Once a climate leader, Canada Is doubling down on oil

This story was originally published by Grist and is reproduced here as part of the Climate Desk collaboration.

Before he became prime minister of Canada, Mark Carney was perhaps one of the world’s biggest supporters of the idea that climate action was good business. He led the clean energy investment fund for Brookfield, one of the world’s largest financial firms, and founded a global alliance of bankers and politicians who wanted to channel their resources toward green energy. When he took over from outgoing Prime Minister Justin Trudeau, many expected that he would follow the previous Liberal leader’s ambitious climate agenda, which included taxing fossil fuels and subsidizing clean technology. 

But just like in Carney’s beloved sport of hockey, momentum in the climate world can change fast. In the year since he took over, Carney has unveiled a suite of new policies to gut Canada’s ambitious climate regulations and support the country’s powerful fossil fuel industry. This reversal reached a climax last week when he struck a deal with the province of Alberta to prop up its tar sands oil industry and vowed to expand the country’s power grid through the use of natural gas.

Carney is pitching the reversal as a political and economic necessity. Canada is facing the prospect of a severe economic downturn as a result of President Donald Trump’s disruptive trade agenda, and a group of conservatives in Alberta are waging a campaign to secede from Canada altogether. He has claimed that the country can achieve economic security by investing in oil and gas production while still making progress toward reducing its own carbon emissions.

“It will be an opportunity to accelerate the energy transition across Canada, and it’s also an opportunity for Canada to be a reliable supplier for partners across the globe, and to do so in a manner that makes Canada more prosperous and independent,” said Carney in announcing the strategy. 

The reversal reveals a stark truth about the direction of global climate action: Despite the rapid deployment of clean energy, even countries and politicians once seen as climate leaders are turning to fossil fuels to protect against the turmoil of Trump’s trade disputes and the war in Iran. 

But Carney’s new strategy doesn’t seem to have pleased anyone. Major oil producers and conservatives in Alberta are still pressuring Carney for further concessions, and a broad spectrum of left-wing politicians and civil society groups have condemned it as short-sighted. The critics argue that doubling down on fossil fuel exports is the wrong move at a time when the rest of the world may be shifting away from them.

“The problem is we’re defaulting back to what Canada’s known how to do in the past, rather than what the world’s going to need in the future,” said Simon Donner, a climate scientist at the University of British Columbia who served as chair of the federal government’s climate policy advisory board until he resigned late last year. 

Carney has already rolled back several of Trudeau’s climate initiatives. He scrapped Canada’s federal electric vehicle mandate and eliminated the country’s unpopular consumer carbon tax, which added a surcharge on gas stations and power bills. The one major policy he left alone was the “industrial carbon price,” which charges polluters a fee for every ton of carbon dioxide they emit. The nation’s biggest emitters are multinational oil and gas companies, which produce sticky crude from the massive tar sands fields in Alberta; the oil sector produces about 30 percent of Canada’s emissions, more than buildings or cars.

Canada and Alberta have a mutual dependence. Oil makes up more than 15 percent of Canada’s export volume, and Alberta’s oil wealth makes it a net contributor to the federal budget. Under the Canadian constitution, provinces have control over natural resources, and Alberta leaders have long viewed the industrial carbon tax as a threat to their sovereignty. But the oil industry in Alberta needs help from the Liberal government, too. The inland province is producing more oil than it can sell, and the industry’s future growth depends on building another pipeline to the Pacific Ocean, which needs federal support. (The existing pipeline to the Pacific is nearing capacity. Oil producers are also seeking to build new pipelines to the United States.)

Last week, Carney and Alberta Premier Danielle Smith unveiled a “grand bargain” meant to resolve this conflict: Carney removed a proposed hard cap on carbon emissions from the oil sector, and in exchange Alberta agreed to support a long-term increase in carbon prices. The federal government will also expedite permitting for a new Pacific Coast pipeline, while oil producers agreed to build a massive carbon capture system that would offset emissions from oil drilling.

Climate advocates in Canada say the final deal is toothless, and makes major concessions to the oil and gas industry. The deal will lower the headline price of the industrial carbon tax and slow down the rate of the price increase by three-quarters, whereas Carney had at first proposed to tighten the price. The proposed carbon capture project has also shrunk to a fraction of its original size, and the oil industry hasn’t agreed to it yet.

“It would have been a big enough motivator to find those emissions cuts, but it wouldn’t have jeopardized the possibility of oil and gas companies making money,” said Julia Levin, the associate director for national climate policy at the nonprofit Environmental Defence. She noted that under the previous framework, the per-barrel cost of the carbon tax comes out to the price of a Timbit, the Canadian equivalent of a Munchkin donut hole: about 50 cents. Now, she says, “the companies don’t have to do anything at all for 15 years.”

Even early news of a potential deal triggered a revolt within Carney’s own party, leading to the resignation of his climate minister, Steven Guilbeault, as well as two members of the government’s independent climate advisory panel. But the industry isn’t satisfied, either. The chief executive of the Canadian oil company Cernovus said last week he doesn’t think the country should have a carbon price at all, saying it “doesn’t incent us to decarbonize,” and some producers have said they still worry about making money even under the loose regulations. A leader of the Alberta separatist campaign said the deal only made him more convinced the province needs to leave Canada.

Richard Masson, a longtime oil sands executive who has worked for Shell and the government of Alberta, said that companies should see the carbon tax as the price of doing business in a country where most voters want some action on climate change.

“The producers will probably take a little bit less return, but in the world we’re in, there’s enough money to go around,” he said. “You’re saying, ‘I’m going to spend a premium on this to prevent having the world turn its back on me.’”

Masson also said that the ultimate climate impact of the deal depends on whether a pipeline to the Pacific actually comes together. Carney has already eased environmental permitting laws to make it easier, and last month he created a $25 billion development fund that could help pay for construction. But there is still no private company that has come forward to build it, and a number of First Nations tribes with treaty rights on the Pacific coast have rejected the idea. 

“No offer of equity or ownership will change our position, and no proponent is acceptable to us,” said Marilyn Slett, president of the Coastal First Nations, in response to the pipeline plan. First Nations have ironclad consultation rights under British Columbia provincial law, and securing a pipeline without tribal agreement will be impossible.

Even so, in what seemed to be a further embrace of fossil fuels for economic security, Carney also unveiled a “national electricity strategy” at the same time as the Alberta deal. This strategy seeks to double the size of Canada’s grid by 2050 through investments in renewable energy and a new network of transmission lines connecting the provinces. But it also calls for natural gas to have a major role on Canada’s future power grid, even though the country has made major investments in zero-carbon power and gets most of its electricity from hydropower dams and nuclear reactors. 

Here again, the Carney government framed the decision as a necessary step toward geopolitical resilience. The strategy claims that “Canada’s economic growth and long-term competitiveness will depend on its ability to attract and retain investment in high-growth, electricity-intensive sectors, including artificial intelligence…liquid natural gas export facilities, mining, and critical minerals.”

Underlying all these moves is the assumption that fossil fuels will provide protection against economic uncertainty. As long as Canada can extract and export natural resources, it will be able to balance its budgets and keep its citizens safe. But despite Carney’s reputation as a shrewd central banker, critics of his government view the prime minister’s new strategy as short-sighted—Carney is pinning his economic hopes on the sale of a commodity that the world is starting to abandon.

“This is the sort of decision that they’re probably happy about today, and we will look back in 10 years and think, ‘What the hell were we doing?’” said Donner, the former chair of the government’s climate advisory board.