Shell's Quest Carbon Capture and Storage (CCS) facility in Fort Saskatchewan, Alta., in 2021. The technology will likely play a role in the Liberal government's new strategy on climate change and the economy.TODD KOROL/Reuters
Ottawa is preparing to lay out a new climate-change vision that will deprioritize Canada’s commitments to reduce domestic greenhouse gas emissions, in favour of focusing on ways to reap economic advantage from the global transition toward low-carbon energy.
It’s to be presented in the new “climate competitiveness strategy” that the government is aiming to release before the end of this month – a subject of speculation since Prime Minister Mark Carney first promised it in early September, with little explanation.
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Mr. Carney has much riding on the strategy, as he seeks to reframe Canada’s approach to environmental and energy issues amid global trade wars that have overshadowed longer-term dangers to the planet’s future.
It involves balancing his efforts to appease Alberta and other oil-and-gas-reliant provinces that opposed then-prime-minister Justin Trudeau’s green focus, with reassuring people – including Liberal caucus members – disconcerted by his deprioritization of climate policy since taking office despite championing it before.
Mr. Carney's climate strategy will need to strike a tough balance between economic concerns and environmental ones.Justin Tang/The Canadian Press
While Mr. Carney and his cabinet have been tight-lipped, interviews with nearly a dozen people familiar with the document’s development – including government officials and climate advocates who have engaged with them – have offered indications of how it’s taking shape, questions with which the government is wrestling, and ideas for how to resolve them.
By all accounts, Ottawa is unlikely to officially change national emissions targets – which currently involve a reduction of at least 40 per cent from 2005 levels by 2030 – because it’s too difficult legislatively and as a matter of international process. Instead, the strategy is expected to play them down and perhaps tacitly acknowledge they won’t be reached. To the extent that it mentions those sorts of goals, it will likely be through an emphasis on net-zero emissions by 2050, not nearer term landmarks.
At the same time, a subtext will be that despite the United States retreating from climate action, the energy transition is continuing apace globally, and Canada needs to embrace related economic opportunity.
As for the meaning of “climate competitiveness,” which may seem abstract to most Canadians, it broadly appears to be twofold.
In part, it refers to getting existing Canadian industries to offer relatively low-carbon versions of their products, which other markets may increasingly value. Most prominently and contentiously, that includes carbon-capture investments for the fossil-fuel sector.
A challenge is that policies to shape those efforts are tied up in negotiations with Alberta around producing more oil and gas sustainably. So the strategy’s specifics could be limited, unless Ottawa delays releasing it.
The other meaning is to compete in growing low-carbon sectors, such as the electric-vehicle battery supply chain, non-emitting electricity, mass timber, and early-stage clean technologies.
Carbon Engineering's direct air capture pilot plant in Squamish, B.C., in 2023.DARRYL DYCK/The Globe and Mail
Those aims involve an array of potential policy decisions – and competition for scarce public dollars – which Ottawa is unlikely to have fully worked through during a hurried strategy-development process.
It may add up to a fairly high-level document, not a fully detailed road map, based on how officials have been managing expectations.
Still, the strategy’s credibility may hinge on providing some clear sense of direction and new ideas. And for some of its likely pillars, there are all sorts of ways that it could do so.
Industrial carbon pricing to address pollution
One of the safest bets is that the strategy will recommit to carbon pricing for heavy industrial emitters, which among other attributes is essentially the only plausible path to financial viability for the carbon-capture projects that Mr. Carney wants to see in the oil sands and other fossil-fuel sites.
The question is how firm he will be about strengthening a system, mostly run by the provinces, that’s currently too weak to incentivize those investments.
A Syncrude oil sands mining facility near Fort McKay, Alta. It's likely that climate strategy will recommit to industrial carbon pricing.ED JONES/AFP/Getty Images
There might be only so much Ottawa can say about that, because it’s a key item in the talks with Alberta. But it could draw some lines in the sand, for example by emphasizing the need to significantly increase the share of emissions covered by the pricing system.
It could also hint at what it’s willing to give up in return. A widely anticipated trade-off would be dropping the planned cap on oil-and-gas sector emissions set in motion under Mr. Trudeau; lack of commitment to the cap in the strategy would reinforce that perception.
The same goes for other possible concessions that Alberta is seeking, such as dropping the ban on large oil tankers on B.C.’s northern coast.
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Less contentiously, Ottawa could confirm that it will implement tougher standards for methane containment, which is essential to claims of producing natural gas relatively cleanly.
Not that it’s all about regulations. There could also, for instance, be tweaks to the existing federal investment tax credit for carbon capture, and a doubling down on carbon contracts for difference – a financing mechanism Ottawa has tried to deploy to de-risk projects, with limited industry uptake so far.
Support for clean electricity
On electricity policy, most public attention will probably be paid to whether Mr. Carney recommits to the Clean Electricity Regulations – yet another existing policy, effectively restricting new investment in gas-fuelled power plants absent accompanying carbon capture, that Alberta opposes.
But building new sources of renewable electricity to bolster what are already low-emissions grids across most of Canada – a significant advantage in attracting industrial investment – is more in keeping with the competitiveness frame.
The most straightforward option on that front would be to confirm that Ottawa will implement a tax credit for clean-power generation and transmission, available to public utilities that produce much of the country’s electricity, put forward under Mr. Trudeau. It could also bolster federal mechanisms to finance grid investments, particularly through the Canada Infrastructure Bank.
Power transmission lines and wind turbines near Pincher Creek, Alta.Jeff McIntosh/The Canadian Press
Another potential objective is encouraging Canadian sourcing of materials for those projects. One option, advocated by the Canadian Renewable Energy Association, would be a domestic-content bonus to the clean-electricity tax credit, as well as to an existing credit for private-sector clean-power investments.
And Ottawa could give some sense of how it wants to help Canadian power producers enter export markets – particularly capitalizing on renewed international interest in nuclear technology.
Becoming an EV battery player
Building a start-to-finish EV battery supply chain, and taking a leading role in international efforts to counter China’s dominance of that space, has been an objective for years. With Mr. Trudeau’s government having attracted several massive (and heavily subsidized) battery-assembly plants, the focus now is largely on leveraging Canada’s mineral reserves to extract and refine components.
An electric vehicle charging in Ottawa. The new climate plan could lean on building up Canada's role in EV battery supply chains.Sean Kilpatrick/The Canadian Press
The strategy will probably lean heavily on expediting approvals for mines, including through the new Major Projects Office. But it could also include (or at least hint at) new financing mechanisms.
For instance, industrial-policy think tank The Transition Accelerator has been advising Ottawa to use contracts for differences – which would use federal funds to guarantee a price for minerals such as copper or lithium – as a way to insulate potential proponents from fluctuating market prices.
Atop that, the strategy could also clearly tie domestic-content requirements to any future battery-plant subsidies, if not those already announced.
Innovation, not just infrastructure
While Mr. Carney has been heavily focused on large infrastructure projects, it would be a glaring omission to overlook early-stage clean technology. As with other forms of innovation, the challenge is to better leverage Canada’s strong research ecosystem to commercialize and grow products and companies.
If the strategy gets into the weeds, there are lots of tools for accessing capital in which it could signal interest, itemized by the Canadian Cleantech Alliance in a recent prebudget submission. They range from flow-through shares (allowing investors to claim tax writeoffs from preprofit companies’ expenses), to enhancing existing tax credits, to fully restoring the role played by the funding agency Sustainable Development Technology Canada before a management controversy led to its demise.
It could also give some indication of how Ottawa plans to use Buy Canadian policies, including in new defence spending, to boost clean tech.
And if it wants to provide some higher-level direction, it could indicate whether there are particular new technologies where it sees the greatest potential competitive advantage, and for which it might develop specific strategies.
How can Canada’s climate plan address affordability concerns?
Climate organizations such as Clean Energy Canada have been warning Ottawa that it shouldn’t completely overlook cost-of-living challenges that, according to recent polls, are back atop Canadians’ list of concerns.
While affordability doesn’t easily align with the competitiveness focus, there are some options for trying to address both. An obvious one would be to announce a return of EV purchase rebates but partly tie them to domestic content.
Mr. Carney tours an under-construction modular home at an announcement for his government's new agency aimed at building affordable housing.Justin Tang/The Canadian Press
There are also synergies with the government’s support for mass timber as a low-carbon material for quickly building new homes, or wind and solar power to minimize energy costs.
It gets harder to find a competitiveness angle with something such as supporting heat pumps, which make home energy use more efficient.
But it’s in Mr. Carney’s interest to draw the connection wherever possible, if he wants to bring people along.