As an energy-hungry world is grappling with the dilemma of how to replace Russian natural gas supplies, Canada is resurrecting a plan to get climate credit for its future liquefied natural gas exports that could help shut down overseas coal-fired power plants.
Some countries, particularly in Asia, still rely on emissions-intense coal for power. The Canadian industry has long touted exports of LNG as a means for reducing global emissions, as the burning of natural gas creates less emissions during electricity generation compared with coal. Canada believes it would be able to count the emission reduction toward its own targets through Article 6 of the Paris climate agreement, a mechanism meant to allow countries to participate in a global carbon market.
In 2019, then-natural resources minister Amarjeet Sohi raised the possibility of using Article 6 for LNG exports, before Jonathan Wilkinson – then the environment minister – poured cold water on the idea by the end of that year. At the time, Mr. Wilkinson said the government’s focus is on domestic emissions cuts and “achieving our commitments, without Article 6.”
Mr. Wilkinson, now in the Natural Resources portfolio, said Article 6 discussions are back in play.
“We’re working on figuring out how we operationalize Article 6. We are having conversations with industry, and we are starting conversations with a couple of allies who could potentially be LNG importers,” Mr. Wilkinson said in an interview during a visit to Calgary this month.
Article 6 is based on voluntary agreements between countries. Mr. Wilkinson said the discussions with an Asian ally became very complex last time around but there’s a renewed chance for deals now. “I wouldn’t want to tell people that it’s going to be easy or fast. I think it’s probably going to be a minimum of a year or two for us to actually get to the point where we know where we stand.”
Natural gas is a fossil fuel, there are environmental costs, and potent methane emission leaks or venting from production is a major concern. But Canada, with its ample natural gas reserves, has become a leader on reducing methane emissions. Burning natural gas only emits about half the carbon dioxide of coal. Mr. Wilkinson said there’s hard work to be done to validate that Canadian LNG exports – coming from Canada’s first export terminal on the West Coast, still three years away from completion – actually can and will displace coal generation in Asia. “We need to be able to make that claim, and it has to be true.”
A narrow focus only on Canada’s domestic greenhouse-gas emissions has guided nearly all federal climate policies in recent years. But now there’s war in Europe, and highly industrialized countries such as Germany are gobbling up global LNG shipments – helping to propel the United States to become the world’s top LNG exporter. At the same time, Asian countries unwilling to pay as much for LNG as rich European countries are going back to coal.
There’s also greater understanding, for the good and the bad, that natural gas is going to be a part of the energy mix for more years, or decades, to come.
Any interview with Mr. Wilkinson wouldn’t be complete without him talking about political leaders having to be “capable of walking and chewing gum at the same time.” That was on full display when he talked not only about LNG and the climate emergency – “If you have teenagers or kids in their early 20s, they’re terrified about what the future holds,” he said – but also his view that Canadian oil sands producers are making progress toward emission reductions. Pointedly, he said a Pembina Institute report criticizing their progress didn’t acknowledge the complexity of planning for multibillion-dollar carbon capture projects.
“Having spent a lot of time working in industrial technology before I actually got into politics, I am very cognizant of the time frames that actually are required,” Mr. Wilkinson said.
“I just felt like maybe Pembina didn’t give quite enough credit to the work that’s going on behind the scenes.”
That stands in contrast with the concern that oil companies are just ragging the puck, waiting for a return to a Conservative government that will reverse the push on climate. Or, as Environment Minister Steven Guilbeault argues, the country’s major oil players are simply funnelling their record-breaking profits back to shareholders. Mr. Wilkinson insists there’s no divide in the federal cabinet. “Steven would say, and I would also say, we need to get on with it.”
Still, there is also a decided change in tone between some oil and gas players in the Alberta-based energy industry, and some Liberal cabinet heavyweights. It stands in contrast to an environment of distrust that has characterized the relationship between the industry and Ottawa, particularly before the pandemic. Think Justin Trudeau’s decision in the 2019 federal election to lump the entire oil industry in with his Conservative rivals.
Part of that better relationship is because of the new focus on global energy security, and the importance of having access to fossil fuel supplies apart from those under the control of authoritarian regimes. But the change has to also be because of the pledge last year by the Pathways Alliance – a consortium of Canada’s largest oil sands companies that together produce more than 3 per cent of the world’s daily oil demand – to work together to reduce the sector’s absolute emissions by 2030 and to reach net zero by 2050. Many industry players also agree future fossil fuel production in Canada depends on emissions being “abated.”
Mr. Wilkinson’s main purpose while in Calgary was to meet with the province’s new Energy Minister, Peter Guthrie. The two men “had a productive conversation” about critical minerals, hydrogen and carbon capture projects, according to Mr. Guthrie’s chief of staff Jerry Bellikka. Mr. Wilkinson said in the interview, “The time has come for politicians, on all sides of the partisan fence, to down their tools and work together.”
Working together is admirable. But that won’t change that most Liberal party policies will continue to be built around regions of the country untroubled by job losses in the oil and gas sector. And Prairie premiers Danielle Smith and Scott Moe will continue in their plans to fight what they see as federal intrusion, or hinderances to their resource-based economies.
Some agreement now probably won’t make for lasting peace on energy and environment, Canada’s two most existential issues.