2035, the proposed regulations would prohibit operating a fossil fuel generating unit above a near zero emissions performance standard and would limit the use of unabated natural gas plants to emergency situations.

To be sure, there’s value in these regulations. Putting a net zero 2035 stake in the ground provides clarity for electricity sector players as they plan future investments. And accelerating work on a net zero grid helps Ottawa’s electrification plans maximize emissions reductions.

But how much is the federal government working with the provinces to develop the new rules?

Coal and natural gas constitute small parts of power generation in Canada — nationally, electricity generation is over 80 per cent non-emitting — but in many provinces fossil-generated power is critical to reliability and system performance. Backing it out rapidly exposes Ottawa to the charge that it’s meddling in provincial jurisdiction.

Recent sparks between Saskatchewan Premier Scott Moe and federal Environment and Climate Change Minister Steven Guilbeault over the new regulations could be just the beginning. Alberta Premier Danielle Smith is also drawing a line in the sand over the new rules.

The regulations could also create friction with Ontario, a jurisdiction with a very clean grid — over 90 per cent non-emitting. The province announced a procurement this spring of almost 600 MW of gas-fired power as part of its efforts to address looming supply shortages and maintain system reliability.

In Ontario, gas is a small proportion of electricity capacity, but it plays a strategic role in meeting peak demand cost-effectively. Removing or penalizing gas could compromise the pursuit of larger emissions reductions elsewhere in the province’s energy system — in the next decade, you get more emissions bang for your buck electrifying energy demand in the province than you do backing a relatively small amount of gas out of the system.

Electricity systems are complex beasts with multiple moving parts. Is Ottawa working sufficiently with the provinces to get a firm grasp on the impacts of net zero rules on reliability, affordability and system performance? If not, this could drive a new wedge into federal-provincial relations.

Similar issues surround the federal oil and gas emissions cap, which also dives deep into provincial energy systems. Is Ottawa working closely enough with producing provinces to develop a constructive approach? In Alberta, the province is now aspiring to become net zero by 2050. This alignment of federal and provincial long-term aims offers a good basis for collaboration. Will it be leveraged?

Federal spending: will governments align spending plans?

To sweeten the bitter pill of regulations, Ottawa’s pulling out its cheque book. As detailed in Part 3 of this series, billions in subsidies and tax credits are on the table. This is good news. Transforming the energy system and broader economy to net zero will take public and private money. Lots of it.

Provincial governments are also pulling out their cheque books. Will Ottawa’s plans be co-ordinated with the provinces? Collaborating to align plans and build synergies across funding opportunities will enable companies to move further and faster on reducing emissions — not get tangled in a web of multiple programs operating at cross purposes with different eligibility and application requirements.

Getting things built: will governments work together to streamline and align?

Ottawa’s climate plans hinge on rapidly building an unprecedented quantity of new energy infrastructure, but Canada lacks the policy and regulatory frameworks to enable the country to build enough fast enough (see Part 2 of this series).

The federal government has committed to improving frameworks for major project decision-making. Collaboration with the provinces will be essential to achieve this goal. Opportunities include creating integrated federal-provincial approval processes, collaborating on economic reconciliation and deferring to provincial decision-makers when possible.

This requires trust between Ottawa and the provinces, and the willingness to work together. If there is conflict in other areas of the relationship — take your pick of the areas above — collaboration on major project decision-making is unlikely to materialize.

The Sustainable Jobs Act: a new place to collaborate?

Ottawa’s most recent move is tabling the Sustainable Jobs Act. The bill has generated heated conflict with the premier of Alberta, who has painted it as the federal government coming after the province’s oil and gas industry.

The feds seem to have heard the concerns, shifting the original language of ‘just transition’ to the more positive sounding ‘sustainable jobs’. They also took pains in its interim Sustainable Jobs Plan released earlier this year to note that oil and gas will continue to be needed in the decades ahead and that the government supports oil and gas jobs consistent with net zero. That’s progress.

Despite all the bluster, the legislation is limited in scope. It contains no prohibitions, regulations or plans, but rather, committing the government to creating a Sustainable Jobs Partnership Council to advise the government, tabling a Sustainable Jobs Plan in 2025, and reporting on progress every five years.

The big question will be who gets appointed to the Partnership Council. Will Council membership include provincial, sectoral and industrial views reflecting the full breadth of the country’s energy sector? Let’s hope folks from Alberta and other producing provinces offer to join the Council — and that Ottawa appoints them. If not, things could get ugly.

Conflict leads to lost time pursuing the country’s energy and climate goals. Collaboration enables the federal government to manage risks and seize opportunities for energy reliability and affordability, economic growth and jobs, and reconciliation. Better for Ottawa and the provinces to move forward together than drift apart.

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