Opportunity to get it right

The Conservatives in Ottawa are more determined than ever to engage the United States in pursuing coordinated energy and environmental policies which could evolve into contributing much-needed energy stability in what Environment Minister Jim Prentice calls “a very volatile world.”

He set out his priorities in a speech to the Canadian Council of Chief Executives in Toronto the morning of Barack Obama’s inauguration as the 44th U.S. President, welcoming much-anticipated American re-engagement in multilateral climate change negotiations.

Prentice reiterated the minority administration’s desire for “an effective multilateral climate change agreement for the years ahead.” The key elements would be joint action on greenhouse gas emissions and a transition to “a larger and cleaner supply of both fuel and power.” It wouldn’t be easy because various “actors and interests” influence how much progress each federal government can achieve.

He said the Conservatives’ target of a 20% reduction in emissions from 2006 levels by 2020 is “ambitious but achievable” unlike the previous Liberal government’s unfulfilled Kyoto Protocol commitments.

As expected, the starting point remains an intensity-based performance standard rather than what Prentice called “a so-called hard cap-and-trade regime” but the latter would eventually become the order of the day as Canada gained more experience and as the international policy environment evolved.

“A cap-and-trade system will be insufficient alone to get the job done,” Prentice said. “We will need some other common instruments – like a shared target for low carbon power generation, a common bio-fuel mandate, common fuel efficiency standards, and potentially a common low carbon transportation fuel standard for North America, a standard that would seek to reduce the carbon intensity of transportation fuels into the future, based on emissions measured over the complete lifecycle of various fuels from production site to the tailpipe.”

The current economic downturn underscored the importance of avoiding anything which would exacerbate matters. “We will seek to ensure that federal policies are coordinated,” he said. “We want federal climate change regulations to work in tandem with tax, technology, tariff and other policies to promote timely domestic investment and offset weak U.S. demand.” He also stressed the importance of coordinated and harmonized federal-provincial policies.

A bilateral deal also meant a concerted move to reduce North American dependence on “foreign” oil. “Energy insecurity is the large and growing gorilla in the room,” Prentice said, noting that whereas the U.S. imported only 10% of its crude oil just four decades ago, it now imported 60% and faced the prospect of that rising to 80% by 2020.

“Smart grids and conservation, renewable fuels and power . . . are all important, but in an `80/20′ world, they will represent only the `20′, at least until the 2020s. It is the other 80% we have to worry about. In Europe, the `80%’ of energy insecurity means oil and natural gas. And here in North America, with our substantial natural gas reserves, the `80′ means oil.”

Prentice underscored Canada’s role in the “American energy equation” as the main U.S. source of crude, natural gas and electricity and as “an indispensable supplier” to the northern tier states.

“We’re not just a supplier; we’re a partner. . . . We have the capacity to play an even larger role in the North American energy solution. We’re the only nation in the world outside the Persian Gulf region with substantial proven oil reserves; we’re the best way to get Alaskan gas to southern markets; and we’re a country with substantial untapped natural gas deposits and clean hydropower potential – an obvious way for many border states to reduce their reliance on coal-fired power.”