Little Grouse on the Prairie

How a Canadian federal vs provincial spat can inform Europe's future.

I have been working on a long-form paper for the Canadian Global Affairs Institute - focused on lessons that Canada (and indeed many other countries and/or regions) can take from the Great European Energy Experiment. However, there is never a dull moment in energy politics and just this week in Canada, energy and climate politics have boiled over with potentially significant implications for Europe.

The Era of Boiling has Arrived

On Monday 27th November, Alberta’s Premier Danielle Smith invoked a provincial law, commonly called “The Sovereignty Act”, to blunt the Federal imposition of clean energy regulations. For non-Canadians, it is salient to learn that Canada is a federation of Provinces and Territories - with those Ps and Ts having significant autonomy. Not my specialist area - but an interesting learning curve for me - as this is story is about Provincial autonomy vs Federal rules.

In a typically, unintentionally ironic and un-self-aware moment, the federal environment minister Steven Guilbeault, described Premier Smith as being “driven by ideology”. Pots and kettles anyone? This has to be up there with Trudeau and Freeland last week claiming to have “always exercised fiscal restraint” for their administration…. but I digress.

For context, Alberta has made progress cleaning-up its electricity generation mix by reducing the use of coal - but remains reliant on natural gas - which Alberta has a lot of. And oh, that gas happens to be very cheap because virtually none can be exported - so there is a big arbitrage between global prices (expensive) and local prices (cheap). The lack of export options is due to a combination of very active environmental NGOs as well as federal regulation and policy - Steven Guilbeault has feet in both camps. So again, ironically, this has made natural gas an energy source of choice for Alberta - it is locally sourced, abundant and thanks to the lack of export - cheap.

Having helped make natural gas be the energy source of choice, now Guilbeault and team want to force Alberta to phase-out fossil fuels by 2035. Danielle Smith’s position is that this is simply not possible by 2035 - and maintains a political position that the 2050 target date is achievable.

Here in Quebec, we have 98% of our electricity provided by hydro-electric generation - a happy coincidence of geography and good planning. The point being that Canada is very big and Canadian provinces are very “diverse” and that a one-size-fits-all federally mandated energy policy may accentuate the physical and political differences.

There is a complex discussion about whether invoking the Sovereignty Act was necessary or just political theater. Equally, it is likely that the Clean Energy Regulations will be challenged in court rather than halted by the Sovereignty Act. What happens if the courts up-hold the federal regulations and the Sovereignty Act is shown to be simply theater - is a question for another day.

The Buck Does, Indeed, Stop Here.

What Danielle Smith has understood is that politicians are ultimately responsible for keeping the electricity on, and in an Albertan winter - keeping people alive. Indeed, she said exactly this when invoking the Sovereignty Act:

“We refuse to meekly accept actions which are so plainly destructive to Alberta’s economy and to the very safety and security of Albertan citizens.”

The weakness in many electrical supply systems - whether it be the UK, ISO New England, ERCOT in Texas or pretty much anywhere in “developed economies” - was highlighted in Meredith Angwin’s seminal book “Shorting the Grid”;

Incredibly, reliability is the responsibility of no one.

When said like this, it is pretty obvious that lack of accountability is a critical flaw - but when buried in a morass of regulations and overlapping agencies and players - it can be entirely obfuscated.

Again, with a certain symmetry, this is a lesson that many politicians will either heed or learn the hard way.

Don’t Go Straight to Jail

There is a separate and so far, immature, story here also: notably the idea that corporations and individuals running these corporations could fall foul of the federal emissions rules and find themselves criminally liable.

“We will not put our operators at risk of going to jail if they do not achieve the unachievable,” she said. “We have to have an affordable grid, and we’re going to make sure that we defend our constitutional jurisdiction to do that.” Danielle Smith

In the spirit of balance, it is worth noting that Kaitlin Power, spokesperson for Guilbeault commented:

“Let me put to rest false assertions over jail time for non-compliance with the regulations. This is an outrageous threat. While the proposed regulations do fall under a piece of criminal law, it is totally unrealistic that good-faith non-compliance will lead to incarceration. Almost a quarter-century of regulation under the Canadian Environmental Protection Act demonstrates that non-compliance is addressed with warnings, compliance orders and gradually larger fines.” Kaitlin Power

So yes, it is under criminal law, “but trust us, it will just be fines…”. Hmm.

Did I mention that Danielle Smith hails from the right-of-centre political spectrum? - and yet, as part of the tussle between Alberta and Ottawa there is the idea of creating a “Crown Corporation” (a Province owned utility) who would be the back-stop for ensuring adequate generation capacity. Not exactly core policy for right-of centre parties normally….

Whilst this falls far short of having a state-owned (country/province) utility - it does hint at the fact that electricity isn’t really a commodity - it is the lifeblood of civilization, one of the things that keep people alive in Canadian winters - and is in fact a utility. Most countries have a pseudo-market driven approach that becomes mired in layers and layers of regulations - to the extent that these are never working markets. Maybe a Public Utility who have ultimate responsibility for keeping the lights on at an affordable level (and ideally with environmental considerations writ-large), will come back into fashion?

So what lesson for Europe?

There is perhaps the obvious lesson that has been formulated as the Iron Law of Climate Policy by Roger Pielke Jr.

“When policies focused on economic growth confront policies focused on emissions reductions, it is economic growth that will win out every time”

In the future it may even be necessary to modify this to substitute “keeping the lights on” or “not killing people with cold” for “economic growth”, but the message is the same.

However, and not minimizing this first lesson - I think the bigger lesson here is that there is a critical word in all of this - and that is “Sovereignty”. The European Community is now a federal political project sitting on top of 27 sovereign states. This has had many successes - not the least of which is not having a major war in Europe for almost 80 years (Balkans and Ukraine excepted). Those 80 years have seen unprecedented economic growth in the post-WWII rebuilding and subsequent decades - all (IMHO) predicated on cheap and abundant energy, albeit with a little-noticed, but important stagnation since the beginning of the 21st century.

As with all alliances, marriages and coalitions - things are easy when life is easy, and cracks show when things start to get more stressed. Energy security and energy affordability will trump climate policy - and the problem for the EU is that it has become a project that defines itself almost uniquely by its climate goals.

The legislative and administrative agenda implicit in the European Green Deal is vast, and suggests that the Commission and the EU itself has become subservient to the climate agenda. The European Commission now appears to identify the moral and political concept of EU with that of climate policy leadership. The bloc is now in effect a climate policy agency, and even the Grand Project itself is a vehicle for protecting the world against global warming. John Constable

Alberta’s rather parochial tussle with Ottawa may be foreshadowing a collapse of the vampire-squid EU. If the EU clings to “moral leadership” at the expense of the prosperity of its citizens, Sovereign nations will exit.