This Changes Everything? Canadian Climate Policy and the 2015 Election

PROFILE

This Changes Everything? Canadian Climate Policy and the 2015 Election

Robert MacNeil, University of Sydney

Department of Government and International Relations

Matthew Paterson, University of Ottawa

School of Political Studies

Introduction

On 19 October 2015, Justin Trudeau’s Liberal Party shocked the pollsters, the electorate, and probably itself, by rocketing from 34 to 184 parliamentary seats, and securing one of the most robust majority governments in a generation (albeit with only 39.5% of the vote). For advocates of climate action both domestically and globally, this changing of the guard in Ottawa was overdue. While Canada had never excelled as a climate leader, the ten years of Conservative rule were especially gloomy. During this period, Canada’s reputation among NGOs and partner states reached rock bottom, as the Harper government developed a reputation for deliberately holding up global climate negotiations and competing with Australia to have the weakest climate policy of any industrialized state.

In the wake of the Liberal party’s victory, many commentators have been optimistic that Ottawa is about to turn over a new leaf on climate. While the new government certainly hit the ground running – making a series of announcements and playing a highly visible role at COP21 in Paris – the change of leadership and rhetoric may mask important continuities in the Canadian economy and political system that could leave environmentalists disappointed yet again. In this brief review, we look at what a Liberal majority might mean for Canadian climate policy over the coming years.

What to expect

It is hard to know exactly what to expect from the Liberals on climate change chiefly because they never really told anyone. Perhaps as a hangover from the 2008 election – in which the Liberals, after placing a controversial carbon tax at the centre of their platform, were trounced by Stephen Harper’s Conservatives – in the 2015 campaign the Liberals adopted a decidedly cagey stance on climate policy. Throughout the campaign, Trudeau refused to make any pledges to increase the ambition of the target set by the Harper government in its INDC submission to the UNFCCC, and carefully avoided specifying any regulatory mechanisms (see Table 1). Instead, he merely claimed that all the details would be determined in consultation with the provinces at some later date.

Table 1. Party promises on climate

• Official platform did not mention ‘climate

• $4.5 billion in ‘green bonds’
• Stricter approvals for energy projects

• $2 billion ‘green energy trust’
• Stricter approvals for energy projects

• End to fossil fuel subsidies
• No new oil exports, tanker routes, pipelines

While sceptics have been quick to note that the Liberals were terrible on climate throughout the 1990s and early 2000s – and thus expected little – Trudeau’s government invested significant effort on the issue in its first few months. In stark contrast to its low profile in the campaign, climate change has been one of the top issues in the Liberal Government’s public messaging. Indeed, in its first few months, the new government changed the name of the environment ministry to the Department of Environment and Climate Change, established a cabinet committee on climate chaired by the Minister for Global Affairs, and served as part of a key contact group coordinating negotiations at COP21 – a position unthinkable in the Harper years. At the COP itself, it announced a number of new policies, including increased funding for the Green Climate Fund, abolition of fossil fuel subsidies, and support for a 1.5°C as opposed to 2°C target in the Paris agreement.

But these initiatives may represent a combination of good optics and policies that are relatively easy to adopt. In the longer term, much about Liberal climate policy remains unclear. Yet, whatever their intentions, there are two key dynamics that will ultimately shape the possibilities and limits of a sustained shift in climate policy for the new government: the dependence of the Canadian economy on fossil fuels, and the constitutional division of powers between federal and provincial levels.

Oil politics

The failure of previous Canadian governments to adequately address climate was underpinned by a profound shift in the structure of the national economy from the early 1990s onwards towards the oil sector, which was cemented in 2006 with the election of Harper’s Conservative Party. Harper consistently promoted a vision of national prosperity intimately linked to natural resource exploitation, and the notion of Canada as a so-called ‘energy superpower’. Under the guiding mantra of ‘rip it and ship it’, Canadian exports tilted heavily in favour of unprocessed natural resources, with Alberta bitumen accounting for nearly 40 percent of export earnings in 2014. With commodity prices consistently high for much of the decade, Harper’s gamble appeared to be paying off. As recently as early 2014, the PM was promising a dramatic ramping up of oil sands production, aiming to increase output from 2 million to 10 million barrels per day.

Yet the crash in oil prices in mid-2014 – and Canada’s subsequent prolonged flirtation with recession – turned Harper’s dream into a liability, with some estimates suggesting the drop in oil prices caused over 100,000 job losses across the country. Given the immense cost of extracting and processing petrol from the oil sands, nine out of ten barrels in Alberta require a price of at least US$95 to turn a profit. As a result, the year preceding the election saw a raft of multinational firms identifying the oil sands as a risky bet. By the time of the election, all but one new project had been put indefinitely on hold, with firms fearful of losing billions in stranded assets.

While the travails of the oil sector had an important effect on Harper’s fortunes in the 2015 election, the embedded nature of oil in the economy remains a powerful obstacle to the sustained development of climate policy in Canada, and the Liberals’ approach to climate stood in significant tension with their commitments to it. While they were able to make some political capital during the campaign from Harper’s ill-fated gamble on the oil sector, Trudeau’s Liberals nevertheless supported oil sands expansion, including major pipeline projects like Energy East, Northern Gateway and Keystone XL. This can be seen – at least in part – as a reaction to the heritage of the controversial National Energy Policy adopted by Trudeau’s father when he was Prime Minister in the 1980s, which triggered much of the subsequent conflict between Alberta and the federal government.

Of course, immediately after the election, the Obama administration announced the death of the Keystone XL pipeline project, shifting the incentives for the new government significantly. Nevertheless the government’s support for (and connections to) the oil sector remained strong – as evidenced by the fact that the Minister for Natural Resources appointed as his chief of staff a senior lobbyist for the Canadian Association for Petroleum Producers. So the government’s rhetoric of ambition on climate change may be compromised by its acceptance of the ‘energy superpower’ logic inherited from the Harper government.

The Keystone episode may indicate that pressure from the US may also be an important question determining the ability to turn rhetoric into sustained action. For the past 25 years, Ottawa’s most consistent tactic on climate has been to hide behind Washington’s equally mournful performance, suggesting that it made little sense to deviate much from the policies of its biggest trading partner. Yet in the wake of the Obama administration’s executive climate regulations – as well as a series of impressive efforts at state level – this excuse increasingly rings hollow. Canadian climate policy has lagged behind US action for much of the Harper decade. Climate and energy politics were the source of a prolonged diplomatic rift between the Obama administration and Harper government, and thus it is likely that Trudeau will have incentives to use climate change as a means to repair the relationship. In any case, with the US administration seeking to reclaim the mantle of climate leadership, Canada may find itself increasingly isolated and shamed on the international stage.

Federal-provincial politics

Trudeau’s refusal during the campaign to commit to more ambitious targets could be read as a hangover from the 2008 election, but it could also reflect a pragmatic acknowledgment that, in many ways, Ottawa has limited capacity to control or direct Canadian climate policy. Under the constitution, Ottawa has no direct jurisdiction over major GHG emitting activities such as natural resource extraction, electricity generation, transportation, agriculture, or urban planning, nor can it unilaterally force a deal between the provinces. Barring the unlikely event that all the provinces willingly agree to a single standard and regulatory mechanism, Ottawa will likely have an exceptionally difficult time enforcing any kind of meaningful national emissions targets.

However, this dynamic has changed significantly during the Harper years. As Ottawa repeatedly failed to act on climate change over the past two decades, the provinces stepped in to fill the breach. This response undeniably had positive impacts – indeed, provincial actions were responsible for the vast majority of policy-induced emissions reductions over the decade (the recession accounts for the big drop from 2007 onwards, with emissions now growing slowly again), and enabled the Harper government to announce a more ambitious target in its INDC than most had anticipated. However, once the federal government tries to act again for the first time in a decade, the policy landscape into which it will step will appear as a bewildering patchwork of inconsistent and incompatible regulations. Between British Columbia’s carbon tax, Alberta’s ‘Specified Gas Emitters’ regulations (plus its new and much more ambitious set of policies, including a carbon tax), a cap-and-trade system in Québec (which is harmonized with California’s), a proposed emissions trading scheme in Ontario and Manitoba (also to be linked to each other and to California), the Feed-in-Tariff in Ontario and a series of different tax incentives and other mechanisms across the country, Ottawa is arriving very late to the party, and is likely to have tremendous difficulty navigating this labyrinth of systems. A new federal cap-and-trade system, for example, would somehow have to harmonize with several different and uneven existing pricing schemes, while also imposing a carbon price on several provinces that do not currently have one. For a federal government that has long struggled with encroachment on provincial autonomy, this is not an enviable situation, and it risks re-opening painful wounds surrounding the character of Canadian federalism.

There is a good chance, therefore, that the result of the renewed federal interest in climate change will be a balkanized system of 10 different programs with 10 different targets and 10 different sets of rules. The question is whether the federal government can develop novel coordinating mechanisms across the two levels, navigate the jurisdictional sensitivities involved, but nevertheless develop a means of ensuring that these diverse regulatory systems and targets add up to the achievement of progressively more ambitious emissions reductions across the country.

Plus ça change…?

These underlying factors will shape both the incentives and possibilities for action at the federal level. Whatever the result, key will be the ability to develop a system of managing climate policy that is systematic and wide-ranging, such as exists in countries that have started the process of decarbonising, like Germany, Sweden or the UK. Something akin to the UK’s carbon budgeting process is probably necessary, with the ability to monitor emissions trends, project gaps between current policies and anticipated future emissions, and continually develop policy to meet those gaps. But here the federal-provincial question again becomes crucial since the sites of policy decision-making and implementation will be so dispersed in the Canadian context. It is a huge political and administrative challenge, and it is by no means clear that the government has understood the scale of it; indeed if the composition of its cabinet committee on climate change is anything to go by, it clearly has not. The cabinet committee contains neither the Minister of Finance (crucial for both budgetary approval and the role of fiscal instruments like carbon taxes) nor the Minister for federal-provincial relations (suggesting that their centrality to the challenge has not been considered). The fact that it is chaired by the Global Affairs Minister (and not the Prime Minister) is further evidence that the Liberals have not understood the scale of leadership required to maintain momentum on the issue. In short, whether or not this changing of the guard in Ottawa signals a long-awaited sea change in Canadian climate policy remains very much an open question.

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