Alberta isn't ready for what comes next

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, which 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?