By Mitchell Beer

A new report suggests future exports of Canadian oil and liquefied natural gas (LNG) could deliver major emissions reductions, but its authors acknowledge they didn’t address some of the key sources of emissions in those fuels.

The report, produced by the Ottawa-based Public Policy Forum (PPF) for the Canadian Chamber of Commerce, asserts that future Canadian exports “are highly likely to substitute higher-emitting global alternatives and deliver significant climate benefits,” the organizations said in a release last week. They put the emissions savings as high as 40% if Canadian LNG displaced coal-fired power production in Japan, South Korea, China, or India, or 40% if it replaced LNG from the United States.

“This report reinforces what we’ve been saying for years: cleaner energy is Canadian energy,” said Chamber President and CEO Candace Laing. “When our LNG and oil displace higher-emitting alternatives abroad, global emissions go down, not up.”

“This analysis represents a win for the economy, Indigenous reconciliation, and the environment,” said PPF President and CEO Inez Jabalpurwala. “The report’s conclusions counter the simplistic narrative that more oil and gas equals more emissions.”

The Globe and Mail touted the release as “giving fresh support to Canada’s ambition to be an energy superpower as the federal and B.C. governments push for increased exports of liquefied natural gas.”

The report concludes that global emissions would “most likely” fall by 40 to 70 million tonnes per year of carbon dioxide or equivalent if all the LNG plants now under development in British Columbia were eventually built—thanks to low-emitting hydropower used in the liquefaction process, “tight” methane controls, high-quality gas with lower carbon dioxide concentrations, and shorter shipping distances to Asia.

It concludes that heavy oil from Canada’s oil sands would generate an emissions saving of 18 to 51 kilograms per barrel, or more if the proposed Pathways Alliance carbon capture hub is ever built, compared to Venezuela, which (like Canada) produces one of the most emissions-intensive grades of oil anywhere.

The report says the emissions intensity of Canadian oil—the climate pollution released per barrel extracted—has fallen 30% since 2005. The Canadian Climate Institute reported this fall that the downward trend has been stabilizing since 2017.

‘Emissions Intensity’, Higher Emissions

Report co-author and Public Policy Forum Fellow Mark Cameron, a former VP, external relations with the Pathways Alliance, acknowledged in an interview that total emissions would rise if oil and gas production increased faster than emissions intensity fell.

“Obviously, if you simply lower emissions intensity slightly and dramatically increase production, you’re going to get higher emissions overall,” he said. “The question is, how fast will intensity improve and what will happen to global oil demand?”

The sweeping memorandum of understanding signed last month by Prime Minister Mark Carney and Alberta Premier Danielle Smith calls for up to 1.4 million barrels per day of new oil sands production, based on an expansion of the existing Trans Mountain Pipeline and construction of a new line to British Columbia’s environmentally hazardous northwest coast—although questions are beginning to swirl about where and whether there will be demand for those supplies. Cameron said long-term markets for oil sands bitumen might put more emphasis on non-combustion products like asphalt and carbon fibre.

As long as that bitumen is being burned as a fuel, Cameron acknowledged that emissions accounting leaves out the roughly 80% of the carbon in every barrel that fossil fuel producers can’t decarbonize—since it doesn’t go into the atmosphere until it reaches its end user.

“That’s going to be happening no matter where those barrels come from, right?” He said. “If we can produce a lower-emission barrel on the production side, it makes sense for Canada to maximize its share of whatever that market is. The emissions are the responsibility of the country that is the final end user, but from a Canadian economic point of view it’s better if that’s Canadian oil, and from a climate point of view it’s better if it’s as low-emission as possible.”

Other analyses have indicated that Canadian heavy oil is among the highest-polluting, as well as one of the most expensive and inconvenient to process.

Methane Uncertainties

The report cites LNG as “Canada’s largest new export opportunity, with potentially the greatest impact on emissions,” based on B.C.’s “stringent methane controls” and its methods for measuring, monitoring, reporting and verifying (MMRV) methane releases. Those numbers matter because methane is a climate super-pollutant with 84 times the global warming clout of carbon dioxide over the crucial 20-year span when humanity will be scrambling to get climate change under control.

Cameron noted that B.C. met its own deadline for reducing methane emissions 45% from 2012 levels in 2023, two years ahead of schedule, one of three provinces that beat their targets.

But the province is still falling far short of its 2030 emissions target, and the report bases its export and emissions projections on completion of several new LNG projects now under review in B.C. Late last month, an independent review commissioned by the B.C. government warned that those projects threaten to “set back progress” on the province’s emission reductions and “stand to all-but wipe out hard-fought gains in other sectors.”

Study co-author Arash Goishan, policy lead with PPF’s Energy Future Forum, said the emission advantages in the report were based on the (even) less stringent MMRV regime in the United States. Donald Trump’s administration moved to severely weaken those regulations after he returned to the White House earlier this year.

Cameron said Canada has some of the lowest methane emissions in the world based on the emissions companies are measuring. But “we can only look at what we can measure,” he told The Energy Mix.

As recently as June, McGill University researchers found that inactive oil and gas wells in five provinces, including B.C., were emitting seven times more methane than reported, and past research has suggested large quantities of unmeasured methane releases from natural gas fracking operations in the province’s northeast. Although replacing LNG with coal is one of the key strategies in the PPF analysis, a report last year concluded that LNG carries 2.7 times the climate impact because of its “significantly higher” methane emissions.

Decades of Fossil Demand

With a global LNG glut on the near horizon, oil prices headed for a “tailspin”, and fossil companies’ market behaviour signalling those risks, Goishan said the latest projections from the International Energy Agency paint “a more nuanced picture” of future demand.

“In the IEA’s Current Policies Scenario (CPS), which reflects only policies already firmly in place, global demand for both oil and natural gas continues to grow through 2050 and beyond,” he told The Mix in an email.

“Even under the IEA’s more ambitious Stated Policies Scenario (STEPS), incorporating announced policies and targets (which we’re seeing how easily are ditched in real time and in response to other economic and geostrategic priorities), oil demand peaks around 2030 at around 102 mb/d [million barrels per day] before a very gradual decline, while natural gas demand grows into the mid-2030s before leveling off into a prolonged plateau of high demand through 2050,” he added. “Importantly, post-peak, there is no sharp decline projected.”

The IEA’s net-zero scenario shows a more pronounced reduction in demand. But “even in those decline scenarios, we would expect the lowest-emission sources would be privileged, right?” Cameron told The Mix. “So if we do follow the net-zero scenario, that would assume there’s going to be some kind of benefit to being a low-emissions source.”

He said those calculations could translate into three to five decades of “pretty significant demand” for Canadian LNG.

The IEA scenarios were published after months of arm-twisting by U.S. Energy Secretary and former fracking CEO Chris Wright, who openly threatened to pull the U.S. and its funding out of the IEA if the Paris-based agency continued projecting a strong future for renewable energy. For years previously, the IEA had projected that demand for all three fossil fuels will plateau this decade before going into permanent decline, as an Age of Electricity begins to take hold.

A ’Pragmatic Approach’

The two authors recommend new accounting methods and bilateral agreements to maximize the emission savings they see in Canadian oil and gas. But they aren’t suggesting that anyone wait for the paperwork before pushing ahead with new exports.

“A pragmatic approach is essential,” they write. “Canada must not delay leveraging its oil and gas export potential by making such agreements a precondition or waiting for a fully-formed global framework, as this would voluntarily forfeit crucial economic, strategic, and environmental advantages that those products offer to Canada, its allies, and the global fight against climate change.”

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By Justina C. Ray and Dave Poulton

Over the summer, the Canadian government announced that it’s setting up a Major Projects Office to identify and fast-track projects deemed to be in the national interest. The projects under consideration are spread across Canada and focus on mining, power generation and port expansions.

But each update to the list throws a spotlight on a persistent gap in Canada’s planning processes. The federal government has signalled it wants to see these projects move quickly — but without a clear way to help ensure they proceed without sacrificing the climate resilience, biodiversity or community trust that Canadians also value.

For example, the government has signalled interest in expanding the Port of Churchill, Man., with new shipping, road, rail and energy infrastructure to support expanded Atlantic access for Prairie industries.

These facilities would introduce industrial activity into Arctic and sub-Arctic ecosystems that have seen little prior disturbance and are already stressed by rapid climate change. The siting and design choices will be critical — raising questions about how early ecological risks are being weighed.

What Canada needs alongside its list of major projects is a principled, transparent sequence of steps that governs how those projects are planned and assessed.

Without such a strategy, the focus centres on pushing the project through. And planners and policymakers fail to consider those early, fundamental questions about ecological risk, or whether the location and design make sense in the first place.

Adopting a well-established mitigation hierarchy, as outlined in our recent report, can help Canada avoid the tangled and dysfunctional outcomes we see again and again in current planning and assessment processes.

In this context, mitigation refers to the full set of tools available to deal with environmental impacts, applied in a clear sequence or hierarchy: first avoiding impacts where possible, then minimizing those that remain, then repairing damage on site, and only as a last resort compensating for residual losses elsewhere.

Step 1: Avoid harm with early-stage planning

Too often planners focus only on reducing impacts after basic design decisions are made. This leaves decision-makers boxed into weaker options than if they had first asked what could be avoided — and it can be far costlier as late-stage fixes mean redesigns, deeper ecological damage and heightened conflict.

Effective planning requires backing up and taking in the big picture. What comes into view is a sweep of globally important, largely intact ecosystems — places that anchor our climate, support communities and sustain wildlife and their movements.

That means the first step in any sensible hierarchy is to steer development away from places like sensitive peatlands, areas important for biodiversity, cultural keystone places and headwaters that sustain vital watersheds.

Early-stage planning enables the most important questions to be asked: Is the proposed option the best means of meeting the need, or do lower-cost or less damaging alternatives exist? Are projected ecological, climate and community impacts supported by evidence of commensurate economic and social outcomes?

Answering these questions well depends on strong baseline information about ecosystems and communities — something too often missing at the outset, causing delays while data is gathered.

Governments can begin closing this gap by strengthening the evidence base needed to inform projects before they advance. This includes support for sustained regional ecological monitoring, Indigenous and community knowledge programs and fuller use of strategic and regional impact assessments. All of these measures can identify cumulative effects and landscape-level priorities and provide shared information for planning across entire regions.

Delivering on the Liberal commitment to “map Canada’s carbon and biodiversity-rich ecological landscapes … to enable a more holistic ecosystem approach to conservation, carbon accounting, and project development” would substantially advance and improve early-stage planning. Integrating existing data held by public agencies, private proponents and consultants would further clarify environmental strengths and vulnerabilities.

Step 2: Minimize harm that cannot be avoided

Only after fully considering ways to avoid impacts should the focus shift to minimizing unavoidable damage. This is where design and operational choices matter: adjusting scale, routing, timing and methods to reduce a project’s footprint and its effects.

In ecologically intact regions — places where human pressures have not yet reached levels that compromise core ecological functions — minimization also means confronting growth-inducing impacts head-on by limiting new access, managing roads and corridors and regulating the pace and scale of development to prevent cascading cumulative effects.

Done properly, minimization protects ecological function and reduces long-term environmental, social, and financial liabilities for proponents.

Step 3: Remediate to make impacts temporary

Once all feasible steps for minimization have been taken, it becomes appropriate to move on to onsite remediation — rendering unavoidable impacts temporary through progressive reclamation, revegetation and decommissioning.

Prioritizing remediation in already stressed landscapes reduces cumulative effects, restores ecological function and builds trust by demonstrating recovery during the life of a project, not decades later.

Step 4: Offsetting is the last tool, not the first

The final step in the mitigation hierarchy is offsetting — the idea of restoring or protecting habitat elsewhere to compensate for what is lost to development. In theory, this promises no net loss, or even a net gain.

In reality, it’s the riskiest and least reliable form of mitigation, which is why it must be treated as a last resort. When offsetting is used in isolation, long after a project’s design is locked in, it becomes a poor substitute for the harder, but more valuable, work of avoiding and minimizing impacts at the outset.

As we stress in our report, that kind of sequencing failure matters. Once decisions are made and footprints fixed, ecological losses can no longer be undone, and offsets are expected to carry a burden they cannot realistically bear.

Offsetting should therefore function as a backstop — not a shortcut. Yet, it is frequently looked to as if it were the first tool in the box rather than the last.

A unified federal policy framework

Deploying the mitigation hierarchy is a technically simple approach to project planning, and it can make a substantial difference in getting projects built without unnecessary delays.

It requires a planning mindset open to alternatives and a willingness to invest early in understanding ecosystems and community needs. The hierarchy also aligns with Indigenous perspectives that view natural systems as interconnected, offering pathways for more meaningful engagement.

There is nothing new about this approach. The mitigation hierarchy has guided major-project planning and financing in other countries for decades and appears — albeit inconsistently — across several federal policies. But in this moment of renewed ambition for “nation-building” projects, Canada has an opportunity to bring coherence and discipline to the management of environmental and social impacts.

This is why we are calling for a unified federal policy framework, so that the mitigation hierarchy is applied consistently across federally supported projects. A clear hierarchy — applied early, consistently and transparently — would make decisions stronger, projects more credible and our commitments to biodiversity, climate, and Indigenous rights more than words on paper.

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by Bob Weber

The year 1539 was a good one to be King of England.

Henry VIII, the reigning monarch, had a free hand on royal marriages, state religion, church property, and such. But those pesky Parliamentarians didn’t always move as quickly or as agreeably as he would have liked.

So he had his fixer Thomas Cromwell come up with the Statute of Proclamations, which gave Henry the power, exercised through decree, to alter any law, with those decrees having the same force as if Parliament had voted for them.

It was not popular with the commoners. The Act was repealed in 1547 and history’s verdict has been harsh. One 18th-century jurist said it “was calculated to introduce the most despotic tyranny,” and it is still considered the height of Henry’s will to power.

But legislation giving the whip hand to the executive branch of government, which scholars call King Henry the Eighth clauses, is still around. One such clause is prominent in the Carney government’s new Building Canada Act (BCA). It’s a major reason observers say the legislation marks a big shift in power to the prime minister and cabinet and away from the courts, Parliament—and the public.

“Cabinet, with cabinet secrecy, can pass a regulation that changes a law duly passed by Parliament,” Martin Olszynski, a University of Calgary resource law professor who testified before a Senate committee on the bill, told The Energy Mix in an interview. “That’s really radical.”

The Building Canada Act was hustled through Parliament last summer in less than a month. It was presented as a response to the perceived need to speed up environmental approvals for large industrial developments, responding in turn to the undoubted threats to the Canadian economy posed by the current United States government. Here, briefly, is how it works.

Project proponents who feel their idea is “nation-building” can apply to the Major Projects Office, a new agency created by the legislation. That office measures the proposal against five goals, including “whether a project will contribute to clean growth and addressing climate change,” according to the recent federal budget.

The office is to ensure both First Nations and provincial governments have been adequately consulted. It then makes a recommendation to the minister of internal trade. After 30 days to ensure the provinces and territories are onside, the minister can then declare the proposal a Project of National Interest, (PONI). Dawn Farrell, CEO of the Major Projects Office, told a House committee she hopes a decision on designation will take four or five months. The discussion will then change from whether to proceed, to how.

Who Wouldn’t Want a PONI?

Supporters say the legislation eliminates the need for companies to answer questions twice, once at an environmental assessment and again when they request permits from federal departments for specific actions—say, building a stream crossing.

“Half the job is getting through environmental assessment, getting your capital together, and announcing the project,” said Dave Nikolejsin, an adviser at the McCarthy Tétrault law firm and the former provincial deputy minister who oversaw natural gas development in British Columbia. “The other half, and sometimes the tougher half, is actually getting it built.”

Speaking on a podcast by the ARC Energy Research Institute, Nikolejsin said “What drives proponents crazy is they will go through massive expense and time to do a baseline study as part of an environmental assessment. Then they have to do it again when they turn to get their permits.”

A blog from the law firm Bennett Jones, which often represents fossil energy companies, made a similar point: “By cutting red tape and coordinating project approvals more efficiently, the MPO represents a significant effort by the federal government toward ensuring that Canadian infrastructure can be advanced to attract investors and boost the competitiveness of Canada’s project execution timing.”

Stacking the Deck

Well and good. Environmental groups and concerned citizens aren’t any keener than businesses to spend time and money in court or endless regulatory hearings. But observers suggest the Building Canada Act has stacked the deck, dealing aces to those in power and jokers to everyone else.

“Parliament has given cabinet really unprecedented power to exempt projects from environmental laws, in effect giving cabinet what are effectively law-making powers,” Anna Johnston, staff lawyer at West Coast Environmental Law, told The Mix.

Pierre-Alain Bujold of the Privy Council Office disputed this characterization in an email to The Mix. “Designation under the Act does not exempt projects from federal laws listed,” he wrote. “It provides upfront clarity and coordination, allowing projects to advance while maintaining protections for the environment and Indigenous rights, with reviews occurring simultaneously rather than consecutively”

“Once reviews are complete, the Minister responsible for the Act (the Minister of One Canadian Economy) issues a single, binding set of public conditions for the project, including mitigation measures.”

Still, questions begin with how PONIs are designated. Most projects won’t be.

Only a small minority of resource projects in Canada trigger a federal assessment. For those that might, Ottawa’s five criteria to determine which ones go through the magic gate are extremely broad. They ask if the project will improve Canada’s autonomy and security, if it will bring economic “or other” benefits, the likelihood of success, impact on First Nations, and environmental and climate effects. Opponents say they are so woolly that—except on the issue of First Nations rights—it would be extremely hard to challenge a project designation in court.

“The act was designed to give huge discretion to federal cabinet,” said Johnston. “It has such broad discretionary powers that I think the possibility of successful legal challenge would be difficult.”

An Environmental Assessment. Sort Of.

A designated PONI would still be subject to an environmental assessment. Sort of.

Before the Act, proponents were required to go through a six-month planning period before beginning their assessment. “That was an avenue for public input,” Johnston said. “That was where we were going to figure out what questions we were going to ask.”

Now, that’s gone, she said. “If you’re a PONI, you have to go through an impact assessment, but you start at the assessment phase, you don’t start at the planning phase.”

The planning period did sometimes spawn the kind of litigation that created crazy-making delays, but Olszynski told The Mix that dropping it shifts power significantly. “Removing that six-month planning period puts the responsibility for setting the terms of reference exclusively in the hands of the proponent.”

Government documents don’t address how reviews will be designed. They only stipulate they will occur. “Projects will continue to be subject to all regulatory review processes that would ordinarily apply to the project.”

The BCA hobbles environmental assessment and public involvement in other ways. Project proponents have been required by law to evaluate their proposals through certain lenses—consideration of cumulative effects, for example. Whether those lenses have been donned are often at the heart of legal disputes.

But PONI projects are “deemed” to have already met such requirements—even if we don’t know whether they have or not. And once something is deemed, it’s done, immune from judicial review.

“If we have any semblance of environmental law in this country, it’s because the courts have pushed that,” Olszynski said. “The fact they are being squeezed out of this space is not good.”

And if regulations are violated, thanks to our old friend King Henry, cabinet can simply alter them. “Cabinet can make a regulation exempting a project from any of the environmental laws,” said Johnston. Hearings may still be held, but the outcome is predetermined.

“It’s just a question of how, not whether,” said Olszynski.

Still, King Henry has his supporters. Nikolejsin sees the mechanism of deemed approval as “something huge (the BCA) has going for it.” As he sees it, that’s the scrubber which will scour away duplication and delay: “If you get through enough gates, whatever that’s going to look like, everything else is supposed to become about expediting things like permits.”

There are still some checks. Safety regulations from the Canadian Energy Regulator and the Canadian Nuclear Safety Commission aren’t subject to alteration. The BCA requires provincial consent for projects that concern exclusive provincial jurisdiction. And cabinet can remove a project’s PONI designation if, say, it’s deemed to ask for too much deeming.

Is This Legal?

You may ask yourself: is any of this legal? Well, maybe. Neither the Constitution nor common law guarantees public input into regulatory matters.

Or maybe not. Johnston said health and safety issues could provide grounds for constitutional challenges. As well, previous court rulings have found the government must consider all relevant information in regulatory decisions, something the BCA may inhibit.

“Even if the government went in and changed the regulations, that wouldn’t change the court rulings,” she said. “We’re in a legal grey area.”

The Quebec Environmental Law Centre is challenging the BCA in Quebec Superior Court. “The Act allows an excessive encroachment on provincial powers and delegates too much power to the federal government such that the population and the courts lose their ability to effectively control government decisions,” lawyer Marc Bishai told The Mix.

He said that while the BCA requires Ottawa to consult with provinces, that doesn’t mean provincial concerns will be heeded. “Consultation is one thing, but it can be set aside.” The Act also allows provinces to delegate powers to the federal government, something the Constitution forbids, he added.

Finally, he argues King Henry VIII has no place in a modern democracy. “By removing the levers that usually exist to control government decisions, this Act puts at risk the ability of courts to effectively verify whether those government decisions are legal,” he said. “That power of judicial review is protected by the Constitution. The ability of Parliament to reduce or set aside that role of the courts is limited.”

Of course, it’s early days for the BCA. So far, the government has only referred proposals to the Major Projects Office for PONI consideration, 11 of them at last count. As yet, there are no actual PONIs in the stable and no one knows what the process will actually look like. Farrell told the House committee that she expects no more than one or two projects will become PONIs. Still, she added that her office has received 500 applications and the Globe and Mail reported there are 32 projects on the potential list—a reminder that, with a law that hands such open-ended power to cabinet, anything could happen.

“How it’s going to be implemented fundamentally depends on who’s in power,” said Olszynski. “You could do radical things with this bill, if a government wanted to.”

Somewhere, King Henry is smiling.

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By Jody MacPherson

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By Jim Stanford

Canada has long striven to be more than a mere supplier of raw resources to more developed trading partners.

From the national policy of the 1870s, to the industrial planning of C.D. Howe after the Second World War, to the Canada-U.S. auto pact of 1965, our economic development strategy tried to nurture secondary and tertiary sectors that add value to primary resources instead of just exporting them raw.

Through the latter half of the 20^th century, this strategy largely succeeded. Value-added industries were built in auto, aerospace, pharmaceuticals and technology – in some cases by Canadian-owned businesses, in others relying heavily on foreign investment.

By 2000, less than one-fifth of Canada’s merchandise exports were unprocessed or barely process primary products. We were no longer just “hewers of wood, drawers of water.”

Unfortunately, much of that progress has been undone in this century – for a variety of reasons, heightened recently by U.S. President Donald Trump’s tariffs and other economic threats. Today, primary exports make up almost half our merchandise exports.

The federal government should use every tool at its disposal to craft a targeted industrial policy to reverse the current trend toward precarious over-dependence on resource extraction and export.

More than “diggers of critical minerals”

After entering a free-trade agreement with the U.S. in 1989, Canadian governments retreated from proactive industrial strategies, instead relying on our supposedly privileged access to U.S. markets.

The commodities boom of the 2000s reinforced the focus on resource extraction – first and foremost, the massive expansion of bitumen production and export. Evolving global competition, including the rise of China and Mexico as manufacturing powerhouses, further challenged our value-added export industries.

Now, Trump is hammering more nails into the coffins of Canada’s value-adding industries with his targeted Section 232 tariffs.

It’s no coincidence these tariffs are aimed squarely at Canada’s most important high-value manufacturing. To date, his sectoral tariffs have targeted auto, aluminum, steel, copper and lumber, while aerospace, heavy trucks, pharmaceuticals and semiconductors are next in his crosshairs.

Trump’s various tariffs, including the so-called “emergency tariffs” levied under the International Emergency Economic Powers Act, are being challenged in various U.S. courts. However, the worrying erosion of the rule of law in the U.S. leaves Canadians with little confidence that his unilateral measures will be significantly constrained.

Trump is happy, it seems, to keep importing Canadian raw materials, which he treats more leniently, with lower tariffs on energy and potash, as well as CUSMA exemptions (for now, anyway) for most other primary products.

His goal is clearly to increase U.S. industrial dominance in the sectors that transform raw resources into more expensive value-added products – the very sectors Canada must defend and grow.

Otherwise, Trump’s trade war will pigeon-hole Canada as a continental resource pit – and a lucrative market for America’s more innovative (and expensive) exports.

To “hewers of wood and drawers of water” we would then add “steamers of bitumen and diggers of critical minerals.” The economic, geopolitical and environmental risks of this structural retreat from value-added industry are worrisome.

Therefore, this is the moment for Canadian policymakers to rediscover the importance of targeted industrial policy, which is essential to help our value-added industries survive Trump’s attacks and to reverse Canada’s over-dependence on resource extraction and export.

Believers in the traditional “comparative advantage” theory see little wrong with a country being so reliant on production and export of a specialized portfolio of unprocessed resources. If that’s what global markets want from a country, it should simply go with the flow, they believe. Accepted fully, this approach leads to ahistorical and fatalistic passivity in trade policy.

As Nobel economist Paul Samuelson famously quipped, the fact that “the tropics grow tropical fruits because of the relative abundance of tropical conditions” is hardly useful for a country that wants to do more than export bananas. The same warning applies to other countries that can’t see beyond the limited horizon of their immediate resource endowments.

The industrial success of Asia 

Contrary to comparative advantage theory, the most successful global examples of industrialization in the last century have been countries such as Japan, Korea, the other Asian “tigers” and China. They – more often by necessity than choice – did not focus on building industries based on what was buried beneath their feet.

Instead, they mobilized capital, skills and technology to carve out competitive (not comparative) advantages in strategically important and growing high-value industries.

Those efforts relied on powerful state-directed strategies to twist markets and alter incentives. Many tools were invoked – all with the overarching goal of expanding domestic capacities to manufacture, innovate and export higher-value products and services.

Comparative-advantage thinking says “export what you were endowed with.” Good industrial policy acknowledges it’s better to specialize in some industries than others, especially industries that are technology-intensive, export-oriented, anchor valuable supply chains and demonstrate high and rising productivity.

Instead of relying on resource endowments and private markets alone to guide a country’s specialization in global trade, these countries take deliberate action to build a presence in targeted, desirable sectors.

They have all used a wide range of industrial policy levers to become global manufacturing giants. These include channeling capital (including public or sovereign wealth) to targeted industries on favourable terms; powerful public-private missions to develop and commercialize strategic technologies; and complementary investments in skills and infrastructure to lubricate the high-value export machine.

Many European countries have followed broadly similar strategies, using public capital, planning, regulation and knowledge to nurture successful global firms and high-value domestic production.

Even the U.S., while mouthing free-market jargon, relies regularly on powerful, targeted interventions, including massive defence and energy subsidies, to buttress its presence in strategic industries.

These lessons of successful industrialization have renewed relevance for Canada as we confront Trump’s economic aggression.

Some have concluded Canada should double down on extraction and export of natural resources – facilitated by new pipelines and other export infrastructure to sell our resources to countries other than the U.S. But the urgent task of export diversification needs to take account of what we produce, not just where we sell it.

Enter industrial policy, which holds new relevance for Canada as we try to protect our economy and our sovereignty against Trump’s erratic actions. Good industrial policy draws on a full suite of policy measures applied to shift incentives, motivate investment and innovation, reinforce the vitality of domestic industry and penetrate high-value export markets.

Call it “sector-development policy” 

The tools of industrial policy are many and varied, including fiscal rules and incentives, technology supports, preferential access to capital, public investment (including public equity or co-investments), infrastructure construction, skills and training support, trade policy, government procurement and more.

These tools need to be applied creatively and flexibly, reflecting the specific challenges and opportunities of each sector. Governments need strong internal capacity to understand and manage industrial policy (to avoid being captured by rent-seeking businesses). As well, the goals and performance requirements need to be explicit and enforced.

Industrial policy doesn’t apply only to conventionally understood industry, which is often stereotyped as large-scale goods-producing facilities, such as resources and manufacturing.

Any technology-intensive, high-productivity, tradeable sector – including technology, business, digital, entertainment or education services – is a candidate for targeted attention. A better moniker for this theme might be “sector development policy,” moving past the outdated assumption that industrial policy is only about smokestack industries.

A fully capable industrial nation must do more than harvest resources. This has always been true.

The global energy transition – which will continue despite Trump’s best efforts to roll back history – gives further impetus for Canada to diversify beyond fossil fuels.

The current concern with Canada’s lagging productivity growth provides another important motive. Indeed, it’s no coincidence that the countries leading productivity growth globally (such as Korea, the U.S. and Ireland) are those with the biggest domestic presence of high-tech production.

Those industries didn’t end up there by accident or thanks to the autonomous logic of market forces. They ended up there because those countries undertook targeted efforts to attract and build them.

Trump’s trade war is forcing our governments, businesses and workers to collectively renew Canada’s historic crusade to build an economy that is more than a northern appendage to a larger, more developed neighbour.

A comprehensive industrial strategy – using every tool to add value to our resources instead of exporting them raw, and sustaining and growing a strong Canadian footprint in innovative value-adding industries – needs to play a central role in that nation-building mission.

The post Opinion: Only targeted industrial policy will fulfil Canada’s value-adding potential appeared first on Thoughtful Journalism About Energy's Future.

By Steve Lafleur

Donald Trump’s re-election as president of the United States has left our entire country in a state of flux. His tariffs on key Canadian exports have already resulted in people losing their jobs and businesses scrambling to find new markets. Entire industries are in doubt. The only certainty, as Prime Minister Mark Carney has said, is that the “old relationship we had with the United States, based on deepening integration of our economies and tight security and military co-operation, is over.”

While this doesn’t mean we need to throw out one of the world’s most productive trade relationships, we need to be able to succeed as a country independent of U.S. public policy. We have no idea what Trump’s plans are from one day to the next, so we must be prepared for a more uncertain future.

Canada at a crossroads

Given the deterioration not only in our trade relationship, but also in our security environment, we need to do big things — fast. Could a stronger role for Canadian industrial policy be part of the answer?

The Institute for Research on Public Policy consulted hundreds of people from academia, business, government, industry groups and non-profits as part of a multi-year research project on Canada’s future economic choices. A final report is to be released at a conference on Sept. 16 in Ottawa.

The institute ran four workshops, guided by a group of experts, across the country. During those conversations we heard potential ways industrial policy could be applied, as well as divided opinions about how much — if anything — governments ought to do to support or reshape parts of the economy.

To some, a more robust industrial policy represented an opportunity for Canada to play a leadership role in future industries. To others, it sounded like heavy-handed government intervention. There was considerable openness to using targeted government actions to address some public priorities that financial markets have little incentive to address, for example, ensuring that Canada has the domestic capacity to manufacture vaccines.

Industrial policy is a loaded term. It means many things to many people. Most broadly it means governments actively attempting to steer a portion of economic activity. That can range from small things like tax credits to bigger plans to promote a particular sector or region.

An IRPP event | Canada’s Next Economic Transformation: Industrial Policy in Tumultuous Times

Some would argue that industrial policy is a form of socialism. Financial Post editor Terence Corcoran refers to it as “industrial statism.” He equates all industrial policy with the Trump administration’s arbitrary attempts to coerce and forcibly take equity stakes in American companies. If one believes there is no legitimate role for the government in the economy, this makes sense. Of course, by that logic the oil sands — arguably Canada’s biggest industrial policy success story — are socialist to the core.

There is always some level of government intervention in the economy, whether it’s setting and enforcing intellectual property law or building infrastructure or funding research. It is certainly true that governments can go too far, which is why it is crucial to distinguish between seizing the means of production versus giving industries incentive to do things in the public interest.

Doing big things right

While we are now faced with needing to do big things fast to adapt, we need to do them right. Reducing reliance on the United States while boosting internal trade and diversifying our export markets requires more and better infrastructure, fewer internal trade barriers, more effective marketing of Canadian research and development, and deeper integration with other trading partners. There are businesses that would be eager to participate in this transformation, but the overarching goals are far beyond the means of individual companies. Governments need to make investments in training, education, research and infrastructure, but also, in some cases, help de-risk private investments. Building more manufacturing capacity isn’t cheap, for instance, but it may be necessary in a world with thicker borders.

But big things tend to happen slowly — especially with major infrastructure projects that are often rife with delays and cost overruns. Canada’s many interminable transit projects are one example. Some might lament we can’t build big things anymore like the railway that tied the country together. But construction of that “ribbon of steel” came at a terrible price for workers who were treated as disposable and for Indigenous communities along the route. We would never think to build like that again. Nor should we. We can’t steamroll over communities or exploit labourers. We need to work in genuine partnership with Indigenous Peoples, and ensure that we don’t sacrifice safety or the environment.

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Due to its potential to decarbonize hard-to-abate sectors, green hydrogen–produced via electrolysis using only renewable energy resources— and hydrogen-derived commodities including ammonia and methanol, emerge as key components of a holistic energy transition towards net zero.

But the benefits of green hydrogen go beyond reducing greenhouse gas emissions. Scaling value chains for green hydrogen and derived commodities can enable green industrialization, energy independence, increased participation in global trade and markets, and job creation.

Fossil-derived “grey” hydrogen is already an important industrial commodity today. Green hydrogen, beyond its role as a potential energy carrier, can also serve as a clean feedstock in carbon-intensive industrial processes.

To decarbonize hard-to-abate industrial sector, replacing existing grey hydrogen volumes with green volumes is a key priority. In chemical sector for example, green hydrogen will be a crucial component of the sector’s decarbonization pathways. It is currently being actively pursued as a candidate for use in the direct reduction of iron for steel production.

The heavy-duty transport sectors—aviation, maritime shipping, and possibly long-haul trucking—are other sectors that represent an opportunity for next frontier green hydrogen deployment. They demand energy-dense solutions capable of powering extended journeys. Instead of fossil fuels, green hydrogen and its derivatives like ammonia, and e-fuels including e-kerosene and e-methanol are expected to provide clean alternatives.

In addition, green hydrogen has the potential to address the critical challenge of seasonal energy storage. Green hydrogen produced when renewable inputs are readily available, to be consumed when energy demand is highest, may provide a solution for large-scale, long-duration energy storage needed across extended periods. Flexible electrolysers may also support power system resilience in variable, highly renewable power systems.

Such versatile purposes have put green hydrogen in the centre of global energy transition acceleration efforts and discussions, prompting speculations about the prospects of an emerging international markets for hydrogen and derived commodities. IRENA analysis has suggested that around 20 per cent of the total global demand anticipated for hydrogen may be satisfied through international trade flows.

The opportunity for international trade in green hydrogen and renewable-produced ammonia, methanol and other derived commodities stems from a geographic reality: the centres of demand for these commodities are unlikely to be in the regions with the highest potential of renewable energy resources needed for cost-effective production. Since electricity represents the primary cost component in green hydrogen production, countries with abundant solar and wind resources hold competitive advantages.

Trade dynamics will also vary across green hydrogen commodities. Ammonia is projected to dominate international flows, with 30 per cent of global demand expected to cross borders, followed by e-methanol at 18 per cent, direct reduced iron (DRI) at 14 per cent, and gaseous hydrogen at 14.4 per cent.

With high renewable energy potential, the Global South is poised to become essential players in the international markets for these green commodities. In doing so, the Global South’s countries can transform themselves from energy importers to exporters—a paradigm shift creating substantial economic opportunities for the developing nations, while enhancing their energy security.

Latin America for example, can leverage its solar and wind resources with existing industrial infrastructure. The region could become a major supplier across multiple green commodities, from ammonia and e-methanol to direct reduced iron, serving markets in North America, Europe, and Asia.

Sub-Saharan Africa is also presented with opportunities to produce green hydrogen for both domestic use and export. The region’s strategic geographic position is expected to enable efficient access to European and Asian markets, while its vast land availability supports the infrastructure deployments required for competitive green hydrogen production.

Another region that holds strategic significance given its proximity to European demand centres is North Africa. IRENA’s analysis indicates that the region could supply approximately 18 per cent of the European Union’s green hydrogen and related commodities by 2050, establishing a robust Euro-Mediterranean energy trade that builds on existing energy cooperation frameworks.

To fully realize this potential, developing countries must coordinate policy frameworks with infrastructure development within a holistic energy transition strategy. Development of substantial renewable generation capacity and transport and storage infrastructure would be needed. IRENA’s estimation shows that on a global scale, the cumulative investment need for infrastructure throughout the hydrogen value chain amounts to USD 2.49 trillion by 2050. It encompasses 4.7 terawatts of renewable energy capacity, 2.1 terawatts of electrolysers, and 0.9 terawatt hours of battery storage.

IRENA and WTO previously analysed the enabling actions needed to unlock these value chains and drive sustainable development. With strategic planning, targeted investments and international collaboration, benefits can be realized as the markets for these green commodities emerge.

International markets for green hydrogen and derived commodities offer the developing countries in the Global South a pathway to sustainable industrialization, energy security, and economic diversification. They therefore can accelerate their own energy transitions while becoming an indispensable partner in the global journey towards net-zero emissions.

To understand the full scope of this challenge and potential solutions, James Walker (Team Lead-Renewable Gases) and Francisco Gafaro (Team Lead-Power Sector Transformation) from the IRENA Innovation and Technology Centre, shared their insights in one of IRENA’s latest podcast episodes.

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By Jody MacPherson

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By Anita Hofschneider

Canada’s newly elected prime minister wants to turn the country into an “energy superpower,” while promising to respect Indigenous rights, prompting both cautious optimism and skepticism from Indigenous leaders and advocates in Canada.

Prime Minister Mark Carney won Canada’s election this week in what many observers are calling an embrace of Canadian nationalism and rebuke of U.S. President Donald Trump. Carney is a former central banker who became prime minister in March after Justin Trudeau stepped down. He is largely expected to continue the policies adopted by his centrist Liberal predecessor, who supported aligning Canadian law with the United Nations Declaration on the Rights of Indigenous Peoples, the cornerstone of international rights for Indigenous peoples, but also faced criticism for his support for the Trans Mountain oil pipeline.

Carney’s Conservative opponent, Pierre Poilievre, embraced a major expansion of domestic oil and gas development and voted against the 2021 bill to ensure Canadian laws are consistent with the U.N. Declaration on the Rights of Indigenous Peoples.

“I am very proud to say that I oppose this bill,” Poilievre said at the time. One study found that if Poilievre won, Canada’s emissions would increase, whereas Carney’s win means the country’s emissions will continue to fall — albeit not low enough to avoid the worst effects of global warming.

Indigenous Climate Action, an advocacy group for Indigenous peoples and climate justice in Canada, said in a statement that Carney was considered the “lesser of two evils” compared to his Conservative opponent but that the organization is concerned that both Carney and Poilievre promised to speed up extractive energy projects in the name of Canadian sovereignty.

“So-called Canadian sovereignty shouldn’t come at the expense of Indigenous sovereignty, nor should it be an excuse to violate our inherent rights,” the organization said. “True climate justice can only be achieved when Indigenous Peoples are given the rightful power to determine the fate of our lands and territories.”

Prior to his election, Carney had a track record of climate advocacy: In 2019, he became the United Nations’ special envoy for climate action and finance, with the goal of drumming up private financing to help countries prevent the earth from warning more than 1.5 degrees. A decade ago, he said the “vast majority of reserves are unburnable” if the world is to avoid the worst-case scenarios of climate change.

Carney’s rhetoric has since shifted. One of his first decisions after replacing Trudeau was to remove the federal carbon tax on fossil fuel usage that was widely criticized for increasing the cost of living, despite data indicating rebates reached more than 80 percent of Canadians. The issue had become a political liability for the Liberal party and scrapping the tax ahead of the election undercut what had become a rallying cry for his opponent. Carney has also promised to fast-track resource development projects to decrease Canada’s reliance on energy imports.

“Build, baby, build,” Carney said in his victory speech this week, a play on Trump’s “drill, baby, drill” motto that refers to ramping up oil production. For Carney, “build, baby, build” expresses his commitment to shoring up Canadian infrastructure, including building half a million affordable housing units and expanding domestic energy production.

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By Mathilde Fajardy, Energy Analyst
Carl Greenfield, Energy Analyst
Josephine Tweneboah Koduah, Energy Analyst

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