Call it an energy reset. When President Barack Obama rejected the Keystone XL pipeline project on November 6 after a seven-year political slugfest, the timing, especially for Canadians, was conspicuous. Just two days earlier, Liberal Party leader Justin Trudeau had been sworn in as Canada’s new prime minister after an election heavy on talk of pipelines, oil prices and the country’s green energy future.
Perhaps intentionally, President Obama waited until former Prime Minister Stephen Harper left office, just prior to the United Nations climate change meetings in Paris. But what comes next for Canada’s energy future – and energy relations between the two countries – will depend largely on Trudeau, and whether it is his predecessor’s pragmatism, or his father’s legacy, that most informs his approach to energy policy.
In October 1980, after a decade-long energy crisis, Trudeau’s father, Prime Minister Pierre Trudeau, introduced the National Energy Program (NEP). The NEP aimed to control the energy industry through increasing the federal share of energy revenues, raising Canadian ownership in the oil industry and making Canada self-sufficient as an oil producer. That, along with the Canadian government’s decision to keep oil prices artificially low, even as the global price had risen by 50 percent, alienated the oil industry in Alberta and Canada’s west. The program was phased out by 1985.
Now, Justin Trudeau faces his own set of energy challenges. Canada’s major oil-producing province of Alberta maintains a fierce independent streak due to its role as the engine of the Canadian economy. The oil sands deliver 2.3 million barrels per day, and the natural resources sector represents 20 percent of Canada’s GDP. Trudeau’s balancing act will be to continue ex-Prime Minister Stephen Harper’s push toward North American energy integration while also answering demands for a greater focus on green energy, and meeting his own campaign promises on global climate change.
With the memory of Trudeau Sr.’s energy approach still fresh in their minds, the oil industry is understandably nervous about the prospect. Harper’s government was very friendly to the oil patch, with a focus on developing the oil and infrastructure industries. Pipelines were built going north and south, but also east to west. Trudeau supported Keystone XL, but has come out against the Northern Gateway pipeline in Alberta and British Columbia. Where Harper made Keystone XL a focus of his administration’s relationship with the United States, Trudeau has sought to lower the rhetorical temperature.
With the dramatic fall in oil prices since 2013, policy toward the oil sands will be adjusted regardless. Small and medium-sized oil companies are wary because they are most vulnerable. These companies expressed concern in the run-up to the elections, and are sensitive to potential changes in policy, including taxation, regulation and pipeline decisions. Trudeau has promised to rework the approval process, which could delay projects, limit market access and hamper integration looking south, east and west.
Given that Canada’s share of the global clean energy market is $7 billion – less than one percent of the world market – there is certainly more the country could be doing in terms of renewable energy. Canada stands to benefit from a great resource base, especially in wind and solar. Hydroelectric power has been a focus of previous governments and will continue to be emphasized. Moreover, the country has unfulfilled potential in biofuels, energy efficiency, green buildings and smart grids.
The Liberal Party’s plan is to invest in cleantech companies, shift subsidies to renewables, and develop a price on carbon, among other priorities. Combined with continued development of the oil sands, this new approach toward energy policy would also boost relations with Mexico and North America broadly, as they are able to cooperate on best practices and connectivity across borders. Further development could also lead to increased energy exports east to China and, assuming the Trans-Pacific Partnership is finally approved and implemented, with Japan.
Trudeau will have to balance these competing desires, while looking for responsible energy development. The prime minister will likely approach the energy and the environment file with a comprehensive look toward the potential of energy development and environmental stewardship, while also seeking continued good relations with the United States, which, despite the Keystone decision, remains Canada’s main energy consumer.
The new approach will require support in Parliament to unify the demands of the Canadian west and east. However, assuming this can be sustained, the opportunities for the continued effective development of Canada’s full energy matrix are broad and compelling. Canada’s future awaits.
Christian Gómez, Jr. is a contributing writer to AQ Online. He is director of energy at the Council of the Americas. Follow him on Twitter at @cgomezenergy.