Joe Biden is poised to begin his presidency with a wake-up call for Canadians who expect him to compromise his climate agenda in the name of diplomacy.
The president-elect’s apparent plan to cancel the Keystone XL pipeline expansion as one of his first actions after Wednesday’s inauguration, laid out in leaked transition documents, shouldn’t come as much of a surprise. It’s what he promised during last year’s U.S. campaign, it’s easy to act on and failing to do so swiftly would have sounded alarms within the Democratic Party’s base.
Still, hope has sprung eternal among those counting on the TC Energy Corp. (TRP-T) project – which could carry more than 800,000 barrels of bitumen daily toward U.S. refineries – as a lifeline for Canada’s oil sands. After buying a US$1.1-billion stake in the pipeline during the U.S. campaign, Jason Kenney’s Alberta government has continued to express hope that lobbying efforts claiming increasingly clean extraction processes will persuade the incoming administration to reconsider. The federal Liberals have to some extent suggested the same and even on Monday were continuing to insist it’s not yet over.
Vestiges of that optimism may persist after Mr. Biden’s expected executive order stopping construction, including the pipeline’s proponents going to court.
But Mr. Biden’s stroke of the pen nevertheless stands to force a reckoning about how Canada fits into Washington’s imminent effort to confront climate change more seriously than it ever has before and pull the rest of the world along with it.
And there are two very different lessons that Canadian leaders, industry and the broader population could draw: one of them positioning this country for a lot more frustration with increasingly adversarial continental relations, the other opening the door to new economic opportunities.
Those who consider Mr. Biden’s decision nothing more than virtue-signaling – a sop to environmentalists, on the back of an ally, that won’t significantly reduce U.S. emissions – will be tempted to respond coldly to any subsequent U.S. overtures on climate-related matters. That was somewhat how prime minister Stephen Harper reacted to president Barack Obama’s more drawn-out rejection of Keystone (before President Donald Trump approved it). It’s possible to imagine provincial premiers, along with a federal Conservative opposition that could well form government during Mr. Biden’s term, following that lead.
It may be even more tempting for Canadian leaders, and the electorate in resource-reliant parts of the country, to take it as evidence against the promised economic upside of ambitious domestic climate policy. There has been hope that measures such as carbon pricing, increasingly stringent regulations for oil and gas producers and investment in clean technology will keep this country’s oil and gas products competitive for as long as there is global demand for fossil fuels. Failure to give Mr. Biden any pause on Keystone could be interpreted, by the likes of Mr. Kenney, as evidence of their pointlessness.
Understandable, though, as that might be as emotions run high, it would also be incredibly self-defeating for Canada to embrace being a climate laggard at a time when its biggest trading partner – and the biggest customer for its oil and gas – is abruptly shifting in the other direction. Keystone won’t be the last of Mr. Biden’s efforts toward clean-energy transition to affect Canada, and the more backs are up on this side of the border, the harder it could be to navigate that push to our advantage.
So the more constructive approach is to recognize that while Mr. Biden may be starting with a blow to Canadian interests, there will soon be plenty of other opportunities to move more collaboratively – most of them helpfully highlighted in the platform he campaigned on.
In some instances, that could mean simply keeping up with U.S. industrial regulation to prevent Canadian competitiveness from suffering. Perhaps the best example is Mr. Biden wants to move back toward aggressive targets for reduction of methane emissions (primarily, although not exclusively, from oil and gas production) established on a continental basis near the end of Mr. Obama’s presidency and abandoned under Mr. Trump. If Canada realigns with the United States on that goal and strengthens rules and enforcement to meet it, that will help prevent the market for its products from suffering further.
Other cases have mostly upside. That includes a shared strategy around the shift to electric vehicles – a direction both countries are moving in, but where as much synchronization as possible would help a Canadian auto sector that is the junior partner in an integrated continental market.
More under the radar but rife with potential for Canada are cross-border electricity-transmission ties, which would allow provinces such as hydroelectricity-rich Quebec to help with (and benefit from) Mr. Biden’s ambitious goal of a clean U.S. grid by 2035.
Broadly, the large waves of green spending likely to pass through a Democrat-controlled Congress will present sales opportunities for lots of emergent Canadian clean-tech companies – but much less so if Canadian governments aren’t highly attuned to U.S. needs on that front and how to help meet them.
And then there are plans of Mr. Biden’s that could either be a huge problem or a big boon for Canada, depending on negotiations between the two countries. Mr. Biden’s enthusiasm for carbon border adjustments, which effectively attach tariffs to emissions-intensive imports, could cost some Canadian industries a lot of business. Or it could see this country become part of a continental pact that helps make carbon pricing and other domestic measures more of a competitive advantage.
Little of this is going to get decided, one way or another, in the first few days of the new presidency. Canadians disappointed by the reported Keystone decision can probably afford to do a little venting this week.
But Mr. Biden’s administration is not going to step carefully around neighbours with chips on their shoulders while pursuing a climate agenda it clearly considers central to its mandate.
The faster that Canadian governments and industries embrace that reality and aim for partnership while matching or exceeding Mr. Biden’s ambitions, the fewer frustrations await in the years ahead.
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