Mark Carney: the climate and energy implications of Canada’s new PM

The victory of Mark Carney in the federal election likely means a continuation of the Canadian government’s support for both clean and fossil energy, which may not translate into substantial progress on slashing climate pollution. 

Just a few months ago, the Conservative Party appeared to be cruising to a landslide victory. But U.S. President Donald Trump upended the entire race, putting the Trump-friendly Conservatives on the defensive and allowing Carney and the Liberals to position themselves as the defenders of Canadian sovereignty.

Climate change fell off the radar during the campaign, but the energy industry used the country’s surging nationalist fervour to make the case that an oil and gas expansion away from the U.S. is needed for economic security. Aside from the Trans Mountain pipeline, which runs from Alberta to the Pacific Coast, nearly all of Canada’s 4 million barrels per day of oil exports heads to the United States.

On some issues, the Liberals and the Conservatives are aligned, and there is a “political consensus” to expand energy infrastructure to reduce dependence on the United States, Hadrian Mertins-Kirkwood, a researcher at the Canadian Centre for Policy Alternatives, a non-partisan research institute, told Gas Outlook.

Both Liberals and Conservatives promoted the construction of pipelines, railways, and electric transmission lines across the country through “energy corridors.” But the plans are light on details.

One concept that came up during the campaign was the revival of the Energy East pipeline, a proposed oil pipeline that would have run over 3,000 kilometres from Alberta to New Brunswick to export crude oil on the Atlantic. It was abandoned in 2017 because it was too costly and too complex to build.

Several provincial premiers have talked up the idea of revisiting the Energy East proposal in response to Trump’s tariffs on Canada and his general hostility towards the country.

But Energy East has just as many problems today as it did a decade ago when it was under consideration. Moreover, the energy transition is much further along, and future demand growth prospects look weak.

“Not only would it have to cross through six provinces, it would have to cross through 180 First Nations who all have rights to their own land,” Mertins-Kirkwood said. “It’s politically, a massive project, not just economically, to try and do something like that.”

He pointed to the Trans Mountain Expansion oil pipeline, which saw its cost soar from an original estimate of about $3 billion to $34 billion once it was completed. It required the government to nationalise the project and take on all the costs and risk.

“It was extremely expensive. And so, the thought of building a new pipeline in that in that context is kind of silly,” Mertins-Kirkwood said.

The support for LNG on the West Coast, on the other hand, will continue to receive support. The Shell-backed LNG Canada project is expected to ship its first cargo in June, after years of construction. Woodfibre LNG, a smaller project located north of Vancouver, is under construction. Other projects are on the drawing board.

The expansion of LNG on the Pacific Coast has the backing of the Liberals and Conservatives at the federal level, and at the provincial level in British Columbia, it has the support of the New Democratic Party, which governs the province.

Long-term demand in Asia is questionable, imposing significant risk on new projects that haven’t yet received a green light. In that sense, the limiting factor on more LNG may come from the market, not government policy.

Weak climate progress

LNG is already undermining the province’s progress on cutting greenhouse gas emissions. B.C.’s latest climate accountability report shows that the province is off track to meeting its emissions reduction targets by 2030. LNG is the main reason for that backsliding.

For years, green groups and other experts have been sounding the alarm that LNG would wreck the province’s climate goals. But the provincial and federal governments continue to ignore those warnings.

The Liberals have tried to balance an “all of the above” policy for the past ten years, Mertins-Kirkwood said, promoting the expansion of both clean and fossil energy.

“The Trudeau Liberals bought the Trans Mountain Expansion pipeline and have facilitated and invested in LNG facilities on the West Coast,” he said. “And that looks to be their strategy still.”

The ongoing support for oil and gas, from all major parties, will make it very difficult for the country to make meaningful progress on climate change.

At the national level, the key plank of Canada’s climate policy towards the energy sector is the oil and gas sector emissions cap, which would cut sectoral emissions by 35 percent below 2019 levels by 2030, using a cap-and-trade system.

But it has been repeatedly delayed and is still not fully implemented, and it has been watered down to such a degree that it probably won’t actually curtail the industry’s production levels for years, Mertins-Kirkwood said.

“The final proposal was quite weak. And that’s due to a lot of lobbying from the oil and gas industry,” he said.

Under the cap, it will still be possible for oil and gas production to increase. Ultimately, the vast majority of the emissions from the sector come from the combustion of the products, which is not included in the cap.

“It’s kind of irrelevant because the cap is so high and comes into effect so late that it’s unlikely to do anything that global oil demand wouldn’t do first,” Mertins-Kirkwood said.

Clean grid

Climate groups argue that Liberal support for oil and gas is unworkable if the country is to make progress on climate change.

“With the election over, Prime Minister Carney has the opportunity to practice what he has preached for years, and kickstart a green transformation that will build our country’s resilience for decades to come,” Caroline Brouillette, Executive Director of Climate Action Network Canada, said in a statement after the election results.

“That requires picking a lane with regard to energy: no more flirting with fossil fuel expansion and new pipelines, which would come with staggering costs to our wallets and our planet. Instead, the new federal government must focus its attention on building a renewable-powered electricity grid as the backbone of a new economy in line with Canadian values.”

But there are some reasons for optimism that there can be some progress on renewable energy. There is a “strong  consensus” on building out and connecting the grid across the country, Mertins-Kirkwood said.

“There’s support for this idea at every level of government in every part of the country. So, I actually think we’re likely to make really strong progress on this.”

Unlike a long-distance pipeline, which needs to traverse the entire continent, an electricity grid that improves connection from east to west is not one continuous project.

“What we need is to plug in systems that can support each other. We need the Alberta grid, which is mostly gas, to plug into BC’s hydro grid. We need Saskatchewan’s gas grid to plug into Manitoba’s hydro grid. We need the Atlantic provinces to plug into Quebec,” Mertins-Kirkwood said. “So, it’s a more piecemeal and strategic approach when we talk about east-west electricity.”

Better interconnections will facilitate the buildout of more renewable energy. It will also make it easier to satisfy future demand growth with clean sources.

He said one big question that remains is whether or not the expansion of the grid will be done under public or private ownership.

“Especially when it comes to transmission infrastructure, it’s very important that it’s public, and partly because it’s not always economic,” he said. “You need the grid there so that private generation can plug into it. So, we see public investment in the grid as enabling private investment in generation.”

(Writing by Nick Cunningham; editing by Sophie Davies)