Edward Greenspon is President & CEO of the Public Policy Forum, former Editor-in-chief of The Globe and Mail and former Global Managing Editor for Energy and Environment at Bloomberg.
Kim Henderson is former Deputy Minister to the Premier of British Columbia, Deputy Minister of Finance and a PPF fellow.
Dave Nikolejsin is a strategic adviser with McCarthy Tetrault LLP and a former Deputy Minister of Energy, Mines and Petroleum Resources in B.C.
When German Chancellor Olaf Scholz arrives in Canada Sunday, he will be asking his long-time NATO and G7 ally why we aren’t developing more natural gas for export and picking up the pace on hydrogen, the holy grail of the global energy transition.
With the very real prospect of energy rationing and industrial slowdowns this winter, Mr. Scholz is feverishly working to avert supply shortages, price shocks and job losses that could, among other things, erode domestic support for Ukraine. Cold homes don’t make for warm hearts.
All over Europe, nations are revisiting policies that have encumbered fossil fuels in favour of renewables that proved not quite ready to fill the gap. Germany, which prides itself as a climate leader, is now scrambling to build new LNG intake facilities, recommission coal-fired power plants and bail out its largest gas importer. While promising to double down on renewables, Germany is also debating anew its decade-long exit from nuclear.
Canadians also have some important questions to ask ourselves, as set out in a Public Policy Forum paper published today. Do we want to contribute to international security and – perhaps counterintuitively – global emissions reductions by further developing our gas reserves? Or does the world’s fifth-largest producer and sixth-largest exporter of natural gas prefer to keep its energy battalions off the field?
Canada provides a stark contrast with a Russia that is long on geopolitical gamesmanship and short on environmental, social and governance (ESG) principles. Canada is not just home to abundant natural gas reserves but also some of the cleanest gas anywhere. The International Energy Agency calculates the LNG Canada plant under construction in Kitimat, B.C., will be 60 per cent less carbon intensive than global averages and that next-generation facilities, like Indigenous-owned Cedar LNG in Kitimat, a second phase of the LNG Canada and Woodfibre LNG project in Squamish, will emit 90 per cent fewer greenhouse gases.
This is no accident. Canadian gas benefits from good geology, good geography and good governance. Its carbon content is low coming out of the ground. Proximity to hydropower enables clean processing. Canada’s weather gives a natural assist to the cooling requirements in liquifying gas for transport. Some of the strictest methane regulations in the world are pushing down fugitive emissions.
To be sure, natural gas remains a fossil fuel. But picking a single lane at this point would be a mistake. A successful energy transition requires a two-track approach of developing renewables while pursuing the aggressive decarbonization of established energy sources. As the German Chancellor can bear witness, giving short shrift to reliability and affordability puts at risk the sustained public support serious climate action demands.
We find ourselves at one of those rare junctures where the world really does need more Canada. Here’s how we can help others and ourselves:
1. Since international agencies expect gas consumption to grow for another 20 years and remain part of the energy mix at least into the 2050s, Canada’s gas offers the best available ESG alternative. But to make a difference to our trading partners and allies we need to dispense with our customary ambivalence and press ahead with new LNG capacity, starting with the second phase of LNG Canada.
2. We need to find a way to deal with emissions rules that count exports against the producing country rather than importers clamouring for gas. The Paris Agreement anticipated this distributional problem in its Article 6, which endorsed trading mechanisms to spread the burden, but agreement on the specifics has proven elusive. Given Germany’s desperation, Canada should negotiate to put Article 6.2 into action, allowing Canada to be credited for at least some German emissions savings.
3. Canada’s gas-versus-gas advantage grows even greater when our gas displaces coal, which, incredibly, is back on the upswing around the world. Ontario and Alberta have shown how replacing coal with gas and renewables can dramatically improve emissions. The time has arrived to make coal-to-gas switching an explicit part of our international climate efforts, perhaps in partnership with the United States.
4. The two North American gas powers should also co-operate on supplying markets in the most emissions-efficient manner possible. American LNG going to Asia currently takes a circuitous route through the Panama Canal, creating extra emissions. If B.C. LNG was expanded for Asian markets, it would free up U.S. capacity to focus on Europe.
5. Hydrogen’s potential to become the mainstay of future clean energy systems has entranced policymakers around the world. Canada’s access to key hydrogen inputs of natural gas, hydro and offshore wind gives us a leg up on the clean fuel of the future. But we need to keep pace with countries like Australia and Chile in jumping from planning to building mode.
Finally, serving the global good can also serve Canada’s domestic good, particularly the critical priority of Indigenous reconciliation. Every proposed LNG plant in Canada features some form of First Nations participation. In Kitimat, the Haisla Nation owns the proposed Cedar export facility. The Miawpukek Nation is a key proponent behind LNG Newfoundland and Labrador. Sixteen of 20 First Nations on the Coastal Gas Link route have taken equity positions. Germany isn’t the only sovereign nation wanting Canada to get behind gas.
The Chancellor’s visit signifies that decision time has arrived for Canada.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.