Patricia Mohr: Reducing Canadian economy's carbon footprint will take time and money
Credit to Author: Hardip Johal| Date: Fri, 21 Feb 2020 02:00:50 +0000
At the recent GLOBE 2020 conference in Vancouver, there was widespread agreement that Canada needs to move towards a lower carbon economy, given local, national and global concerns over climate change.
However, there was much less clarity on the new technologies needed and how to finance the transition. In my view, a balance needs to be maintained between environmental concerns and the economy.
Canada is a trading nation and an “energy specialist” — it is how we earn our living. Crude oil dominates Canada’s merchandise trade, generating net exports of $62 billion in 2019, up from $57.5 billion in 2018 — far outstripping any other export category.
The trade surplus on all energy products was $76 billion, helping to offset large, chronic deficits on motor vehicles and parts (down $21.6 billion), industrial machinery (down $28 billion), electronic equipment (down $42.1 billion) and consumer goods (down $54.6 billion).
The dominance of oil and energy products in the Canadian economy makes the transition towards a lower carbon future challenging, but also offers opportunities. Emissions Reduction Alberta (ERA) — funded through Alberta’s carbon levy on large industrial emitters — has been a leading light in financing oilsands pilot projects aimed at reducing GHG emissions as well as innovative technology in the renewable power, biotechnology, agriculture and forestry sectors.
Calls for projects seeking new uses for carbon dioxide — effectively sequestering carbon — have resulted in new cement and other products, with huge potential in construction markets both at home and abroad. Since inception in 2009, ERA has provided $564 million of funding — leveraged 6.6:1 with industry and government partners — to yield $4.3 billion of R&D financing to cut GHG emissions.
New technology will likely transform the Alberta oilsands over the coming decade. Producers have already cut their GHG (greenhouse gas) emissions intensity by 20 per cent over the past 10 years through better engineering efficiency, the Quest CCS (carbon capture and storage) project and a shift away from petroleum coke. Emissions intensity is on track to drop another 20 per cent through 2030 and even more with transformative technology.
At the show, ERA highlighted the bright spots emerging in the clean-tech sector, including a Vancouver-based start-up at the point of commercialization and finding strong Alberta and international markets for its technology in oilsands and lithium mining. ERA has provided funding to five start-up companies in the Vancouver area, helping to build a stronger clean-tech industry. It is exciting to see their growing success.
It was also encouraging to see the re-emergence of interest in nuclear solutions, given Canada’s deep knowledge of nuclear power and a huge uranium mining sector, the second biggest in the world. Small, modular nuclear reactors may be a solution for the energy needs of the Canadian North.
Despite considerable support from Canadian government funders, more private sector funding is needed — especially further development of venture capital markets. As they prove out their technology and reach higher technology readiness levels, many clean-tech companies stall and require more in-depth financial and marketing assistance to commercialize their products.
As a final comment, the Canadian economy has recently been sluggish. GDP grew below its potential at about 1.6 per cent in 2019 and is projected to advance by a mere 1.5 per cent in 2020, well below the United States. In my view, this partly reflects poor productivity linked to an excessive regulatory burden and a lengthy, difficult permitting environment for resource projects as well as challenging international trade conditions.
While investment in clean tech will eventually pay off by spurring new industry and export markets, the lead time for developing new technology is lengthy — often over 10 years — and the capital requirements large, especially in the energy sector. In the meantime, maintaining a positive regulatory environment, keeping Canada “open for business” and spurring growth in Canada’s traditional industries — oil and gas as well as mining — is vital.
Patricia Mohr is a corporate director in Vancouver and the former vice-president, economics and commodity market specialist at Scotiabank’s executive offices in Toronto.
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