There’s fiddling while Rome burns, and there’s whatever the Conservative Party of Canada is doing right now on carbon taxes. Despite an early wildfire season and a major drought in most of western Canada, the CPC has rolled out yet another attack on the carbon tax, suggesting it will force Canadians to “cancel their summer vacations.”
Never mind, for the moment, that gasoline prices are exactly where they were last May, even with the increase in the carbon tax (and rebate). And let’s set aside the ludicrous suggestion, one made by Poilievre himself, that suspending the carbon tax along with the federal gas tax would save the average household as much as $955, which could pay for upwards of 37,000 kilometres worth of driving over the next three months. And, of course, the far more probable cause for any vacation cancellations this summer will be wildfires and the impacts they have on places like the Okanagan.
But all of this silliness misses something much more serious: the latest phase of the energy transition is about to leave Canada, and especially Alberta, in its low-carbon dust. While we bicker about reports from the Parliamentary Budget Officer and the math around rebates and carbon taxes, Chinese companies are upending the global transportation market with ultra-cheap batteries and ultra-competitive new vehicles. In the process, they’re destroying the optimistic — and now, perhaps, delusional — medium and long-term forecasts for oil demand that Conservatives like Danielle Smith and Pierre Poilievre treat as gospel.
First, the batteries. A Chinese company called Contemporary Amperex Technology Co., Limited, better known as CATL, announced earlier this year that it was cutting the price of its lithium-iron-phosphate battery (LFP) cells to $56 per kilowatt hour, whihc is 40 per cent below the global average. This new battery chemistry has any number of advantages over the lithium ion batteries found in most North American electric vehicles. It doesn’t require nickel or cobalt (both of which are expensive and hard to find), lasts longer and can endure the most aggressive recharging cycles. Cost was once thought to be its biggest weakness. No longer.
As veteran journalist Steve Levine noted, Western automakers dismissed the announcement at the time as a promotional stunt. No company, they assumed, would be able to actually sell LFP batteries at that price and make a profit. As it turns out, they were wrong. “The LFP business may be evidence that the Chinese battery sector is repeating a phenomenon that has roiled industry after industry—so altering the economics of a product that most Western rivals are unable to compete, and are driven out,” he wrote.
The EV-related innovation happening in China isn’t limited to the batteries, either. As automotive expert Kevin Williams explained after a recent visit to the Shanghai Auto Show and a tour of the Geely Group’s headquarters (a major Chinese EV maker) in nearby Hangzhou, the cars being made in China might be even more impressive. “Deep down, all of the Western auto executives and some hawkish China pundits understand that Chinese EV and PHEV models are more compelling than what European, other Asian, and American brands have come up with. I’ve seen it with my own two eyes. We’re cooked.”
That helps explain the recent announcement by the Biden administration of a new 100 per cent tariff on Chinese EV imports that is clearly intended to buy the American automakers time to adapt and evolve. Whether they actually do that or not is an open question, and their ongoing reluctance to actually commit to the transition to EVs suggests they may prefer to become a protected industry rather than a globally competitive one. As economics writer Noah Smith noted, “A refusal of GM and Ford to bet big on the EV transition (and Tesla’s pivot to robotaxis) would then be able to keep America as a gas-guzzling nation, clinging to our outmoded comfort cars, orphaned from global technology and locked out of the high-tech future.”
That would have some pretty obvious negative implications for the fight against climate change — and some positive ones for anyone holding out hope that oil demand will somehow remain steady going forward. But China doesn’t actually need Americans to buy their cars, and its leaders have obviously been aware of that possibility for some time. Its focus is now clearly on the developing world, that last bastion of supposed growth in oil demand.
As David Goldman, the business editor of the Asia Times, noted in a recent piece, “China is exporting less, not more, to the developed markets with which it competes directly, and exporting a great deal more to the Global South, which has virtually unlimited demand for $10,000 electric vehicles, cheap solar panels and broadband infrastructure.”
Those $10,000 EVs are a game-changer in countries like Ethiopia, which just banned the import of new internal combustion engine vehicles. As Wood Mackenzie’s Ed Crooks noted, this is, “A sign of things to come. China's success in EVs is largely explained by the fact that it's the world's largest oil importer. EVs are obviously superior for national security and the economy. Where low-cost Chinese EVs are available, other countries will make similar calculations.”
If Canada’s Conservatives were actually serious about helping Alberta and its oil and gas industry, they’d focus on the threat to demand these developments pose. They’d do everything in their power to help Alberta’s oil and gas companies decarbonize as quickly as possible, develop new lines of products and otherwise prepare for a future in which demand isn’t just lower than it is today but potentially much, much lower.
Fat chance of that happening, though. Instead, they’ll almost certainly find new ways to blame Justin Trudeau, denigrate electric vehicles and otherwise bury their heads in the oil sands. The cost to future generations will be enormous, both in terms of time squandered and opportunities lost. But, then, they’ve never really cared about what’s best for future generations, have they?
Alberta’s hydrogen pipe dream isn’t going to pan out
Whether it’s her government’s ban on renewables or ongoing attacks on federal climate policy, Danielle Smith has made her disdain for the future abundantly clear. But there’s one notable (and predictable) exception: hydrogen. “I think our solution for zero-emission vehicles is hydrogen — and they're already here," she said on her call-in radio show last year.
As the CBC’s Jason Markusoff noted last fall, “Smith has embedded this enthusiasm into government action, mandating her Service Alberta minister to pursue a network of hydrogen fuelling stations across the province, up from the zero publicly available now. The province is commissioning an analysis into the potential conversion of all or part of the government's 3,400-vehicle fleet to hydrogen — from sheriffs' cruisers to Alberta Forestry and Parks ranger trucks.”
This pipe dream is almost certainly fueled by her determination to prop up the province’s natural gas industry, which would benefit from the additional demand that more widespread hydrogen usage would create (so called “blue hydrogen” can be created using natural gas paired with carbon capture and storage technology). That determination also informs the ban on renewables, her constant talk about the need for more natural-gas fired electricity, and any number of other UCP policies.
Alas, reality refuses to stop beckoning here. While the hydrogen economy remains stuck in neutral, battery technology keeps making massive leaps forward. As a result, Bloomberg New Energy Finance’s latest outlook no longer sees any role for hydrogen in home heating or cars, with overall hydrogen demand revised down by 20 per cent in its latest net-zero scenario.
Even industrial heating and trucking, which looked like the safest bets for its application, look increasingly dubious. As the Financial Times noted in a long piece about hydrogen’s declining prospects, “advances in electricity-based technologies have threatened hydrogen’s potential role in industrial heat. Hydrogen trucking also looks more challenging given improving battery technology and the difficulty in providing hydrogen refuelling infrastructure.”
There will still be useful applications for hydrogen going forward, and they may even involve Alberta. But Smith’s overly enthusiastic embrace of the technology reflects her fundamental bias against anything that doesn’t begin with the extraction and combustion of fossil fuels. As should be obvious and becomes clearer every day, the rest of the world isn’t biased in nearly the same way.
This former oil sands CEO just said the quiet part out loud
For as long as I’ve been covering the oil and gas industry, the refrain has been the same: it just needs to do a “better job” of telling “its story.” My refrain hasn’t changed either: what really needs to change is the content of the story, not how it’s being told. The problem isn’t how the industry’s executives and leaders communicate around things like climate change but the fact that they have very little to communicate on this front.
Derek Evans, the former CEO of MEG Energy and new executive chair of the Pathways Alliance, trotted that familiar argument out in a recent interview with the CBC’s Kathleen Petty. To his credit, though, he actually acknowledged my point. "We've talked for 40 years about climate change. And we've done very, very little about it."
He’s right, even if he didn’t intend to sound like this. For all of its talk about reducing per-barrel carbon intensity, the industry has done almost nothing to address the real problem: that its emissions keep growing. Ironically, the per-barrel intensity reductions they talk about are the same ones I heard when I worked for the Government of Alberta between 2017 and 2019. That’s more than half a decade ago, and even then, those reductions were transparently thin gruel given that they were being benchmarked against the ludicrously high levels of the late-2000s. Losing 15 per cent of your body mass doesn’t sound quite so impressive if you were tipping the scales at 500 pounds to begin with — and it doesn’t get you anywhere close to a healthy weight.
Evans seems to understand that the need to reduce emissions reductions is existential, not optional, and that the prospect of a Poilievre government won’t change that. He tiptoed around the need for more certainty from the CPC leader on the industrial carbon price that may well be holding up a host of decarbonization projects right now. But the oil sands companies Evans represents also need to stop stalling for time they don’t have. He suggested the federal government’s interim targets included in the proposed emissions cap are excessively ambitious, and Canadians should just trust these companies to get to net zero by 2050.
I would refer Evans to his previous comments. If the industry has spent 40 years talking about climate change and — again, in his words — “done very, very little about it,” why should Canadians expect that to change? It has proven, time and again, through its actions that it doesn’t take this issue very seriously, and only a fool — or a government run by them — would take any new promises or pledges at face value.
Once again, if folks like Evans want to change the narrative around their industry, they need to start changing the facts on the ground. Invest those many billions in profits they’re making every quarter in decarbonization projects — not tomorrow, not next year, but right now. Start appointing new corporate leaders who take climate change seriously, and stop replacing them with retired executives who clearly believe it’s not worth the trouble.
Until then, it’s all talk. Just like it’s always been.
I get letters: Baby Boomer edition
Those of you who have followed me for a while know that criticizing the excesses of the Baby Boomer generation is one of my preferred hobby horses. As I’ve told my own mother many times, it’s nothing personal. On an individual level, most Boomers — okay, many Boomers — are delightful people and wonderful contributors to society. It’s also worth noting, as I often do, that the Boomers who don’t look like me haven’t had it nearly as easy as the ones who do. For women and minorities, the generational lottery paid out far less generously.
None of that has stopped me from writing about the broader challenges posed by the Boomers and the ways in which they’ve tilted the table in their direction. I got a letter on this subject recently, and I wanted to share a snippet from it.
“There seems to be a misconception that all “boomers” (I hate that term) had everything handed to them on a silver platter and that we’re all just kicking back living in the lap of luxury without a care in the world. Nothing could be further from the truth for many of the post-WWII generation. While I am the first to admit I am doing better than most, I can hardly afford to live an extravagant lifestyle and worked hard all my life to get where I am. I’m still working in fact because I can’t afford to fully retire. Yes, I own my own home, but the financial projections tell me I will have to sell it at some point to keep paying the bills. When the proceeds from the house sale are gone, it’s the ice floes for me, which will probably not disappoint some.”
I cannot help but point out that ice floes are an increasingly rare commodity, thanks to….oh, stop it Max. Back to the letter:
“How did we get here? Successive governments, both Liberal and Conservative, have clearly not planned very well and did not foresee, or flat-out ignored, the obvious bump in health care needs that was coming as my generation aged. Should more resources have been devoted to providing for the needs of my generation as we age? Yes. Should my generation have footed more of the bill? Probably. Is it my fault or the fault of everyone of my generation that this was not done? No. I have been working for years and happily paying taxes on the expectation that the government of this country would spend my tax dollars wisely and efficiently. I voted in every election that I was entitled to and voted for politicians that I felt would do the best they could for the people they represented. I never once voted for a politician that promised to cut taxes because I am well aware that cutting taxes inevitably leads to fewer needed services being provided to the citizens of this country. And also inevitably leads to a failure to provide for future needs. I would happily have paid more tax if asked. But no government of the day ever really asked. I think it’s unfair and ageist to blame an entire generation for our current economic and societal woes, especially considering what has befallen the world in the past 8 years.”
I don’t think people like me and Generation Squeeze’s Paul Kershaw are blaming all Boomers for the economic and societal woes we’re facing today. Instead, we’re just flagging the inequity associated with some of the choices we’ve made in the past — ones that were disproportionately made by, yes, Boomers. I would gently point out that some of the most vociferous opposition to the recent increase in the capital gains inclusion rate came from those who bought second properties decades ago and now have massive capital gains baked into them. That description does not include anyone in my peer group or generation.
“The failure to plan and provide for the future is still going on today. Notwithstanding that the Liberal party is finally starting to show it has some vision and take some steps to deal with some of our most pressing issues, such as affordable housing and climate change, support for the Conservative party and its “affordability” message has never been higher in recent years. And not all of that support is coming from my generation; if the polls are to be believed, a significant number of younger voters are being seduced by PP’s siren song. I don’t see any widespread support among Canadian voters for a party running on a platform of increasing taxes so that we can have better and more services now and in the future. That applies to all voters, not just those of my generation.”
This is true, fair, and a little bit depressing. One of my longer standing political beliefs is that we’re inherently selfish as a species — indeed, this is part of why we’ve thrived — and so, any talk from politicians about respecting the needs and interests of future generations ought to be heavily discounted if not outright dismissed. It’s actions that matter — and often, the same folks who talk a good game about intergenerational equity react to actions in ways that undermine it.
When Stephen Harper’s government extended the eligibility age for Old Age Security to 67 (a decision I supported at the time and still do) it was met with howls of outrage from progressives — and, yes, Boomers. But those are the sort of hard decisions we’re going to need to start making if we’re going to actually level the playing field, or at least tilt it back in that direction, for future generations. Maybe that means talking about taxing some of the capital gains in people’s principal residence. Maybe it means tying future increases in healthcare spending to a new healthcare tax. Either way, it has to mean a real conversation about generational fairness that goes beyond our individual experiences.
Yes, it’s possible in any realignment that some Boomers might bear the brunt of whatever policy choices get made. But it’s important for them to remember, I think, that younger people have been bearing the brunt of those decisions for decades now — and will continue bearing them unless something meaningful changes.
That’s all for this week, folks. Please send me your own letters if you like. I try to read and respond to them all — at least, the polite ones.