Why are Obama and Harper so out of sync on carbon emissions?

Image from Wikipedia
Image from Wikipedia

By Jeff Rubin

Toronto – In the US, President Obama has declared a war on coal that’s taking direct aim at his country’s largest polluters. He might not win, but he’s using his mandate to throw his weight behind the environment.

In Canada, meanwhile, Prime Minister Harper is using his to muzzle weather forecasters at the Meteorological Service of Canada from even mentioning climate change. The two major trading partners have their differences, but seldom have they been so out of sync.

The Harper government has argued that taking unilateral action to reduce Canada’s carbon emissions would be hopelessly ineffective and costly without the cooperation of the US and China, the world’s major carbon polluters. The Prime Minister has been confident that an insatiable demand for cheap energy meant the environmental file wouldn’t ever become a real priority in either country. It’s been a good bet—until now.

The US and China have both recently changed course and are now taking unprecedented steps to reduce the amount of carbon their economies will emit. Harper is sticking to his guns, but he’s one of the few. Seeing their Prime Minister wander ever further into the wilderness should worry Canadians. The country’s increasing global isolation on the carbon front could soon have economic consequences much broader than simply the approval of the Keystone XL pipeline

Last week, President Obama unveiled new regulations that will reduce emissions from coal-fired power plants by 30 percent below 2005 levels by 2030. Since coal is the largest source of US emissions, the move to clamp down on the industry will go a long way toward reducing America’s carbon footprint over the next two decades. Recent developments in China are even more striking. Beijing’s new war on pollution will see carbon-belching coal plants shuttered and millions of cars taken off the road. It’s a stunning about face for a country that was long obsessed with economic growth, but one that shouldn’t be ignored.

Canada, in contrast, is poised to see its emissions skyrocket over the next twenty years. It’s not hard to guess the culprit.

Unlike China and the US, in Canada coal-fired power plants aren’t the biggest worry when it comes to increasing emissions. The contribution to national GHG emissions from electricity generation in Canada is about a third of what it is in the US. The difference can be traced to Canada’s greater reliance on hydro and nuclear.

Over the next few decades, Canada’s carbon emissions will be driven by the sharp growth in bitumen production from Alberta’s oil sands. Although the country is taking steps to rein in carbon pollution in other parts of the country, the exponential rise in emissions from the oil sands will more than offset gains being made elsewhere. Ontario, for instance, has decided to close all of its remaining coal-fired power plants, while Alberta has all but precluded the possibility of any new coal-burning plants being built in the province. To be effective, however, such steps need to be part of a comprehensive effort, which in Canada, at the moment, just isn’t in the cards.

Alberta’s oil sands figure so prominently in the country’s emissions profile that Harper can’t match Obama’s new policies on carbon without upsetting his vision for the country’s economic apple cart. Likewise, Canada can’t even come close to meeting the commitment it made at the Copenhagen Conference to lower emissions to 17 percent below 2005 levels by 2020. According to Ottawa’s latest estimate, emissions will be 20 percent higher than what we promised in Copenhagen. Canada’s economy can’t meet its emissions target because trying to do so would thwart the production gains slated for the oil sands. As the Prime Minister has reminded Canadians ad nauseam over the course of his tenure, that’s where the country’s economic future lies.

The big fly in the ointment for Harper’s master plan for economic growth comes from the countries that will supposedly be buying all of the bitumen that will be mined in northern Alberta. As they get serious about controlling emissions it’s not a big leap to expect that emissions-intensive bitumen production will come under the microscope. Today, countries are targeting coal; tomorrow it could be heavy oil. By refusing permission for TransCanada’s Keystone XL project, the US could already be drawing those battle lines.

The Harper government doesn’t seem to be concerned about the new emphasis on environmental policy coming from the world’s two largest economies. Earlier this week, he suggested that talk from other countries about mitigating carbon pollution is disingenuous. The Conservatives, on the other hand, are just being frank when they say environmental objectives will take a backseat to the economy.

The Prime Minister seems to believe the recent moves by the US and China to battle pollution are simply a misguided response to fictional claims about climate change. He’s no doubt waiting for both countries to reverse their new policies before they wind up harming economic growth.

Canadians need to be asking what will happen to their increasingly petro-dependent economy if the rest of the world is right about climate change and their Prime Minister is wrong.

Jeff Rubin was the Chief Economist at CIBC World Markets for 20 years, and is one of the world’s most sought-after energy experts.

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