Feds’ clean electricity approach could ‘raise the temperature’ of an already pretty hot conflict

Alberta and Saskatchewan’s longstanding opposition to a national climate policy could be tested if the federal government forces provinces to fall in line to access funding aimed at ushering Canada into a low-carbon economy.

A new discussion paper reveals the federal government is considering offering investment tax credits worth tens of billions on the condition that provinces get on board with its target to decarbonize the country’s electricity grid by 2035.

If the federal government follows through, it will “raise the temperature of that already pretty hot conflict,” Lisa Young, a political scientist at the University of Calgary, told Canada’s National Observer. Alberta and Saskatchewan have made it clear they are not willing to commit to meeting clean electricity targets laid out by Ottawa.

Nothing is set in stone yet, but “there's already a situation where you've got … the two orders of government on opposite sides of this issue and in a very politically tense relationship,” said Young.

Alberta and Saskatchewan have long been spoiling for a fight with the federal government over a slew of climate action issues, including the federal sustainable jobs legislation, forthcoming oil and gas emissions cap and clean electricity targets. Last month, Alberta Premier Danielle Smith tasked the province’s Affordability and Utilities Minister Nathan Neudorf with “pushing back against any federal regulation requiring a net-zero power grid by 2035” in his mandate letter.

When the federal government says net-zero electricity, it means the electricity generated — for example, by natural gas power plants — does not emit any planet-warming greenhouse gas emissions when emission reduction technology like carbon capture or carbon offsets are taken into account.

Saskatchewan and Alberta have repeatedly said they can only get there by 2050.

Alberta calls 2035 deadline ‘unrealistic’

The discussion paper released Tuesday outlines the federal government’s vision for achieving a non-emitting grid by 2035. The new refundable clean electricity tax credit, estimated to cost $25.7 billion from 2024 to 2035, already has strings attached to it requiring that provinces buy into the federal government’s target. Saskatchewan’s justice minister has previously said the province isn’t yet willing to sign onto the federal target in order to access the tax credit.

The document also left the door open on the possibility of basing the provinces’ access to several other investment tax credits aimed at growing the low-carbon economy — including support for carbon capture, hydrogen, nuclear and more — on their willingness to work towards a non-emitting electricity grid by 2035. However, it is still a live discussion, according to federal Energy and Natural Resources Minister Jonathan Wilkinson.

“All of the provinces and territories agree they need to get to a non-emitting grid,” Wilkinson said at a press conference Tuesday at energy storage company Invinity’s warehouse in Vancouver. “What we have now is a difference in terms of what people think the timing can be.”

Canada’s National Observer reached out to premiers and ministers from all provinces for comment. Only Saskatchewan and Alberta returned a request for comment by publication time.

In a press release, Alberta’s Environment and Protected Areas Minister Rebecca Schulz said the possibility that Ottawa could stop provinces unwilling to commit to its “unrealistic” 2035 deadline for a zero-emissions grid is alarming.

“This would obviously penalize the provinces most in need of assistance in transitioning to a carbon-neutral grid, including Alberta,” Schulz said. “Alberta will not recognize any target that will massively drive up the cost of Alberta power bills while simultaneously risking the integrity of Alberta’s grid.”

Saskatchewan had a similar response.

“Saskatchewan cannot logistically, technically or financially meet the Trudeau government’s net-zero targets,” Don Morgan, Saskatchewan’s minister responsible for the Crown corporation SaskPower, said in an emailed statement to Canada’s National Observer.

“By withholding the very funding meant to help provinces reach the Trudeau government’s net-zero targets, Saskatchewan’s customers will see a dramatic impact on their rates,” his statement reads. It goes on to say the federal government is “increasing costs for our province’s residents at a time when affordability is top of mind.”

‘Sit down and work together’

At the press conference, Wilkinson said the “most appropriate way” to address issues raised by provinces “is to actually sit down and work together on how we ensure that we can reduce emissions in line with concerns around affordability and reliability.”

Wilkinson is leading an initiative where the federal government meets individually with different provinces and territories to “advance the top economic priorities in the energy and resource sectors” in their region.

Nine provinces and territories are currently participating in these regional energy and resource tables. The federal government aimed to establish regional tables with all 13 jurisdictions by 2023, but Alberta, Saskatchewan, Quebec and Nunavut have yet to join.

Wilkinson said Environment and Climate Change Minister Steven Guilbeault “will be bringing forward the clean electricity regulations soon” and when those draft regulations are published, the federal government wants to use the 75-day consultation period to “sit down and talk” with provinces and territories — including Alberta — about any remaining concerns.

The consultation period is open to input from all levels of government, industry, unions, investors, not-for-profits and other experts to develop a strategy to decarbonize Canada's electricity grid by 2035. It says the resulting Clean Electricity Strategy will be released in 2024.

“Provinces and territories have different starting points. For example, B.C., Quebec and Manitoba have already close to 100 per cent non-emitting grids,” Wilkinson said. “Whereas Alberta, New Brunswick, Nova Scotia (and) Saskatchewan are presently largely reliant on coal and unabated natural gas.”

B.C. Minister of Jobs, Economic Development and Innovation Brenda Bailey said the paper’s target matched with the province’s climate goals, which include implementing a 100 per cent Clean Electricity Delivery Standard for the BC Hydro grid.

“With the scale of the climate crisis to the tremendous opportunities before us, we know we must act with more urgency than ever before,” Bailey said. “If we don't accept the transition, we do risk being left behind.”

David Suzuki Foundation clean energy manager Stephen Thomas told Canada’s National Observer the only barriers to reaching a zero-emissions grid by 2035 would come from political inaction.

“For us, the roadblocks are only political,” Thomas said. “When it comes to affordable, reliable technology being ready for this for 2035, we're very confident that Canada can get there.”

'They just want the carrot'

Last week, Alberta announced a six-month freeze on approvals of all new renewable energy projects while discussions about appropriate land use, power grid planning and end-of-life plans take place. When asked about the six-month moratorium, Wilkinson noted Alberta has “the most dynamic renewable market in the country” and the sector’s rapid growth “has attracted billions and billions of dollars in investments.”

“That, from my perspective, is a very good thing,” he added.

Wilkinson said he takes the province at its word that it needs time to determine how “that rapid growth in renewables fits in the context of their overall grid planning.”

“I think, though, that there are huge opportunities going forward with respect to further development of renewables,” he added. “I think that we all have to be cautious and careful about not dissuading investments, not creating that uncertainty for investments on a go-forward basis.”

Young, the Calgary-based political science professor, noted Prime Minister Justin Trudeau recently had the opportunity to pause and shift directions on certain issues with the cabinet shuffle. But notably, he kept his environment and natural resources ministers in their posts, with only a small name change to add “energy” to Wilkinson’s title.

“This is one of the first signals that we've seen since the cabinet shuffle about direction, and it certainly doesn't seem to be a softening of the federal government's stance,” said Young. “It does seem like it's full steam ahead on taking a very robust role around measures designed to tackle climate change, and that inevitably does mean significant conflict with Saskatchewan and Alberta.

“There will be more signals to come; we can keep reading these tea leaves. But right now I think we're on track for a crisis in federal-provincial relations around this,” she said.

Constitutional jurisdiction is an issue Kathryn Harrison, a professor of political science at the University of British Columbia, expects to crop up regarding the clean electricity regulations. Electricity generation has, historically, she said, been provincial jurisdiction, but the federal government has authority over interprovincial transmission and is responsible for meeting Canada’s climate and environment goals, among other things.

Harrison said the mere fact that the federal government is putting tens of billions on the table with these investment tax credits is “pretty darn collaborative.”

“There's a stick and a carrot … the provinces that are objecting, they don't want the stick, they just want the carrot. But I don't see how Canada will meet its goals only with carrots because we know the provincial government could be authorizing electricity generation that is inconsistent with the goal at the same time as they're making some good investments,” said Harrison.

There is a potential for political tensions to increase if the federal government makes those federal dollars conditional on provinces embracing a clean electricity regulation, but “those tensions are already there,” added Harrison.

“The question for me is: Can we really achieve our emissions goal without tensions?” she asked. “Or, at the end of the day, is it the federal government's responsibility to ensure that Canada meets its goal in a regionally sensitive way” and fills the gaps left by provinces to hit emission-reduction targets like the Net-Zero Accountability Act requires, she said.

The federal government’s carbon price faced fierce opposition from provinces, but it stayed the course and emerged victorious from multiple legal challenges.

Natasha Bulowski and Isaac Phan Nay / Local Journalism Initiative / Canada’s National Observer