Alberta Election: Where Do the Parties Stand on Energy?
This week on the podcast our special guest is John Dillon, former Senior Vice President, Policy and Corporate Counsel at Business Council of Canada.
First, John joins Jackie and Peter in a discussion about the Alberta Election that is being held on May 29, 2023. What can we learn from the past record of the two leading parties, the United Conservative Party (UCP) and the New Democratic Party (NDP)? What do we know about their plans for the future of Alberta’s energy industry?
Next, we ask John to reflect on his 32 years at the forefront of climate change policy in Canada. How have corporate attitudes towards reducing greenhouse gas (GHG) emissions changed over that time? What policy changes are needed for Canada to make big reductions in GHG emissions by 2030 and achieving net zero by 2050?
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Episode 202 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas podcast. I’m Jackie Forest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome back and well, if you have enjoyed the long weekend, it’s welcome back after the long weekend. We’re recording on Tuesday.
Jackie Forrest:
We are, and great warm weather in Calgary, but lots of smoke reminds us of all the wildfires that are happening in northern Alberta. Not a great situation. Hopefully getting better with some rain yesterday.
Peter Tertzakian:
Yeah, last week was not great at all for the smoke. Saturday was not particularly good. It started to clear yesterday and we got some rain up there, so we’re thinking of the people up there. I mean, it’s just a terrible situation.
Jackie Forrest:
Just hope that these fires get under control and we get some rain. I mean, that’s a real issue up north it’s so, so dry.
Peter Tertzakian:
Yeah.
Jackie Forrest:
Yeah.
Peter Tertzakian:
Okay. Let’s talk about the election, which is coming up.
Jackie Forrest:
Yeah, and so we’re going to have a couple of topics today, but we’re going to have a guest join us and we’re excited to introduce our special guest, John Dillon. John has spent over 32 years at the forefront of climate change policy in Canada, and he recently retired from his role as Senior Vice President of the Business Council of Canada. Welcome, John.
John Dillon:
Thank you.
Peter Tertzakian:
Great. Yeah, thanks, John. And just for the benefit of our audience, where are you coming from? Where are you talking from?
John Dillon:
I’m in beautiful downtown Ottawa.
Peter Tertzakian:
Fantastic. Okay.
Jackie Forrest:
All right. Well, hey, we’ll get the Ottawa perspective on the Alberta election here, and now that you’re retired, John, you can just say what you feel, so don’t hold back.
Peter Tertzakian:
That’s right. That’s right. Yeah, you have no career-limiting moves. Okay, so Alberta election, the election is, I don’t know, I’ve been away for three weeks.
Jackie Forrest:
Six days.
Peter Tertzakian:
It’s in six days.
Jackie Forrest:
Yeah, next Monday.
Peter Tertzakian:
Next Monday.
Jackie Forrest:
Yeah.
Peter Tertzakian:
Okay. So I know that the early polls are open and starting today you can go out and start voting in advance, but the big day is next Monday, so we are also going to record once we know the results, podcast on Tuesday, we usually release the podcasts on Tuesday, but as with this week and next week, we’re going to release them on a Wednesday, right?
Jackie Forrest:
That’s right. Because we want to… Well, first we had the May long weekend and both of us didn’t want to come in on Monday, but next week we thought it would just make more sense to wait one day and be able to give some views on what happened.
Peter Tertzakian:
Right. So this is a two-party race, I think it’s safe to say. It’s the NDP and the UCP, and we have Rachel Notley the NDP leader, and she is going up against Danielle Smith. Both of these two leaders are veterans of elections past. Both are well known to the public and it’s very interesting. I think it’s an overarching statement on the election and energy, energy is not as prevalent a topic in the election narratives for either the UCP or the NDP this time, right? I mean, the social circumstance with high inflation, COVID policy, legacy stuff, healthcare, et cetera, these are the big hot-button topics. Energy-focused issues, nor I would argue even climate change, which used to often be at the top of the priority list of what people were thinking about, now it’s all about healthcare. We see that in the narratives of the NDP and it’s all about leadership and so on, and inflation, and affordability, and stuff like that.
Jackie Forrest:
John, maybe you could add some comments from the Ottawa lens there.
John Dillon:
Yeah, I think that’s generally true, Peter, although every time there’s an extreme weather event, including the forest fires right now, there’s a fair amount of attention paid to climate change. But I think you’re right, the issues of inflation and economic uncertainty are a bigger issue across the country right now than climate change. And the climate has always been something that kind of moves up and down, and it’s always a basic concern of Canadians, but the prevalence tends to waiver up and down over time.
Peter Tertzakian:
Interestingly, you point that out. I mean, the fires started when the election kicked off. I mean, the first forest fire was probably three weeks ago. The smoke didn’t engulf the province in Western Canada until, I don’t know, arguably a week ago, depending on where you were maybe two weeks ago if you were further up north. But it didn’t any change in the platforms of any of these parties and they didn’t start talking climate change about because of the forest fires, would you say John? Right?
John Dillon:
No, no. And of course, a lot of the policy is in place, although it’s still debated to some degree, and we know the debate that’s been ongoing about the carbon tax, both provinces and the federal government are putting a lot of policy in place. There are some that are controversial, including the plan for a clean electricity grid by 2035 and the cap on oil and gas emissions, which are federal policies, which are going to have real implications for Alberta.
Peter Tertzakian:
Well, Danielle Smith has certainly said even before the election was called, I mean she did have a stance concerning things like emissions cap and was very protective of our oil and gas industry. The narrative is, “I’m going to stand up and fight for you against Ottawa”, and so on. So we’re going to talk more about that. We’re going to talk more about the policies and how each party if elected, will handle Ottawa because I think that’s a big thing. But I would say that the UCP has been much more vocal about that issue than the NDP. The NDP is focusing more on the issue of leadership, trust, healthcare, and affordability.
Jackie Forrest:
Now, Danielle Smith is against the cap, and we’ll get into that in this next section. The NDP has come out, Rachel Notley says she does not oppose the captain principle, but the current plan is too onerous. So she has sort of pushed back on Ottawa, which a lot of the narrative from the UCP is that she’s just working with Justin Trudeau. So she’s trying to show, hey, I don’t agree with that particular policy, it’s going to hurt the province. Well, let’s take advantage of the fact that we can do a look back. It’s kind of interesting that we have two candidates here, one that was a premier for four years, one that was a leader of the opposition, and of course, the UCP has had four years here in Alberta. So what can we learn from the past track record? So I thought it’d be fun to go through some of the big policies that each group put forward and the NDP, there was a lot of energy.
It was a different time, like you say when energy was a very top priority for the government. But we had things like the Royalty Review, Peter, which I know you were part of. Other big policies were the early shutdown of coal, and putting a limit on oil sand emissions. Remember all the CEOs and the environmental groups on the stage. There were also the liberals who bought the TMX and the-
Peter Tertzakian:
The federal Liberals.
Jackie Forrest:
… The federal Liberals bought the TMX pipeline and the NDP government, in fact, at the debate last week, Notley made the point several times that she got the new pipeline to tidewater. I think she did have a big influence in terms of I think that cap helped. I think working with BC, remember they had their demands. Maybe John we’ll bring you in here. Do you think that Rachel Notley deserves credit for getting the TMX to tidewater and the liberals acquiring the project?
John Dillon:
I think she does deserve some of the credit. I mean, it was a challenging time in terms of negotiating with an NDP party in British Columbia that was fairly sizably opposed to it and supported by the Green Party and their coalition government. And I think she helped change the public opinion of it both in Alberta and across the country, because NDP governments, at least for most Canadians, are not known for being big supporters of oil and gas. So she took a very realistic and common sense approach to it, and I think helped build public support for it. At the end of the day though, as Peter said, the liberal government had to buy the pipeline because the owners at the time felt that there was just too much risk involved in it. And of course, it’s turned out to be a very expensive project, but at the end of the day, it’s going to serve the industry in terms of its ability to export oil in particular, which we’ve never had before.
The other thing I would say is that, of course, she was working at the time with a lot of liberal provincial governments across the country. You mentioned standing on stage with all those other players, the current Federal Environment Minister Steven Guilbeault likes to point out that he was on that stage as well. But they had support from not just the industry, but also environmental groups and support across the country in terms of several liberal governments in other provinces, many of which have changed since that time. But it was one of the reasons why the federal government was able to secure some form of agreement on carbon pricing as well.
Jackie Forrest:
Yeah, right. You’re right. That was a big part of the climate agreement on the federal level.
Peter Tertzakian:
Can I just say about this TMX thing, because I look at it and say, well, how is it that we got to the point where the federal government had to buy it out? Because to me, if you look at the history of the TMX and the TM expansion, the industry was willing to pay for it. It was just that it was so bogged down in regulatory issues and all sorts of other issues of the day that ultimately the principal proponent and the financiers dominantly from the U.S. said, “We’re out of here.” And so the pieces had to be picked up by the federal government. And yes, it’s true, Rachel Notley was part of that and the prevailing governments at the time. But I think what’s important in this election is to think about that experience and think about which party is going to deal with what I would call the national energy policy dysfunction that we have and which leader is going to handle the forward energy policy issues with Ottawa better.
And there are two camps. There’s one, which is sort of the more, well, let’s take a much more combative stance. And there’s one, the other stance would be, well, let’s collaborate more. And it’s unresolved. And there are arguments for doing both by the proponents. I’m not going to pass judgment. I’m just going to say people have a decision to make in terms of how they want to see energy policy go forward. John, do you get that sense too, that there are sort of a couple of options here, one of butting heads versus sitting around a table?
John Dillon:
I do, and we see that I think about other issues besides climate change as well, which I think is unfortunate. I think at the end of the day, this has to be resolved collaboratively. We’ve already had one case go to court on the carbon tax. There’s another case before the Supreme Court now on the constitutional validity of the federal government’s environmental assessment regime, and we’ll see how all that plays out. But at the end of the day, policies have to be made in a collaborative spirit. And I think what industry is looking for is the certainty and predictability of policy, which you don’t get when there’s the threat of litigation, including from First Nations obviously over some issues. But generally speaking, business-like policy predictability. They don’t like to see skirmishes regularly.
Jackie Forrest:
We’ll just quickly finish off, the other major policies were the curtailment of oil production. So Rachel Notley may have helped get the TMX on, but she faced the problems of the lack of our takeaway capacity with those big blowouts. It was very controversial and it resulted in them procuring a bunch of rails, which was deemed maybe to be a lot of money that wasn’t needed because when COVID came along we didn’t necessarily need that rail capacity in the end. But I would say that the NDP did have more collaboration with the feds, and there are some advantages to that for sure. And I also think they did hold several collaborative processes like the Royalty Review in terms of bringing people together.
Peter Tertzakian:
Well, I would argue they were combative as well. I mean, they put into place the policy that gave them the option to dial down the throughput through TMX to BC.
Jackie Forrest:
That’s right. Yeah.
Peter Tertzakian:
In conjunction with the ban on line imports from BC.
Jackie Forrest:
That’s right.
Peter Tertzakian:
Both of these leaders, I think can be tough if need to be. And there’s some sense that only Danielle Smith can be tough with Ottawa or other provinces, but I think Rachel Notley also has a record of being tough. And by the way, that policy is still out there, that legislation was passed that Alberta can dial down oil throughput to BC if needed.
Jackie Forrest:
Okay. Well, let’s talk a little bit about the UCP. Now, of course, Jason Kenny was the premiere for a lot of this, and there were a lot of other issues this government had to deal with COVID, the health crisis for a couple of years, and now inflation, but I’ll just bring up some high-level ones. Invested in the Keystone XL, so while Rachel Notley had her crude by rail, they had their Keystone XL, which turned out to be not a good use of money because of course the project got canceled by Biden. They did make several changes to the TIER. They did start the Alberta Indigenous Opportunities Corporation. We had that podcast with Enbridge that talked about how that was critical for the deal that they made to sell part of their pipeline to the Athabasca group.
Peter Tertzakian:
That’s a billion dollars, isn’t it?
Jackie Forrest:
The Billion Dollar Fund, right? So in fact, Rachel Notley said in the debate that she agreed with this policy and would even expand it. That’s one policy she was supportive of that the UCP brought in. As John mentioned, they challenged the feds on the carbon price. They’re challenging them on our environmental impact assessment right now or formerly known as Bill C-69. Very controversial.
Peter Tertzakian:
Oh my God, don’t bring that up again.
Jackie Forrest:
Yeah. They were frustrated with the oil and gas industry for not spending more money on Capex. They had cut the corporate tax rate. This is still a discussion right now because Rachel Notley wants to increase it again, but they had cut it from 12% to 8%, and they hoped that that extra money would flow into people spending more money on oil and gas. But as you know, investors were demanding the money back.
Peter Tertzakian:
I’m just going to chime in here because it’s not like the government can do much about that. The issue of whether or not the oil and gas industry is going to spend more money on Capex, drilling, et cetera, and development, really is a function of the financial markets. And we’ve talked about that on this podcast before, which is that there are two kinds of policy or regulatory influences on the oil and gas industry. One comes from the government and that’s one that’s very overt and everybody hears about it in the newspapers and so on. But the other major influence is how the capital markets and the financial industry influence whether or not they invest in oil and gas companies, and whether ultimately the boards of directors and the other financiers that are part of the decision-making make a conscious decision to invest. Now, we know since 2018, there’s been almost zero investment going into these companies from Bay Street, Wall Street, et cetera. So whether or not the tax rate goes up and down I would argue is not the governing variable of whether or not the oil and gas industry invests money into the ground.
Jackie Forrest:
As we saw in real-time.
Peter Tertzakian:
Mm-hmm. John, you were going to say something?
John Dillon:
Yeah. I think you’re right, Peter. And to that, I would just add the issue of what the long-term demand forecast looks like. And one of the reasons they’re feeling pressure from the financial communities is this question of how much more can oil demand grow and when will it peak and when will it start to decline. And there’s huge pressure not just from the financial community, but from shareholders and stakeholders about what’s your long-term plan. And so a lot of that investment, as you know, is more focused on emissions reductions, things like CCUS, than it is on expanding production.
Jackie Forrest:
Right. Well, they have not supported CCS financially. The feds have offered things like tax incentives. Now they’re talking about a contract for differences potentially through federal funds. But I think there has been some pressure on the Alberta government to support that. We haven’t seen that yet. And I just want to say one last thing, remember the energy war room that was turned into the Canadian Energy Center?
Peter Tertzakian:
Mm-hmm.
Jackie Forrest:
That still exists and that was a big part of their platform.
Peter Tertzakian:
What war are they fighting?
Jackie Forrest:
Well, I just went on their site and there are several articles written in the last week that are talking about our oil and gas industry.
Peter Tertzakian:
Okay.
Jackie Forrest:
Okay. So quickly, any takeaways from either of you on the UCP time? I will also mention they have put out several high-level strategies around the new economy, like a hydrogen roadmap, natural gas vision, mineral strategy, and geothermal, not a ton of money towards those things, but there’s been some work about where we need to go.
Peter Tertzakian:
Yeah. Well, I think though the narratives are not front and center in terms of their campaigning and the platforms, energy is still a big deal. And behind the scenes, I know that both are thinking a lot about the questions and the issues that we just raised. I believe both can be combative, but also both can be collaborative and it’s just a matter of style. What you hear in the headlines and what’s going on is not necessarily what’s going on behind the scenes. And I know John as an Ottawa veteran, what do you think about it?
John Dillon:
Yeah, I mean, there’s a couple of issues that I think are going to be fairly important and that don’t seem to be playing out very much in the election. But in talking about the UCP government they fought against the consumer-facing portion of the carbon tax, but they’ve largely adopted what the NDP had in terms of emissions pricing on industrial emissions, the so-called TIER program. I think they may have made some modifications to it, but it’s largely still intact. And that’s something that the industry supports. I think the bigger issue or a big issue that isn’t getting a lot of attention either is what’s the future of natural gas? Particularly in electricity. We’ve seen the coal phase out and that’s been very significant in Alberta. And there’s great wind and solar potential. Natural gas is still going to be the backbone of the system, I think, for several more years. And how’s that going to work with the federal policy of zero-emissions electricity by 2035?
Jackie Forrest:
Well, let’s talk about some of those future policies. So you’re kind of hitting on some of the go-forward policies. Of course, UCP was kind of silent on the net zero but they came out last month with the document that says they have an aspirational goal for carbon neutrality by 2050. So the NDP and UCP both have the view of net zero by 2050, but with his net-zero electricity by 2035, there’s a difference in the perspective. The UCP is not committed to net zero by 2035. They want a plan that provides reliable and affordable electricity. Meanwhile, the NDP is committed. Now, the UCP claimed that going the way the NDP wants, would cost 80 billion-plus dollars to Albertans. The NDP says that’s kind of overblown in terms of that estimate, but it will cost something. So there’s a difference there. And when it comes to natural gas, the UCP has said they’re pro natural gas for power, pro LNG, natural gas should be a transition field for decades to come. And we haven’t heard anything on the NDP that I’ve been able to find about their view on natural gas.
Peter Tertzakian:
Mm-hmm. Well, I think that the two variables or time can be done by 2035. And what is the cost? And who’s going to pay for that cost as a corollary? I think both are contentious. Both are starting to amp up both overtly and behind the scenes. And hey, in the Prairie Provinces, it gets cold and so we need natural gas. The wind doesn’t… The thing is that the wind doesn’t blow and the sun doesn’t shine in the winter. On very cold days the wind doesn’t blow. So what are we going to do?
Jackie Forrest:
And we don’t have big hydro within-
Peter Tertzakian:
No.
Jackie Forrest:
… Alberta and Saskatchewan.
John Dillon:
Yeah, and this is going to be a big challenge across the country because many other places are still reliant on natural gas for both heat and electricity. We’ve seen the UCP government in Alberta, but also the Ford government in Ontario roll back or provide rebates on electricity whenever the cost gets a little too high because it’s a consumer issue, but it’s also a business competitiveness issue. I mean, one of the advantages that Canada has had is a relatively clean electricity grid and a relatively affordable one. The next changes and the next big portfolios to get to that zero emissions grid are going to be very expensive. And Peter’s right, who’s going to pay for that and how are we going to maintain both public acceptance of that and also a competitive position of Canadian industry?
Peter Tertzakian:
Mm-hmm.
Jackie Forrest:
Mm-hmm. Now in terms of the timing, during the debate, I felt like Danielle Smith seemed to say that they’d get there by 2050. I think that’s the time she’s thinking about electricity. So big difference there in terms of the timeframes. We talked about the cap already. The UCP is against the cap. It will hurt Alberta. It will cause us to cut our production and it will result in carbon leakage. Meanwhile, the NDP does not oppose a cap in principle, but the current plan is too onerous. So I think they’re aligned somewhat in that on the top.
Peter Tertzakian:
Oh, yeah. I mean, both parties see that the cap is potentially damaging to the economy, and the functioning of the biggest industry. I mean, even Scott Moe in neighboring Saskatchewan has identified the same issue and is becoming much more vocal about it.
John Dillon:
Yeah. I think the question here is what kind of reduction over what time?
Peter Tertzakian:
That’s it.
John Dillon:
You’ve seen some of what the oil sands industry is saying, and I think the oil sands are the biggest. Peter, you probably know the numbers, but is the biggest contributor to oil and gas emissions in Canada. And they have said they’re not against the cap, but they want one that’s realistic and one that they can do in the timeframe that’s allowed to them. And it relies on a lot of investments in technology and policy clarity is not there yet to allow some of those investments to happen.
Peter Tertzakian:
The policy is very… The proposals are murky. It’s like trying to apply a blanket policy on a huge industry that is not a homogeneous thing. I always say it’s like applying policy to retail shopping. Well, what does that mean? Are you talking about shopping malls or are you talking about corner stores? Are you talking about online shopping? One policy for oil and gas emissions cannot fit all modalities of extraction. It cannot fit oil sands, which are highly concentrated and has a very unique extraction modality relative to conventional, which spans a huge landscape, not only geographic but political because of the different provinces from northeast BC to Southeast Saskatchewan, a big swath through the Western Canadian Sedimentary Basin through Alberta. It’s just very complicated in terms of how to and the clarity is just not there. And bringing clarity to it is going to be something that is going to have to be dealt with on day one after the election because the federal government is still very determined to get some kind of policy. So we’ll see how that’s dealt with.
Jackie Forrest:
Okay. Well, I think we’ve covered the big topics for the election. Maybe we’ll switch gears now to talk about John John, you’ve been in a career thinking about climate policy for a long time, and you’ve been with the Business Council of Canada, I think, since the early 1990s. Is that right?
John Dillon:
Yes.
Jackie Forrest:
Yeah. We thought we’d just get some of your reflections in terms of how climate policy has evolved in this country over your career to finish off the podcast.
John Dillon:
Sure.
Jackie Forrest:
So maybe we’ll start with, you being involved with Rio and Kyoto Climate Meetings. So what years were those events?
John Dillon:
Rio was in 1992, and that’s when the Framework Convention on Climate Change was signed. Kyoto was in 1997.
Jackie Forrest:
Okay. So when you think about those UN meetings and so many that have been held since then, and then you look at what happens to emissions, they continue to go up each year, what do you think about these meetings? Should they continue? Are they an effective way of solving this problem?
John Dillon:
Well, I certainly wouldn’t be one to claim that the United Nations has made great progress on this. It has its limitations on so many global issues. But I think the meetings have been effective in terms of bringing all players to the table. If you remember the Kyoto Protocol, which was to be the first legally binding commitment under the Climate Change Convention, only covered developed countries. And what was defined as developed countries in those days didn’t include China, India, Brazil, South Africa, a lot of the Middle East, et cetera. So we needed a mechanism to continue to engage those other countries that are big emitters. The beauty of the Paris Agreement, which came much later in 2015, was that it allowed countries to sort of come in on their terms, including China, India, and other major developing countries, because of this idea that somehow you could impose targets on countries wasn’t going to work.
So I think it’s important that they remain at the table, but at the end of the day, it has to be a collective global effort. And we’ve seen too many examples of countries that don’t want to play by the rules and so we have to figure out. And I don’t have any magic solutions as to how we do that, but I think we have to keep the countries at the table and talk about this.
Peter Tertzakian:
Mm-hmm. So that’s the global view. Let’s bring this back to Canada and the Business Council of Canada with which you’ve been for, I don’t know, 30 years. How does corporate Canada feel about climate policies, especially in the last five to 10 years? And I’m thinking specifically as the timelines get tighter, we’re talking about net zero by 2050, but a lot of the targets are 2030 and 2035, which are just looming. You have a lens into all the different industries in Canada. How are they viewing the realism of the targets that are being set out and the magnitude of the cuts that have to be realized on those dates?
John Dillon:
Well, I think there’s always been a problem and this goes back to the very early days of this with setting ambitious targets and not focusing enough on how we’re going to meet them and talking about the policy. Two things have happened in the business community. One is the evidence of climate change is compelling. Now, it wasn’t always, in the early days, people didn’t understand exactly what that meant to have a three to five-degree change in average global temperatures over several decades. But now we’re seeing real evidence of that and we’re seeing huge movements in public views on this and in government action on it. So the business community, I think as a whole is fully engaged on this issue. And I’m seeing the evidence, again, from where I sat at the business council of that across sectors. Yes, in the early days, a lot of focus was on oil and gas, and still is.
But we’re seeing changes happening across electricity, buildings, and construction, and concrete, steel, and cement, and a whole range of mining. The auto sector is moving significantly towards electric vehicles and other low-carbon sources and huge movement around the minerals and other materials that will supply that growing EV industry.
Peter Tertzakian:
Right. Can I just interject? You use this word that the business community is much more “engaged” as the deadlines loom, as we see more evidence of climate change. So there are proverbial lights that go on, but there’s a difference between being engaged and then the realities of what you have to accomplish and the decisions you have to make at the boardroom table in terms of capital spending to transform your business into achieving these targets. Can you talk about, I’ll call it table-level decision-making, just dialogues that are going on.?
John Dillon:
Yeah. Well, it is a focal point at most board tables these days. We talked earlier about how the financial community is looking at this and putting pressure on it. Companies and boards are feeling that pressure from their employees, from Shareholders, from stakeholders regulatory agencies, frankly everyone’s asking. I know that ESG doesn’t always win applause in all sectors of this country, but the fact is that most companies are living with that today. They’re feeling the pressure to come up with plans and at the end of the day, the board has to make those decisions about what investments make sense.
Peter Tertzakian:
So let us talk about the magnitude of the investment because a few years ago, the public was engaged with climate change because the surveys went out and asked the question, “Hey, are you worried about climate change?” “Yes, of course, I am.” And then the subsequent question was, “Well, how much are you willing to spend on it?” And I can’t remember the exact number. It was the equivalent of a Netflix subscription per year. It was all that people were willing to pay. So now making a parallel to the boardroom tables, there’s engagement as you called it, and realization, and awareness, and pressure from ESG regulations, whether it’s financial or government policy-driven. But what is the willingness to spend?
John Dillon:
Well, I think it’s real. I mean, I think, obviously we’ve talked a little bit, and we may chat more about the policy certainty and the investment incentives that companies are looking for, but we’re seeing investments in things like CCUS, not as much as we need obviously to meet ambitious targets like the one we have for 2030. But we’re seeing investments in hydrogen, in low carbon concrete, in, as I mentioned, we’ve got huge government incentives around EV both purchases and obviously in building facilities, and battery facilities, and assembly facilities, and so on. So the investment is there. I do think there’s even more investment capital out there from private sources. There are a lot of pension plans and private equity funds that are looking, and some are still sitting on the sidelines waiting for some of that policy clarity that we talked about earlier. The RBC did a study a couple of years ago that put the cost of a net-zero transition in Canada at $2 trillion.
I don’t think many people dispute that. The government has referenced that. The federal government has referenced that in its budget statements. So that’s the level of investment that we’re talking about and that’s not just the private sector, that’s public and private.
Jackie Forrest:
So, John, when you talked a little bit about some of the uncertainty on the policies and Canada and that’s holding back investment, what do you think Canada needs to do if they are going to achieve such a big goal, over 40% reduction by 2030? What policy changes are needed to achieve that?
John Dillon:
Yeah, I’m a lot more optimistic about the net zero by 2050 than I am about a 40% reduction by 2030. And I say that only because you’ve talked about a lot of these projects to a lot of these people. We still need time to figure out the rules around some of these really big investments, whether it’s carbon capture and storage, whether it’s hydrogen, whether it’s ramping up electricity or clean electricity production, whether it’s building all those EVs for people to drive, that’s going to take time. So, I think what we need are a few things. Number one is the policy clarity that I talked about earlier. What is it that federal, provincial governments are going to do together to make this happen? The regulatory piece is critical. Even the federal government itself acknowledges that it takes too long to build a new mine in Canada and yet we want to have a vast supply of new critical minerals to feed batteries.
The reality is that we need to figure out what are really big projects that they’re going to make a difference, both in terms of Canada’s economy and in achieving our climate change goals. You may have seen in the US; Joe Manchin is talking about a bill that would do just that and put a time limit on the approval for those kinds of projects. I mean, there may not be exact parallels to make that work in Canada, but the federal government says it’s serious about improving the regulatory process, but we need to see real action on that. And the recent paper that we did at the business council lays out some of the criteria of how you would determine what are the big infrastructure and other energy and clean energy projects that we need to get on with because we can’t wait five, six, seven, eight years for those projects to be approved. There’s no way we can make our 2030 target if that happens.
Peter Tertzakian:
Yeah, I think these are all great points. And I think further to the election discussion that we were having, the issue of clarity, and by the way, we discussed that on the last podcast as well, Jackie, about investors needing to understand it. In other words, it has to be clear in terms of what the terms of the policy are. Otherwise, the default is to pass and just move on to a different investment. So, clarity is key. Resilience is key. And this ties into the provincial election and other elections, including the federal election, that if investors don’t see that the policy is going to be resilient through government change, in other words, a new government comes in and shreds the policy, then I’m not going to allocate billions to something that I’m quite dependent upon to make a return in the near term. So, resilience is key. And I think finally, John, you talked about that, we talked about it as we wrap up this podcast. This is just harmony. I mean, there has to be some sense of function, not a whole bunch of dysfunctions.
Otherwise, we can’t attract investment even from within the country, let alone abroad. And so much of Canadian infrastructural investment historically has come from outside of the country. And if we don’t have some sense of function instead of dysfunction, foreign investors aren’t coming here.
John Dillon:
You’re right. And we’re seeing the example of the Inflation Reduction Act in the US and how much that’s growing investment. So we need to get our act together in the short term because there are huge opportunities here for Canada. But I worry that we’re going to miss out both on the economic opportunity and also on our climate change targets if we don’t get this right.
Jackie Forrest:
Yeah, and moving our economy into the new world and the new future.
Peter Tertzakian:
Okay. Well, that’s a wrap until the actual election, which is next week.
Jackie Forrest:
Thank you, John, for all of your insights today.
John Dillon:
My pleasure. Thank you both.
Jackie Forrest:
Thanks to our listeners, if you like this podcast, please rate us on the app that you listen to and tell someone else about us.
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