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The Globe and Mail

Now is the time for a strong Canada-China energy partnership

Robert Johnston is the CEO of Eurasia Group. Wenran Jiang is the president of the Canada-China Energy & Environment Forum and a senior fellow at the Institute of Asian Research, School of Public Policy & Global Affairs at UBC

Prime Minister Justin Trudeau's trip to China this week is raising questions about the risks and opportunities for Canada in seeking a deeper trade and foreign policy relationship with Beijing. One area where effective co-operation has fallen short of potential is in the area of energy. Now is the time for the Prime Minister to make a strong pitch for a deeper China-Canada energy relationship, cutting across both traditional oil and gas, as well as emerging renewable and clean energy technologies.

Why now? A deeper relationship serves the economic and political interests of both countries. Evidence of this can be found in potential areas of co-operation in oil, gas, climate policy and renewable energy.

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While energy policy-making in Canada at its worst gets mired in a debate in which fossil fuels and climate/renewable energy objectives exist in a perpetual zero-sum battle, at its best all levels of government and industry work toward a balanced approach inclusive of all resources. The balanced approach is anchored by a recognition of an ongoing transition toward lower carbon emissions, but not one that excludes more efficient production and usage of fossil fuels during the transition period.

China has made remarkable progress toward such a balanced approach. China's energy policy reflects multiple objectives: improved energy security; a diverse energy mix; improved environmental performance; as well as industrial and innovation policy.

Canada can, and should, contribute to these goals.

In the oil market, the expected construction of the Trans Mountain pipeline expansion will give Canada a long-awaited outlet to the Asia Pacific market, assuming final regulatory and legal challenges in B.C. can be cleared. Asian refiners, including China, are keen for more diverse and stable sources of oil supply, as their dependence on geopolitically volatile producers is growing. Evidence for this is found in the rapid uptake of U.S. crude exports to China since the Obama administration lifted legislative restrictions on crude exports in 2015.

In natural gas, Canada needs both investment and markets. China offers both, with natural gas consumption growth well into the double digits this year and is expected to remain so for the foreseeable future. While China is also increasing its uptake of U.S. LNG, it will want diverse supply and see Canada as an attractive alternative and hedge given an uncertain relationship with the Trump administration.

An unambiguous public statement of support for LNG development from Prime Minister Trudeau while in Beijing would likely resonate. Better yet if he can announce some tangible collaborative projects similar to Sinopec's proposed $43-billion (U.S.) Alaska LNG investment announced during President Donald Trump's China visit. This is critical given China's preference for government-to-government deals in energy development.

In climate policy, the Trudeau government made a strong impression with European leaders at the COP 23 talks in Bonn with its leadership role in the coal phaseout campaign. With a weak to non-existent climate policy in Washington, China also needs new partners to advance the global climate change mitigation agenda. Canadian climate policy focus on Asia should intensify.

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More specifically, Canada and China should work on demonstration of policies and technologies that can be deployed in southeast Asia and India, which have become the fastest growing energy markets and for associated air quality problems. Critical to this is an effective partnership between renewable resources such as wind and solar backed up by natural gas.

Lastly, China offers formidable competition in the manufacture of solar panels and lithium batteries, foundational technologies for cleaner energy usage in the electric power and transportation sectors. China's dominance in these areas is built on its state capitalist model and massive industrial capacity. Canada's competitive advantages in the renewable energy space should in turn leverage our scale and innovative potential around bio-energy, both from agriculture and forestry. Both countries would greatly benefit from access to each other's expertise.

The Canada-China energy partnership has had its share of bumps, from the delays around pipeline and LNG development, to controversy over the acquisition of Canadian energy firms by Chinese national oil companies. Yet throughout these difficulties, the need for, and potential rewards from, enhanced co-operation have only grown greater – and more urgent.

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