As an energy-hungry world grapples with the dilemma of how to replace supplies of Russian natural gas, Canada is resurrecting a plan to obtain climate credits for its future liquefied natural gas exports that could help shut down power plants at coal overseas.
Some countries, particularly in Asia, still rely on carbon-intensive coal for energy. Canadian industry has long touted LNG exports as a means to reduce global emissions, as burning natural gas creates fewer emissions during electricity generation than coal does. Canada believes it would be able to count cutting emissions towards its targets through Article 6 of the Paris climate accord, a mechanism meant to allow countries to participate in a global carbon market.
In 2019, then Natural Resources Minister Amarjeet Sohi raised the possibility of using Article 6 for LNG exports, before Jonathan Wilkinson – then Environment Minister – poured cold water on the idea by the end of that ‘year. At the time, Mr. Wilkinson said the government’s focus was on national emissions cuts and “achieving our commitments, without Article 6”.
Mr Wilkinson, now in the Natural Resources portfolio, said the Article 6 discussions were back in the game.
“We are working on figuring out how to make Article 6 operational. We are in discussions with industry and are starting conversations with a couple of allies who could potentially be LNG importers,” said Mr. Wilkinson said in an interview during a visit to Calgary this month.
Article 6 is based on voluntary agreements between countries. Mr Wilkinson said discussions with an Asian ally had become very complex last time around, but there was now a renewed possibility of deals. “I don’t want to tell people it’s going to be easy or quick. I think it will probably take at least a year or two to actually get to the point where we know where we are.
Natural gas is a fossil fuel, there are environmental costs, and powerful methane emissions leaks or venting from production are a major concern. But Canada, with its large reserves of natural gas, has become a leader in reducing methane emissions. Burning natural gas emits only about half as much carbon dioxide as coal. Mr Wilkinson said there was hard work to be done to confirm that Canadian LNG exports – from Canada’s first export terminal on the West Coast, still three years from completion – can indeed replace coal production in Asia. “We have to be able to make that claim, and it has to be true.”
A narrow focus only on Canada’s greenhouse gas emissions has guided nearly all federal climate policies in recent years. But now there is war in Europe and highly industrialized countries like Germany are gobbling up global shipments of LNG, helping to propel the United States into becoming the world’s leading exporter of LNG. At the same time, Asian countries that are unwilling to pay for LNG as much as wealthy European countries are switching back to coal.
There’s also a greater understanding, for better or for worse, that natural gas will be part of the energy mix for more years, or decades, to come.
Any interview with Mr. Wilkinson would not be complete without him discussing political leaders who must be “able to walk and chew gum at the same time.” This was evident when he spoke not only about LNG and the climate emergency – “If you’ve got teenagers or 20-somethings, they’re terrified of what the future holds,” he said – but also his view that Canadian oil Sand producers are making progress towards reducing emissions. By the way, he said a Pembina Institute report criticizing their progress failed to acknowledge the complexity of planning for multibillion-dollar carbon capture projects.
“Having spent a lot of time working in industrial technology before actually going into politics, I’m very aware of the timing that is actually needed,” said Mr. Wilkinson said.
“I just thought maybe Pembina hasn’t given enough credit to the work that’s going on behind the scenes.”
This runs counter to concerns that oil companies are just spoiling the record, waiting for a return to a Conservative government that will reverse the push on climate. Or, as Environment Secretary Steven Guilbeault argues, the country’s major oil players are simply funneling their record profits back to shareholders. Mr. Wilkinson insists there are no divisions in the federal cabinet. “Steven would say, and I would say too, we have to move on.”
However, there is also a decided change of tone between some oil and gas players in the Alberta-based energy industry and some liberal government heavyweights. It runs counter to an environment of distrust of the industry’s relationship with Ottawa, particularly before the pandemic. Think of Justin Trudeau’s decision in the 2019 federal election to group the entire oil industry with its conservative rivals.
Part of this improved relationship is due to the new focus on global energy security and the importance of having access to fossil fuel supplies beyond those under the control of authoritarian regimes. But the change must also be due to last year’s pledge by the Pathways Alliance – a consortium of Canada’s largest oil sands companies that together produce more than 3 percent of the world’s daily oil demand – to work together to reduce absolute emissions. industry by 2030 and reaching net zero by 2050. Many industry players also agree that Canada’s future fossil fuel production will depend on “reducing” emissions.
Mr. Wilkinson’s primary purpose while in Calgary was to meet with the province’s new Energy Minister, Peter Guthrie. According to Mr. Guthrie’s chief of staff, Jerry Bellikka. Mr. Wilkinson said in the interview: “The time has come for politicians, on all sides of the partisan fence, to put down their tools and work together.”
Working together is admirable. But that won’t change the fact that most Liberal Party policies will continue to be built around regions of the country untroubled by oil and gas job losses. And Prairie Premiers Danielle Smith and Scott Moe will continue their plans to fight what they see as federal intrusion or hindrance to their resource-based economies.
Any deal now probably won’t lead to lasting peace on energy and the environment, Canada’s two most existential issues.