Economic inflation is clearly on the decline, but we’re about to witness a massive outbreak of rhetorical inflation in Dubai. That’s where the world’s leading politicians, public figures, and climate change activists and celebrities are gathering for COP 28, where we’ll hear the usual array of big promises and bold declarations. They’ll tell us it’s our last chance to avoid disaster and our best opportunity to save the future of our planet. I’m here to tell you that now, more than ever, none of this matters.
This isn’t reflexive cynicism or reactionary pessimism, both of which I regard as lazy forms of punditry. Instead, it’s optimism about the energy transition already underway and the inability of even the most obstructionist governments and large corporations to meaningfully slow its progress. We are, without question, on a path that will see us exceed the 1.5 C target in the Paris Accord. But we are also on a path that will get us much closer to them than many people realize.
My optimism begins in China, of all places, where a new report from Bloomberg New Energy Finance (BNEF) documents the breathtaking scale and scope of that country’s renewable energy buildout. Back in 2021, Chinese President Xi Jinping announced the creation of so-called “renewables bases” in the country’s massive western and northern deserts. These bases would contain massive solar and wind installations along with energy storage technology to help capture and integrate their power into the national grid. Now, with some new data becoming available on what these look like and how quickly they can be built, everyone is going to need to update their assumptions and their spreadsheets.
“The speed at which projects are being deployed has already led several forecasters to upgrade their estimates for renewables adoption this year,” says Bloomberg Green. “China will install more than 300 gigawatts of solar and wind capacity in 2023, almost double the volume a year earlier, according to BNEF forecasts. The entire global total in 2022 was 338 gigawatts.” As Cosimo Ries, a Shanghai-based energy analyst with Trivium China told Bloomberg Green, “There’s nothing in history you can benchmark this against.”
If China’s renewable industry and provincial governments can hit their targets here, they’ll add 455 gigawatts of wind and solar energy — roughly equivalent to the size of India’s entire power network — to a grid that already has more clean power than any other nation on Earth. And because it’s being built on deserts, where the land has effectively no value, it will be some of the cheapest power on Earth, too.
China isn’t doing this out of the goodness of its heart or because it cares about the well-being of all mankind. It’s doing it because it understands that relying on imports of oil, natural gas and other fossil fuels makes it dangerously dependent on other countries. It also understands that by effectively cornering the market on the construction of wind turbines, solar panels and other renewable energy technologies, it can grab a huge slice of the biggest growth industry of the 21st century. In other words: It’s the economy, stupid.
The developments in other parts of the world aren’t quite as breathtaking, but they’re still important markers of an energy transition that continues apace. As Goldman Sachs noted in a new report, the cost of electric vehicle batteries is falling much faster than recent projections predicted. Its research department now sees battery prices falling to $99 per kilowatt hour by 2025, a 40 per cent drop from 2022 levels. So much for all that talk about “greenflation.”
This means that so-called “cost parity” between gasoline-powered vehicles and electric ones could arrive even sooner than expected. As a result, the ongoing adoption of those electric vehicles (EV) will be powered far more by their underlying economic advantages than any government subsidies. “Our analysts see the EV market transitioning to a new phase that is more heavily influenced by consumer adoption than government largesse as battery prices drop,” the Goldman Sachs report notes.
Yes, investors should continue to press companies to lower their upstream emissions, and climate activists should keep pressuring elected officials to implement good, thoughtful policy. But focusing on the oil and gas industry and its unwillingness to co-operate with efforts to prevent catastrophic climate change is a bit like pressing McDonald’s and Burger King to help fight the obesity crisis in America. It is abundantly clear by now that the oil and gas industry, regardless of where it’s located, will never voluntarily wind itself down. The aborted attempts at a pivot to lower-carbon solutions by companies like Shell, BP and even Suncor show when the going gets even a little tough, these companies fold like a $5 tent.
In the end, though, that’s probably OK. As the International Energy Agency noted in a recent report of its own, “Many producers say they will be the ones to keep producing throughout transitions and beyond. They cannot all be right.” Indeed, many of them are already quietly coming to this realization and scaling back ambitious plans to increase production in favour of increasing profits and dividend payments to their shareholders.
This isn’t the sort of clean, satisfying victory many climate activists want to see, whether it’s at COP 28 or some other international conference. But right now, it’s the only one they’re going to get. Rather than being disappointed about the inevitably disappointing outcome of COP 28, they can take heart in the fact that climate progress no longer depends on things like that.
Bill McKibben’s bad math
Taking a run at American environmentalist Bill McKibben calls to mind the famous scene from The Wire where members of the Barksdale gang try (and fail) to kill a rival — only to run into Omar Little. “You come at the king,” he says, “you best not miss.”
And so, with all due respect to McKibben, I’m going to do my best not to miss here. In a recent op-ed for The Narwhal, McKibben argues that we’re doing our climate math all wrong, and countries should be accountable for both their own emissions and the emissions from fossil fuels they export. More to the point, he thinks leading exporters like Canada, the U.S., Norway and Australia should be the focal point of pressure for climate activists in the West. “If other nations and the climate movement could figure out how to pressure these countries to turn the spigot to the right,” he says, “we could staunch much of this flow of greenhouse gases into the air.”
Alas, this is not how it works. The oil market, in particular, is controlled by the cartel known as OPEC (and now “OPEC+” with Russia and other non-aligned nations participating in its market management efforts) and it is mostly immune to pressure campaigns and other forms of democratic influence. Right now, because of its ongoing attempt to steer prices higher, the cartel has 5.7 million barrels per day of so-called spare capacity — that is, potential oil production that is sitting behind one of McKibben’s rightward-facing spigots. Any meaningful attempt by western nations to shut-in their own production would spike prices higher and allow OPEC to release some of this spare capacity and capture the resulting revenues.
McKibben is at least somewhat prepared for this argument. In his piece, he suggests “the most important decision any of these leaders — in the U.S., Canada, Australia, Norway or the United Kingdom — could make is simply to say, ‘We won’t be the hydrocarbon equivalent of the narcotics cartels.’” If they did, some of the slack would be taken up by other nations, like the United Arab Emirates, erstwhile host of this year’s COP. But some of it would also be taken up by the switch to renewables; with the biggest suppliers leaving the market, prices would rise and the spreadsheet would change. Again, that’s how economics works.”
But alas, once again, it really isn’t. Oil is not in direct competition with renewable energy and handing more of its market share over to OPEC wouldn’t make wind and solar any more competitive. It’s also odd that McKibben compares western oil producers to a cartel when there’s already a literal one controlling the oil market that’s been around for most of his life. And if we’re treating oil and gas like an addictive narcotic, shouldn’t we be pursuing harm reduction rather than trying to quit cold turkey?
More to the point, where would McKibben’s strategy leave us, exactly? Back where we started, only with more of the wealth generated by oil and gas going to hostile and undemocratic nations. Now, I know — this sounds an awful lot like Ezra Levant’s Ethical Oil argument. That’s because for all of its impotent bluster and bravado, there’s a kernel of truth buried deep inside it. That isn’t an excuse for Canada to reduce its climate ambitions, and it’s certainly not a reason to reject policies like an oil and gas emissions cap. But we have to acknowledge the realities of the global oil market, as unpleasant and inconvenient as they might be.
The better approach, by far, is to focus any advocacy efforts on driving down demand for oil. That means supporting things like carbon taxes, electric vehicle mandates and other programs and policies that reduce our reliance on it. That means supporting politicians who do the hard work of advancing these ideas and trying to shield them from the inevitable populist blowback they create. And it means focusing on real solutions, not tilting at ideological windmills.
Sorry, Bill.
Kevin Falcon takes aim at CleanBC
Ever since he was elected leader of the former BC Liberal Party in 2022, Kevin Falcon has seemed determined to drive it straight into the political ditch. After a disastrous name change and subsequent floor crossings gave the BC Conservative Party new life (and dropped “BC United” 10 points in the polls), his latest big idea is promising to eliminate the province’s landmark climate policy — one his own party laid the groundwork on. If his party forms the government in the next election — an increasingly unlikely outcome, given the polls — Falcon pledged that it will scrap the CleanBC program.
This seems like a transparently desperate attempt to imitate Pierre Poilievre’s rhetorical style and substance on the climate change file and win back some of the further-right voters who have abandoned his party for the BC Conservatives. In his announcement, Falcon is quoted as saying, “We need common-sense measures that will grow our economy and actually fight climate change, rather than punishing hard-working British Columbians who are just trying to make ends meet.”
Sound familiar?
This Poilievre pantomime includes a pledge to “go all-in on B.C. LNG,” whatever that means, and “hitting fires hard and fast upon initial identification,” which apparently will help the province manage its growing wildfire problems. And, of course, it means a pledge to “axe the tax” — even if his party was the one who implemented it in the first place back in 2008. “I’m not going to allow us to be the only jurisdiction having our residents pay the carbon tax,” he said last month.
Premier David Eby clearly welcomes this fight. “The cost of inaction is our homes, our communities and the path of forest fires,” he said recently. “It’s our crops, our farms at risk of flooding. It’s our children who stand to lose the nature that surrounds us. They will pay the price and this place will never be the same.” As he told delegates at the recent BC NDP convention, his party “will not back down … God forbid, if the rest of the country abandons the fight against climate, B.C. will stand strong.”
Falcon’s pitch might play well in Kelowna, which has become an unofficial colony of the Alberta oil and gas industry. But in most parts of the province, pledging to eliminate a program called “CleanBC” — one that was singled out for an award for “most creative climate solution” at COP26 in Glasgow — would be a step in the wrong direction. This is a province that has faced the worst of climate change in recent years from 2021’s deadly heat dome to the massive flood in the Fraser Valley later that year, and wildfire smoke every summer. Its residents understand the costs of climate change, and climate inaction, better than anyone else in this country.
Trying to win an election on the wrong side of that increasingly important issue seems like a losing bet. Then again, Falcon and BC United have made a whole bunch of those lately.
Save your apology, Don Martin
As someone who has written many, many times about intergenerational equity, I’m always happy to hear an apology coming from a baby boomer. But the one that CTV News’ Don Martin offered up in a recent column was the very definition of a bad-faith offer — one intended not to actually apologize for the hurt his generation has caused mine and those that come after, but ride an ideological hobby horse about debt and deficits.
“Lest we forget,” he wrote, “as debt-servicing charges and health-care costs achieve an ugly budgetary equilibrium, this red-ink burden is not one to be borne by the current crop of parents and grandparents. The borrowing of today will be paid with high interest by the kids who become the taxpayers of tomorrow. For squandering their hard-earned income tax on the questionable expenses we have incurred, they are owed a proactive apology.”
Thanks, but no thanks. First and foremost, any intergenerational apology that isn’t paired with explicit support for things like aggressive climate policy or retroactive taxation on capital gains in people’s homes isn’t worth a cup of warm piss, much less a bucket. Instead, it’s just intergenerational virtue signalling, and it deserves to be called out as such.
Just as importantly, Martin’s crocodile tears about the debt and deficits being left for future generations are totally out of proportion to the problem. Yes, the federal budget isn’t balanced right now, and debt-servicing costs have gone way, way up as interest rates spiked higher, but this is all still well within the realm of manageable.
As University of Calgary economist Trevor Tombe wrote in a piece for The Hub: “Relative to the size of government or the overall economy, the burden of these high interest costs remains lower than it was in the mid-1990s. Far lower. In 1995, interest costs were 35 per cent of revenue and nearly six per cent of our entire economy. Today, even if interest costs exceed $50 billion, that would be 11 per cent of revenue and less than two per cent of GDP. And central banks should start lowering their policy rates next year, perhaps by spring or earlier, as inflation pressures recede.”
And while Poilievre will continue to pretend this increase in interest rates is all Justin Trudeau’s fault, the data clearly says otherwise. In fact, Canada’s fiscal position right now is among the strongest of its peers. “Based on the latest data compiled by The Economist, the U.S. federal deficit is set to reach 5.7 per cent of GDP this year, equivalent to roughly $165 billion in Canada,” Tombe noted. “Borrowing in the euro area is 3.4 per cent. The U.K. is 3.9 per cent. Indeed, of all the countries it tracks — developed and developing alike — only three expect a surplus: Australia, Denmark, and Norway.”
As to the debt we incurred over the last few years, I’d love to know which parts people like Martin think we could have done without. Was it the pandemic relief that helped avert a deflationary spiral and economic ruin? Was it the childcare funding that’s already saving some families thousands of dollars each month? How about the additional health-care transfers to the provinces?
This is, by the way, the question that journalists need to be putting to Poilievre until he finally offers up something resembling an answer. Where, exactly, would you cut in order to balance the budget? Don’t insult us with these suggestions that getting rid of the ArriveCAN app or even defunding the CBC would get it done. Which departments will feel the brunt of the $30 billion or more in annual cuts needed to balance the budget, and who will feel the pain from that?
As to any more apologies coming from deficit-scolding boomers? They can keep them. We sacrificed all sorts of things to protect them during COVID. If they actually want to pay it forward, it’s time for them to put something real on the line: their political support for our best interests.
I’m not holding my breath.
The Wrap
Last week, I wrote (again!) about the Canadian Taxpayers Federation and their convenient blind spot when it comes to conservative governments. They suddenly have even more things to studiously ignore, what with the talk around Poilievre’s expenses and the Alberta government sending 100 of Danielle Smith’s best friends and co-workers to Dubai at a reported $2,500 per night.
I also wrote about Poilievre’s very bad week, and how it opens the door — just a smidge, mind you — to a potential Liberal comeback. With news about the federal government’s deal with Google over its Online News Act and allegations about the Indian government’s murder-for-hire behaviour in the United States, this week isn’t shaping up to be any better for Poilievre.
And Tuesday, I covered Danielle Smith’s much ballyhooed invocation of the so-called “Alberta Sovereignty Within a United Canada Act,” which was supposed to get boots quaking in Ottawa. Instead, it probably just served as a particularly funny punchline, given that her big threat is apparently the creation of a Crown corporation. What’s next, threatening Trudeau with a public insurance option?
That’s all for this week from me. As always, share and subscribe.