In his address at Georgetown, President Obama outlined the environmental and energy strategy the nation would adopt in the face of increasing climate change challenges. He emphasized that environmental measures did not contradict or undermine economic growth, but rather that clean energy and sustainable practices should be the “engine” that bolsters it. The president then announced several measures his administration would take to steer the country towards a “market-based solution” that would create jobs and decrease dependence of foreign energy. Obama hoped to convince the country that a shift towards renewable energy is a strategic choice for the economy, but how will his new plan affect the Canadian economy?
Decrease in our most profitable export
When President Obama announced, at the beginning of his address, that America would strive to increase domestic energy production, more than a few Canadians bristled. The US has already decreased imports by as much as 4000 million barrels a day since 2005, and the trend is poised to continue. For America’s biggest supplier of oil, which exports 90% of it to its neighbour, this is bad news. If the road to the US is restricted, getting the landlocked oil out will prove a complex challenge. The President insisted on the government’s commitment to using cleaner fuels, whether produced domestically or imported, and given that the oil sands are the posterboy for dirty oil, the prospect for Canadian oil exports starts to look bleaker.
Obama briefly mentioned the Keystone XL pipeline project. In a statement that offered no insight into his administration’s position, he simply said that the initiative was being analyzed and would keep the country’s best interests in mind. This offers little hope to Canadian Keystone proponents, a sentiment reflected in the 2.5% drop in TransCanada shares (the Keystone lead) by the end of the day to a 7-month low.
Increase in sustainable energy market confidence
The aim to decrease the use of fossil fuels comes hand in hand with increased investment in green technologies, and the president seeks to significantly swell the latter. Obama is not just calling for private investment, he is almost ensuring it. He pledged that the federal agencies would procure 20% of their energy from renewable sources. The Department of Defense; alone consumes slightly less energy than all of Denmark, and more fuel than Sweden. A guaranteed 20% share means a steady demand for green energy that will start a race to secure government contracts and will make investment skyrocket. To strengthen the incentive, he called for the Interior Department to simplify the process by which it approves private renewable energy projects on public lands. Fewer administrative hurdles to renewable energy development will decrease business costs and lower barriers of entry into the industry.
The rise of the First Solar and SunPower shares by 7.8% and 5.7% respectively happened within the day, and indicate the start of a trend that will continue if the Obama administration keeps its course. Canadian green power companies should also expect a rise in investment; increased confidence in the renewable energy market will spread north of the border, even if the Canadian government is far from offering the same incentives. The private sector will be more willing to expand infrastructure and take advantage of Canada’s expansive unused territory.
Lack of government support makes it hard for Canadian companies to compete
Obama’s goal goes further than expanding the green energy industry domestically; he wants the US to become the global leader in both research and the market. He posed a challenge by maintaining that countries like Germany and China were already “all in”, and if the US wants to win, it needs to take the race seriously. He invited private capital to invest in green technology development and promised that his administration would lobby for federal funds to also support renewable energy projects.
Compare his ambition to become a leader in the green sector with the Canadian government’s abandonment and dissolution of so many of its environmental institutions and initiatives. Andrew Nikiforuk, in his article “Oh, Canada”, describes the Canadian Federal government’s failures in tackling environmental issues.
Faced with a serious lack of government support, especially in terms of research and education, how is the Canadian green sector to amass investment for development? Canadian companies cannot count on a guaranteed customer base, an express lane through the bureaucracy, or the lobbying power of the administration. Canada will have a very hard time acquiring any share of the global renewable energy market if it competes with countries whose governments effectively guarantee more development in their industries.
Decreased confidence and FDI in the Canadian green market
Consider Canada’s current image, as a nation, on the international ‘green’ stage: The government pulled out of Kyoto, and Prime Minister Harper described it as “a socialist scheme”; recent environmental research facility closures have been widely publicized; and Canadian natural resource companies abroad face many legal problems regarding their environmental impact. Now, even the world’s second largest polluter has a more assertive and comprehensive environmental strategy than Canada, and plans to devote vast amount of resources and government authority to put it into action. The US administration has declared itself open to a concrete agreement that is “inclusive, ambitious, and flexible”, with clear emission reduction goals and a greater commitment from nations. Canada on the other hand, would not be receptive to a proposal that would limit its oil and energy development, as seen in Kyoto.
This is more than bad publicity, it is a factor that foreign investors will take into account when considering Canadian green power projects. The fact that the Canadian government does not support the industry’s development as whole-heartedly will make investment migrate south to America, and widen the gap in terms of renewable energy capacity.
Canada will lag behind in the global green stage
Lastly, Obama called for a global free trade agreement in environmental technologies, goods and services. This proposal may be mostly speculation and wishful thinking for now, especially given the rift that exists between the environmental policies and goals in the global North vs. the global South. However, if it were to happen, Canada would be woefully underequipped to compete. For a country that considers its energy industry so important for its economy, and has historically attempted to carve a niche in the global energy market, it is wasting a ripe opportunity to support and profit from emerging green technologies.
The viability of the President’s plan might sometimes be in question, but it is clear that his administration will take some steps towards development of sustainable energy sources. While Obama assured his audience that the US would take “special care” of those unsettled by the American transition, Canada should not depend on it. Rather, Canada should stimulate the private sector to make competition in green energy sector more viable.