Canada’s hopes to be a global power in the low-carbon transition could be dashed unless it develops national strategy based on competitive strengths and aligns its diplomacy, trade and public policy, a new report warns.
The country takes its place in the geopolitical pecking order for granted after prospering for decades as a major oil and gas supplier, says the study by the Centre for Net-Zero Industrial Policy, released Tuesday. Without a new plan, Canada risks losing out as clean energy expands as a supply source and developers look for locations to invest capital, it says.
This should be a national priority, as the United States, China and the European Union put money and political will behind being leaders in renewable energy, hydrogen, critical minerals and other technologies that take greater proportions of the energy mix, said Bentley Allan, a co-author of the report.
“The U.S. underwrites our security. We’re a G7 nation. We’re an exporter of oil and gas. We’re valued and appreciated and welcomed – maybe not always exactly to the degree that we would like – but we basically take that position for granted,” he said in an interview.
“But as oil and gas volumes and trade globally decline, our country is really exposed and it’s going to matter less geopolitically if we don’t bring online these alternative sources of energy.”
The Centre for Net Zero Industrial Policy is a virtual hub for researchers that aims to identify routes to low-carbon transition. It was established by the Transition Accelerator, a think tank that teams with other research groups.
The country’s relevance will depend on its ability to provide ingredients of the supply chains for batteries as well as wind and solar energy to counteract China’s dominance in those areas, said Mr. Allan, who is the think tank’s transition pathway principal.
This is especially true in the midstream processing, where technologies transform the raw materials into ingredients for clean energy, according to the report, titled Electrons, Rocks and Brains: Canada’s power in the new geopolitical order.
The federal and provincial governments have concentrated on attracting and providing subsidies for battery manufacturing plants in Ontario and Quebec. Northvolt AB, Stellantis, Volkswagen AG, General Motors and Ford Motor Co. are among major companies that have announced plants in those provinces backed by billions of dollars in public funding.
The trick is to develop other links in the supply chains to feed those plants and those in export markets, the report says.
Accelerate, a coalition of EV manufacturers, parts suppliers, miners and others, has similarly called for a supply chain blueprint as a national priority.
“What we cannot do is pour all of our money into the downstream manufacturing, because … the real dynamics of the geopolitical competition right now are actually unfolding in the midstream of the supply chain,” Mr. Allan said.
“It’s the materials and the processing of materials and the extraction of minerals themselves which are becoming the geopolitical leverage points.”
As it stands, China’s dominance presents major strategic risks for Western governments, the report says. History has shown that the U.S. – Canada’s largest trade partner and oil and gas customer – will strive to cut its reliance on resources and energy from China and Russia, it says.
This is where Canada can remain relevant, the study said. It pointed to the Canada-Germany Hydrogen Alliance as a guide for how Canadian resources can help cut dependence on Russian oil. Under that deal, signed in 2022, the two countries agreed to speed up efforts to deploy renewable energy and hydrogen in Germany, with Canada as a supplier.
Mr. Allan said the risk of delaying such efforts is stranded fossil fuel assets after 2030, owing partly to the Canadian oil sector’s relatively high costs. The report quoted a recent study by the International Monetary Fund that predicted Canada’s trade balance could decline by between 2 per cent and 3 per cent of GDP, as the world shifts to lower-carbon energy through 2050.
“I think it’s imminent that we’re going to start feeling the pinch of this and its effects on the dollar, our budget, our ability to compete globally. All of these things are going to hit really much sooner than we think,” Mr. Allan said.
Jeffrey Jones