Climate Crunch: Canada’s 5 energy bargaining chips to counter Trump’s tariffs

Issue #06

➔ How Canada can stave off a tariff-trigger-happy U.S.
➔ AI vs Emissions: Canada can have it all

Hot takes

Give those sanctimonious Christmas climate blogs a rest. There might be better ways to make you feel less guilty about your Christmas carbon footprint. Can you travel less in the run-up to Christmas, get on public transportation more, avoid that optional plane trip, stop buying wrapping paper—even send less cards (Canada Post is on strike, anyway)? And dig in your Christmas roast guilt-free.

➔ Environment vs economy plays out in two Canadian cities: Crowsnest Pass, Atla., wants to be a coal town again. The 6,000-strong community recently voted in favour of building the Grassy Mountain metallurgical coal project—and it wasn’t even close: 72% voted yes in a high turnout, in the hopes of securing new economic revenues. While the town’s vote is non-binding, it underscores how economic development is trumping environmental concerns for some communities. Further west, Vancouver clung on to its ban on natural gas heating for new homes—but only just. Those in favour of scrapping the ban, including mayor Ken Sims, said it would improve housing affordability in pricey B.C. But it also sparked widespread opposition. A 5-5 tie at the city council vote ensured the ban remains in place.

➔ The backlash against the plastic backlash. Global climate leaders’ very bad, no good, awful year seems to have ended with another disaster this week in South Korea: a failure to agree on plastic pollution . More than 100 countries were pushing to phase out plastic production, but oil producers warned it could impact economic development. Talks will resume next year. The latest stalemate is part of a broader pattern of stalled progress on climate and environmental issues, especially at COP29.

➔ Barbados swapped a portion of its debt for climate commitments. The debt-to-climate swap allows Barbados to restructure higher-interest debt, and generate $125 million in fiscal savings. In return the Caribbean nation has pledged to use the funds to boost water resource management and improve water and food security. It’s emerging as a popular way for developing countries to ease their financial burden in return for greater environmental stewardship. The World Economic Forum estimates debt-for-nature swaps could provide US$100 billion to restore nature and help countries adapt to climate change.

➔ Bi-Weekly Climate Action Award: Omar Yaghi, a chemist at University of California, Berkely, for developing a carbon capture powder. Early tests show just half a pound of the stuff may absorb as much carbon dioxide as a tree.

➔ Bi-Weekly Climate Fail Award: To Norway for offering commercial deep-sea mining—a world first. The government has since postponed the decision amid pressure from a coalition partner. Thirty two countries, including Canada, have called for a moratorium on deep-sea mining in international waters.

5 Energy Aces Up Canada’s Sleeves

President-elect Donald Trump hosted Prime Minister Justin Trudeau at Mar-a-Lago for dinner last week after threatening to impose a blanket 25% tariff on Canadian goods. Trump described the dinner meeting as “productive,” but Canada’s hardly off the hook. Here’s how Ottawa can leverage its energy resources to play a strong hand and steer U.S. away from mutually assured inflation in both countries.

➔ The crude math doesn’t add up: Heavy Canadian oil still trades at roughly a $10 discount to the North American benchmark. A 25% tariff on the U.S.’s biggest oil shipper could send gasoline prices spiking well over their current US$3 per gallon average, nationwide. That could derail energy czar Doug Burgum’s mandate to lower gas to US$2 per gallon. Incidentally, Burgum was at the Trump-Trudeau dinner table.

➔ There’s no American energy dominance without Canada: Canada is the dominant supplier of piped natural gas to the U.S. If the new administration wants to establish American “energy dominance,” it must lean on Canadian gas. A steady supply from the Montney and Duvernay, would give U.S. lawmakers the flexibility to boost American liquefied natural gas exports to Europe and Asia, without raising prices at home.

➔ There’s uranium at the U.S.’s doorstep: The Joe Biden administration’s plan to triple U.S. nuclear capacity is something the new administration will likely be on board with. Biden’s nuclear framework envisions working closely with Canada, among others, to “establish a secure and resilient global nuclear fuel supply chain,” including uranium. Canada is the world’s second largest producer of uranium with output far exceeding the U.S.

➔ We are critical to building an alternative to China’s supply chains: Canada has nearly five times more cobalt reserves and six times more nickel reserves than the U.S, two key metals in energy transition. We are also a bigger producer of aluminum, graphite (for lithium-ion batteries), indium (for chip-making), iron ore and lithium than the U.S., according to the U.S. Geological Survey. The U.S. needs us to loosen China’s hold on global supply chains.

➔ We power your cities. Admittedly, a bit of a weak hand these days (see chart). Still, Hydro Quebec has built new transmission lines and sewn up long-term contracts with customers in Massachusetts and New York. Droughts are playing havoc with Canadian electricity exports, but it remains an important bargaining chip.

AI vs Emissions

Canada can have it all: a foothold in North America’s booming data centre sector powered by artificial intelligence, but also maintain its climate ambitions. What’s needed is a flexible approach, a strategic alignment with the United States—and meaningful levels of abated natural gas.

Power Struggle: How AI is challenging Canada’s electricity grid, a new report by Energy Policy Lead Shaz Merwat, analyzes how Canada can navigate the stress data centres could potentially place on the country’s grid:

➔ What’s the opportunity?:

Canadian regulators are reviewing data centre applications with a combined estimated capacity of 15 gigawatts—enough to power seven out of 10 homes nationwide. AI is the primary driver of this surge, with data centres offering a $100 billion opportunity for the construction and build of data centres and accompanying IT infrastructure (think expensive Nvidia chips).

➔ What’s the playbook?:

“Bring your own power” seems ideal. That’s the Alberta model, which allows for faster deployment and supports local natural gas prices, driving economic benefits for the province.

➔ What are the climate costs?:

If natural gas powers six additional gigawatts of data centres, annual emissions could rise by 16 million tonnes of CO2e—a 3% increase in Canada’s total emissions, Shaz estimates. However, carbon capture and storage (CCS) could throttle the rise of emissions.

Read the full report here.

The Institute In Action

➔ The RBC Climate Action Institute co-hosted a special session in Ottawa in November with the British High Commission, where Institute head John Stackhouse and Deputy High Commissioner David Prodger offered eight key messages for Canada.

➔ John also spoke at the National Electricity Roundtable in Ottawa about Canada’s opportunity to produce more electricity to power AI, EV batteries and other parts of the economy.

➔ John’s whirlwind Ottawa trip concluded with a discussion at the Sustainable Finance Forum on Canada’s opportunity to produce more food and emit less—it could be our best investment for the disruptive decade ahead.

➔ What’s on the team’s reading wish list: John’s been brushing up on his Trumponomics with two books return by the president-elect’s former advisors. Here are some other books on the team’s list: The New Cold War: How the Contest Between the U.S. and China Will Shape Our Century, obert Niblett, and The War Below: Lithium, Copper, and the Global Battle to Power Our Lives, by Ernest Scheyder.

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