Tariff threats push Canada deeper into fossil fuel trap
Oil and gas photo by: Pexels/Marcus Winkler
Lest anyone forget that our economy is still overly dependent on resource extraction, this week’s political response to the Trump tariff threat is a harsh reminder. In just one week, moves were made to mine more coal and speed the extraction of critical minerals.
Calls also grew for yet more pipelines to ship Canadian oil and gas to markets more friendly than our currently hostile southern neighbour as panic ensued over the tariffs and what they would do to our economy. Most came from predictable quarters like Danielle Smith, premier of oil-rich Alberta, echoing Trump’s “drill, baby, drill” mantra.
It’s true Canada has energy challenges. There is currently no way to move oil from west to east except with pipelines that run through the U.S., which could be problematic if the current war of words turns into an actual economic blockade. It’s also true that even a crusading leader determined to end our reliance on oil and gas couldn’t do it overnight. Combine our own energy vulnerability with our economic reliance on fossil fuels and throw in a 25 per cent U.S. tariff threat, and what you get is the current national crisis.
Even ardent anti-pipeline activist B.C. Union of Indian Chiefs Stewart Phillip intimated his views were changing when speaking this week about the double “abyss” of climate change and Trump’s tariff threats. He later walked back his remarks but the very fact he talked about pipelines in conjunction with the tariff threat shows how rattled all Canadian leaders are at this moment.
It’s easy to see how politicians might view a tradeoff weighted in favor of resource extraction as one worth making in the face of punitive tariffs; a time to chuck climate under the bus and redouble our efforts to capitalize on our most lucrative resources. Still, any pipeline to the east will come far too late for these current negotiations. So most of the serious conversation is focused on upping extraction, beefing up Canada’s energy security and diversifying our energy markets.
The extraction route is well trodden for Canada. Even before Trump took office, plans were in the works to extract more oil. There was also a push to speed up mining efforts for critical minerals, which are needed for batteries and decarbonization efforts, but come at a great cost to the environment. Canada’s response to all of these issues will start to play out quickly.
U.S. President Donald Trump backed off on his original plan to impose 25 per cent tariffs on all Canadian goods on day one of his presidency. But it seems the deadline has only been pushed back until month’s end. Whether the threats are a mere opener to more prolonged negotiations is anyone’s guess. But Trump seems a bit drunk on power at the moment so he just might follow through.
Should the 25 per cent tariffs come to pass, Canada’s economy would suffer a three per cent or greater hit, even with exemptions for core commodities we have that the U.S. wants — primarily oil and gas. Although Trump now claims he doesn’t need Canadian oil, the U.S. sure imports a lot of it. About 60 per cent of U.S. crude oil imports come from Canada, nearly a quarter of the oil used by Americans every day.
But instead of using this moment as a reason to cut back on oil production, Canada is now desperately scrambling for new buyers. The easiest response in the face of this upheaval is to stay the course — drill, dig and pump out more.
And that’s a shame. Because Europe has already proven there is another way. When war broke out between Russia and Ukraine, cutting the gas supply to Europe, the response was to turn to renewables. Almost all the EU nations have drastically reduced their fossil fuel dependency and with it reduced their planet-heating carbon emissions. Of course, most EU countries had little choice. They don’t have much in the way of fossil fuels and were forced to pivot.
It wasn’t easy. I have friends in Germany who spent a couple of chilly winters wearing layers of sweaters so they could dial down their very expensive heat. But sadly in Canada, our political and business leaders seem unable to imagine a future that doesn’t depend on fossil fuel industries that will soon be obsolete.
Britain shuttered its last coal-fired power plant this year and the International Energy Agency says demand for oil will begin to drop this year. As my colleague Seth Klein points out in a LinkedIn post this week it would be far better to use this moment to redouble our efforts to build up renewables and finally wean ourselves off fossil fuels.
Over all, this has been an extremely dire couple of months for the climate. But there are one or two bright spots worth mentioning. This week, B.C. announced plans for a wind project in the province’s northeast. Negotiations between Quebec and Newfoundland and Labrador are underway for a massive joint hydro project. And Ontario Premier Doug Ford is refurbishing one nuclear facility and talking about building an additional, even larger plant. Yes, nuclear power is imperfect; the plants are expensive, take decades to build and produce radioactive waste.
But although we have a pressing need for energy security now, which renewables could well meet more quickly, we also have to look at our energy needs and economic aspirations in the long run. Scientists aren’t banking on fossil fuels, and neither should we.
January 27th 2025
Editor-in-Chief
Comments
The word in the USA seems to indicate that Danielle Smith made a fool of herself with Orange Sphincter and the rest of the misfits like O'Leary. They went on to say that she only made her case to the Orange Sphincter worse. The big mistake that Smith made is that the Orange Sphincter doesn't like a suck up, it shows they are weak and now says that the tariffs will include Alberta's oil & gas. Smith should have sided the Canadians first and with the rest of the premiers. Smith in the end has only made a fool of herself and shown weakness.
It's hard to come up with historical events where appeasement worked with demagogues. And yes, appeasers look like fools puckering up to kiss ass. They demean only themselves.
All this talk from the oil producers about diversifying international markets for Canadian oil is jaw droppingly hypocritical.
Their foreign head offices issued orders to their Canadian branches (which comprise 80% of the extraction effort) to invest in Alberta and key federal politicians to buy their loyalty and direct policy and regulation in their favour.
Hence, Canadian refining capacity was minimized so producers could ship the terrible quality raw product to their own heavy oil refineries in the US, using US labour and capturing the huge differential between the cheap raw feedstock and finished high value products like gasoline and diesel. Moreover, US refiners paid a cheap price relative to the poor quality of the raw oil.
That was in the 70s and 80s. Today it's the same old situation, except for the narrative where the US head offices are now sending messages through their subdidiaries that they need "more diversified overseas markets" to avoid the so-called US "discount" (see above re: priced for poor quality) with one goal in mind -- to extract more public money from compliant governments to subsidize every aspect of their operations, from land leases and discounted royalties to pipelines, idiotic schemes to "capture and sequest CO2" (only to enhance production) and export terminals mainly for the raw product.
Alberta could gave built a trust fund worth trillions much like Norway, but it kowtowed to the foreign oil industry and does not capture much value at home, relatvely speaking. Canada could have kept an equity stake in its own resource but chose to sell it off while paying billions in subsidies to a highly profitable industry It's been ass backwards for decades. That's the Canadian Way.
And here we are. Our stupidity is on full display. All our eggs were placed in the American basket, now the US has turned on its most important trading partner. Renewables are eroding oil demand globally, but Canadian oil and gas proponents are pushing harder than ever for Pierre Elliot Trudeau's old NEP with Energy East and by pretending Trudeau Jr. didn't build a pipeline to the coast after succumbing to their threats and propaganda about magically sending raw bitumen to Asia for a higher price than what the US pays. And so on.
So, let's have a new, 21st Century NEP. Let's build clean energy corridors to all three coasts, new generation capacity (a great opportunity for First Nations) and lauch a program to electrify and recycle everything and build green industries, to focus on developing knowledge and tech fully at home, and to export expertise and only finished products well beyond the US.
A crisis is, after all, an opportunity.
Over all, this has been an extremely dire couple of months for the climate. But there are one or two bright spots worth mentioning. This week, B.C. announced plans for a wind project in the province’s northeast. Negotiations between Quebec and Newfoundland and Labrador are underway for a massive joint hydro project. And Ontario Premier Doug Ford is refurbishing one nuclear facility and talking about building an additional, even larger plant. Yes, nuclear power is imperfect; the plants are expensive, take decades to build and produce radioactive waste."
i vehemently disagree; the "bright spot" that has any hope of making a difference and avoiding worst outcomes is REDUCING our footprint. No amount of "green" expansion (and nuclear is by no means green) will halt the BAU that is day by day reducing the liveability of this planet for all the life that make our home here. i'm losing hope for that reality to take hold.
Oh, but be assured, mother nature will have the last word, balance will be restored one way or the horribly painful other.