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Observers see Trudeau on same climate path after win, eye election promises

27 September 2021 Keiron Greenhalgh

Canadian energy industry observers and players don't expect much of a deviation from the returning government's climate change-focused agenda after the Liberal Party won a national election 20 September.

Climate activists and renewable energy advocates want to see Prime Minister Justin Trudeau deliver on campaign trail pledges, with other observers keeping an especially close eye on a promise to advance building decarbonization.

Trudeau called the snap election—a trip to the ballot box was not required until October 2023—with the aim of securing a majority and a stronger mandate for his economic recovery plan following the COVID-19 pandemic. He also sought backing for policies including a clean electricity standard (CES) and reduced subsidies for the oil and natural gas industry.

In claiming victory 20 September, Trudeau said the election result meant Canadians were "standing together, together in your determination to end this pandemic, together for real climate action."

The Liberals won 159 seats in the House of Commons in the election, 11 short of the 170 majority Trudeau sought. The New Democratic Party (NDP), which won 25 seats, are again set to be the Liberals' regular partner when a majority is needed.

IHS Markit Principal Global Risks Advisor John Raines said the Liberals are likely to continue with their established climate change policy agenda.

Topping that agenda, he said, is implementation of Canada's existing GHG emission-reduction targets, including tightening the existing carbon pricing plan.

At the Leaders Summit on Climate in late April, organized by US President Joe Biden, Trudeau pledged to reduce Canada's emissions by 40% to 45% compared with 2005 levels by 2030 before reaching net zero in 2050. The previous 2030 target was 30%.

During the election campaign, the opposition Conservatives, who lost a couple of seats, had promised to reverse the target back to 30% of 2005 levels by 2030.

The path to net zero and the requirement that there are interim targets are laid out in law under Bill C-12, which passed its final legislative stage of royal assent on 29 June.

Meantime, the Supreme Court of Canada ruled 25 March that the government's pollution pricing regime, the Output-Based Pricing System (OBPS), which includes a national carbon tax, is constitutional.

Trudeau plans to increase the carbon tax to C$170/metric ton (nearly US$134/mt) by 2030 from its current level of C$40/mt (nearly US$32/mt).

The Liberals will also push forward on commitments to phase out oil and gas subsidies and public financing of the hydrocarbon sector, although they are likely to extend the proposed deadline beyond 2023, Raines said.

Plans to invest C$5 billion (US$3.91 billion) over seven years in the Net Zero Accelerator program, supporting initiatives for carbon reduction and for companies to adopt clean technologies will be maintained, and receive support from the NDP, the Liberals' likely partner when a majority is needed.

The policies can be expected to increase operating expenses for the hydrocarbon sector, particularly those dependent on carbon-emission-heavy processes such as the oil sands, said Raines.

Overall, it will be more of the same, Calgary-based IHS Markit Executive Director Kevin Birn told Net-Zero Business Daily, although politics in the House of Commons may be more turbulent as parties will have fresh mandates that may embolden the debates.

Climate change "greatest long-term threat"

As Trudeau sought additional support from a nation that had seen the image of its leader since November 2015 somewhat tarnished by conflict-of-interest scandals over the past couple of years, the Liberals sought to tout their climate change bona fides, arguing it is "the greatest long-term threat of our time" in election materials.

"A re-elected Liberal government will move forward with an ambitious plan to accelerate climate action for more jobs, cleaner communities, and less pollution," promised the Liberal Party manifesto.

"We'll cut pollution by building a net-zero electricity grid and ending thermal coal exports, create cleaner communities by making it easier and more affordable to own a zero-emission vehicle, and create new jobs in the clean economy while supporting all workers so that no one is left behind," it said, adding: "A cleaner, and greener future is within reach, we need to keep moving forward."

The manifesto also promised to support companies manufacturing batteries for zero-emission vehicles; advance emissions reductions across heavy indus­tries through the Net-Zero Accelerator Fund; launch a national strategy to chart a path to net-zero emissions from buildings by 2050; attain a net-zero electricity grid by 2035 by implementing a CES; develop additional investment tax credits for clean energy; and end thermal coal exports from and through Canada no later than 2030.

Plotting the path to net-zero buildings, a new policy for the Trudeau government, is what the Canadian Gas Association will be looking at most closely as the new parliament unfolds, Vice President of Strategy and Delivery Paul Cheliak told Net-Zero Business Daily 27 September.

Cheliak, whose trade association represents pipeline owners, said the key question before his members is whether the decarbonization strategy involves only electrification or if it includes using hydrogen and renewable natural gas too.

Also in the oil and gas arena, the Liberals told the electorate they would make sure the sector reduced emissions from current levels at a pace and scale needed to achieve net-zero by 2050, with five-year targets starting in 2025. In addition, companies would be required to reduce methane emissions by at least 75% below 2012 levels by 2030.

While on the campaign trail, Trudeau reaffirmed support for a recently announced zero-emission vehicle (ZEV) mandate. "We are announcing zero-emission vehicles are the only new vehicles to be sold in Canada as of 2035, and to get there by 2030, 50% of all new vehicles in Canada will be zero emission," Trudeau said at a 29 August rally in Cambridge, Ontario.

Transport Canada on 29 June announced a "mandatory target" for all light-duty vehicle and passenger truck sales to be ZEVs by 2035 that advances a prior target date of 100% sales by 2040, and would bring the country in line with its goal of achieving net-zero emissions by 2050.

Together with the ZEV mandate, Canada also has announced a ban on sales of gasoline-powered light vehicles from 2035.

Walking the walk

While such election promises as the CES are positive, the Trudeau must now deliver, and quickly, renewable energy advocates say.

Canadian Renewable Energy Association (CanREA) CEO Robert Hornung told Net-Zero Business Daily: "Canada's new minority Liberal government made commitments during the election campaign to a number of new actions that have the potential to support the decarbonization and expansion of electricity grids in Canada."

CanREA wants the government to move quickly on the commitments, including the CES, exploring a tax credit for energy storage, and creating a pan-Canadian grid council to optimize the grid on a regional or national scale, he added.

An expanded and decarbonized electricity grid is one of the most powerful safe bets for meeting net-zero GHG emissions targets, Hornung said in an email, adding: "Canadians want this, and the wind-energy, solar-energy and energy-storage industries are ready. Urgent action is required if Canada is to meet its commitment to net-zero greenhouse gas emissions across the economy by 2050."

Environmental Defence Executive Director Tim Gray agreed, saying in a 21 September statement that millions of Canadians cast ballots for parties that put forward strong policies to confront the climate emergency and advance environmental protection.

"If all of the ambitious climate proposals from all of the parties were implemented, Canada would be well on its way to doing its fair share to avoid catastrophic levels of global warming," he said.

Canadian Institute for Climate Choices President Rick Smith echoed the same stance, telling Net-Zero Business Daily: "To me the most significant take-away from this election is how united Canadians are—including every major party and the private sector—around the need for ambitious action to decarbonize the Canadian economy. That consensus is clear, and it can and must carry us through what needs to be the most intensive period of carbon reduction planning and action in our country's history."

Environmental Defence wants a "swift" end to fossil fuel subsidies and supports, including public finance provided through crown corporations such as Export Development Canada, as well as an end to exports of domestic and American thermal coal through Canadian ports, said Gray.

The nonprofit also called on the government avoid carbon capture and storage plus chemical recycling of plastics.

A desire to see Trudeau keep his promises on the energy transition and decarbonization wasn't limited to environmentalists though, with a less typical constituency also urging the government to press ahead with its plans in the sector.

The proposed doubling of the Mineral Exploration Tax Credit for materials on the Canadian list of critical minerals, and commitments to reinforce the Mines to Mobility strategy to build sustainable battery supply chain was a positive development, the Mining Association of Canada (MAC) said.

MAC was also encouraged by commitments to infrastructure investments, particularly in Canada's North, CEO Pierre Gratton said in a 21 September statement.

"One of the greatest climate actions Canada can take in support of Paris Accord objectives is to maximize domestic production of low carbon metals and materials needed to meet projected clean technology demand," he said.

Not everyone is happy

Not all extractive industries are happy with the Trudeau government's plans though, the oil and gas sector in particular.

"Our ask of the federal government is to support Canadian prosperity by getting behind our own country's resources and to trust Canadians to protect the environment rather than relying on other nations to supply the world's need for natural gas and oil," the Canadian Association of Petroleum Producers said 20 September in a statement.

Global demand for gas and oil is growing and will make up over 50% of all energy supply by 2040, it said, adding that "every molecule of natural gas and barrel of oil not produced in Canada, will be produced by other nations that do not share Canadian environmental or human rights standards."

Canada is the world's fifth-largest oil producer and has the world's third-largest proven oil reserves, according to Natural Resources Canada. It is also the world's fifth-largest producer and fourth-largest exporter of natural gas, the government agency added.

The Canadian Chamber of Commerce also called for more support for businesses. The business lobby group's CEO, Perrin Beatty, said the recovery from the pandemic must be led by the private sector.

"We cannot borrow our way to prosperity, and we cannot confuse government spending with economic growth. We need to get very serious about growth if we are to have any hope of paying for our enormous pandemic debt and dealing with the coming costs of climate change," Beatty said in a 21 September statement.

Beatty called on Trudeau to craft "a genuine partnership with businesses" to reach net zero.

Analysts at the right-leaning Fraser Institute, meanwhile, want Trudeau to tweak how he plans to get to net zero, particularly when it comes to the carbon tax.

While the think tank's Elmira Aliakbari and Jairo Yunis agree a carbon tax is the most efficient way to reduce emissions, they said 24 September that the tax should replace existing emissions-related regulations, rather than being supplementary.

The analysts also called on the government to introduce measures to prevent carbon leakage—where companies relocate to avoid taxation—through border adjustments on imports. And, said Aliakbari and Yunis, the level of the carbon should be lower than Trudeau is promising.

Posted 27 September 2021 by Keiron Greenhalgh, Editor, Climate & Sustainability Group, IHS Markit

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