PODCAST: The importance of good energy policy for climate, competitiveness and affordability

There are a lot of factors impacting economic recovery – supply chain issues, the tax environment, the cost of shipping, bottlenecks at ports and more.

What lessons can Canada learn from high energy prices in Europe and rolling blackouts in China? Sound energy policy needs to consider affordability and competitiveness along with environmental ambition.

Energy Examined with Mark Agnew of the Canadian Chamber of Commerce. Agnew highlights the importance of energy to the national economy, the impacts of unreliable energy production, and what governments can do to support innovation as Canada’s oil and gas sector moves to lower emissions.

Podcast Transcript

Leighton: Hello and welcome to another edition of the Energy Examined podcast, the podcast that discusses the issues facing Canada’s oil and natural gas sector with the insiders in the know. I’m Leighton Klassen. Today, I’m joined by Mark Agnew. He’s senior vice-president in policy and government relations with the Canadian Chamber of Commerce. Mark, welcome to the show.

Mark: Thanks for having me on.

Leighton: Your organization advocates and stands up for Canadian business. Now, broadly speaking, how is the Canadian Chamber of Commerce feeling about the business climate as we slowly start to recover from the pandemic? Are you feeling optimistic?

Mark: Well, maybe I’ll just step back for a second and give your listeners just a little bit of context on the Canadian Chamber as an organization. I’m sure people are familiar with, you know, chambers within their local communities. But at the national level, you know, the tagline we always like to use is that we’re Canada’s largest business association. We represent companies of all sizes in all sectors and in all regions. And so, it does give us a chance to really have a wide swath of the Canadian economy that we’re able to talk to and speak on behalf of when advocating either at the federal level or internationally, which are our sort-of main domains.

In terms of the sort-of, you know, the state of the economy and what we’re hearing from businesses, it really is quite a mixed bag across the board at the moment. And if you look at, for example, the macroeconomy numbers, I mean the job numbers that came out a little while back showing we’ve — at an aggregate level — recovered all of the jobs lost since the start of the pandemic.

That really does not do justice to the situation and I think glosses over a lot of things that are happening beneath the surface.

So, for instance, you know, in the travel, hospitality and tourism sectors, what we call the hardest hit industries, they’re still well below their pre-pandemic employment levels. And then you sort-of top on top of that, you know, various other COVID-induced challenges, particularly around supply chains, the cost of shipping, bottlenecks at ports, you know, factory shutdowns in China. Still, a lot of things that are on the horizon there.

And then there are, of course, what I would describe as being the business-as-usual type problems. I think the tax environment, the regulatory environment, you know, people are looking at the fiscal situation and say, ‘OK, well, you know, how are we going to get back to balanced budgets in a way that is sustainable and not completely disruptive to the economy?’

You know, trade challenges with the United States, still trade challenges with China. And I think of particular interest to your readers, of course — or, sorry, here we are pretending like it’s the year 1990 — but to your listeners, there’s still, I think, a lot of questions about, you know, net zero and climate change. I know we’ll have a chance to talk about that a bit more, but we have a lot of ambition that’s on the table. And you know, we’re going to see what the business climate is like to help get us there. So, you can sort-of pick, parse apart, little things from that. I know it might sound like a lot of doom and gloom, but I think it just goes to show that we still are in a fairly disruptive and overall uncertain economic climate for the business community.

Leighton: Yeah, a little too early to get excited. When do you think? And you painted a really good picture because I mean, you know, it is kind-of twofold: you see some stories about how some reports on the employment’s, you know, gone back to pre-pandemic. But then you keep seeing stories on the news as well of some of the industries you mentioned, like hospitality and construction even. So, when do you anticipate things actually getting much better than they are now?

Mark: ‘I don’t really know’ is the answer, and I know that’s not going to be a terribly satisfying one for me to put on the table, but I don’t think anyone actually does know. And if anyone gets it right, it’s more in the spirit of a broken clock being right twice a day.

If I look at even just the pandemic and how it’s unfolded, I mean, you and I were talking before we started recording about what that experience has been like in Ontario and Alberta. And no one thought things were going to unfold this way when we all kind-of packed up our offices in mid-March 2020. And if you look at, for instance, what’s happened in China, where they’re still pursuing a fairly aggressive zero COVID policy, I mean, there was a thing I’d seen a little while back about one case and they shut down the Disneyland parks in China. So, you know, these types of things and you’re shutting up factories. I mean, these are the types of disruptions that who knows how long we’re going to have to deal with them for.

And if you look at, for instance, labour shortages, I didn’t talk about that, but that’s another really big one that’s affecting our members all across the economy. And there’s not going to be a quick fix for certainly an issue like that.

Leighton: Now, obviously, energy companies are among those that the Canadian Chamber represents, and I imagine, access to reliable and affordable energy is important to other industries like manufacturing, high tech and so on. Can you talk a little bit about that?

Mark: Yeah, so in our membership, we would say sort-of we represent the whole value chain, right? And so, we have the producers in our membership, the Cenovuses and the Suncors of the world, pipeline companies like TransCanada, Enbridge and there’s distributors in our membership. And then, of course, the users of this. And as much as I know, the folks out in your part of the country are thinking a lot about oil and gas. I mean, we have members that are in the energy sector in a whole range of products, whether it’s renewables like wind or solar. And of course, you know, nuclear is another big one as well. Hydroelectric production out in Quebec and that part of the country.

So, it absolutely is important. And I think the word affordability that you flag is really critical as well. I mean, it’s the cost of doing business. And when a company is looking at the financials and they’re saying, ‘Am I going to be producing in Country X or Y?’ We tend to get caught up, I think in the public policy world in sort-of our, ‘well, you know, this is federal jurisdiction and that’s provincial jurisdiction and that’s municipal and, you know, that’s a whatever, whatever.’ But it’s one company at the end of the day who has to bear the cost of these and work within the business environment. And the cost of energy is absolutely an important one.

And certainly, you know, where I’m based in Ontario, you know, that’s been a major topic of discussion at multiple points over the years. One of the things that I think we can talk maybe a little bit more about later is the role of critical minerals as well. And how does that interface with the energy sector from a bit of a downstream perspective in terms of these products that we’re using with critical minerals that are going to be increasingly electrified. What does that mean for the energy needs of Canadians? So, I mean, all that to say yes, reliable and affordable energy is critical if we’re going to remain competitive as an economy and getting businesses to not just stay here but invest and grow.

Leighton: I wanted to shift now as we record this interview, COP26 is taking place and as expected there’s been a lot of talk from leaders, including our prime minister, about making very ambitious goals when it comes to tackling climate change, which obviously could affect energy prices. What are your thoughts on what’s taking place so far at COP26 as it relates to our energy sector? And what kind of changes do you think are going to come as a result?

Mark: So, in some ways there’s been a lot, but nothing happening, all at the same time. So, for the listener, we’re recording this on November the 11th and the COP conference is still ongoing. But yesterday, November 10th, the sort-of draft guide I don’t remember which sort of “international summitry” word they’re using, whether it’s a chair statement or a presidency statement. But there’s a product that the British government came up with yesterday talking about what the draft proposals might be that are agreed by the countries.

Some of the things that I’ve seen in that, for instance, a signal that 1.5°C is going to be perhaps the new threshold against which success is measured. In terms of the cuts, we’re looking at kind-of forty-five percent by 2030 on a 2010 baseline and then, you know, net zero by 2050. And also financing for developing countries has emerged as quite a large flashpoint. And what is it that we’re going to be seeing in terms of, you know, how much money countries like Canada, the United States and those in Western Europe are going to have to be, you know, giving to those markets for their adaptation and mitigation measures?

We haven’t seen a whole lot on Paris Agreement Article Six, which is around offsets and also not a whole lot on kind-of transparency, accountability and reporting measures. And I think that’s really important from a Canadian perspective because our companies here they, as you would know, they all want to do the right thing, but they also can’t be sort-of doing it with one hand tied behind their back and other jurisdictions not demanding the same level of accountability and reporting down from the private sector that goes up to the government who then reports to the membership.

If I look at all of that, what the government folks are doing, there’s a lot that the private sector is doing as well in tandem. The Oilsands Pathway Alliance, for instance, I mean, that’s a group that has had some announcements that have come the last little while. And I think that’s great to see and I think it’s exemplifying that notwithstanding the government folks doing their thing, the private sector is really genuinely moving ahead and moving the dial for it. So, I mean, a lot of big ambitions. I don’t think we know yet how we’re going to get there with the level of capital investment that is required, particularly. So, we’ll see what comes out in the final package.

Leighton: Yeah, exactly. Well, we’ve also seen in recent months a bit of an energy crisis in parts of the world with sky high natural gas prices in Europe. And rolling blackouts in China. What do you think that says about the importance of getting policies right when it comes to energy? And can we see the impacts here in Canada?

Mark: Yeah, so I mean it’s interesting thinking about, you know, some of these more global energy issues over the last little while. I mean, for instance, if you look at the power prices in Germany, I mean, in September, I mean for instance, they hit a record level of 135 Canadian dollars per megawatt hour. That’s more than triple what electricity costs were or are in Ontario, even at peak demand times for using the tiered pricing.

And if you talk to folks, they’ve sort-of blamed the price spikes on the chaotic transition from or to using renewable electricity sources such as wind and solar. You know, at the expense of nuclear and, you know, nuclear seems to have a bit of a social license issue at the moment. It has for quite some time. And I don’t think there’s necessarily been an honest reckoning everywhere in the world as to what is the, you know, what is the tradeoff that is required or what are the tradeoffs plural more correctly, that are required?

And I think, you know, some of the stuff that we see in Europe provides an illustrative example about what Canada needs to look to as we sort-of prepare to set out on trying to get our own electricity grid to 100 per cent net zero by 2035. And you know, what are the lessons that can be learned? There’s a report that SNC Lavalin actually had published earlier this year. And what they had projected out is that by 2050, Canada is going to have to triple the amount of electricity that’s currently produced nationwide. And so, you know, seeing some of the commentary on that, I mean, seeing things, for instance, that are indicating we’re going to have to add, you know, between five and seven gigawatts of capacity to the electricity grid every year between this year and 2050, which is a huge, huge amount.

When you consider that, for instance, Bruce Power’s plant, took 27 years to bring a 6.4-gigawatt bit of capacity there. And I think what this kind-of speaks to is an observation that others have made where, you know, the 80 per cent we’ve done is easy. It’s that last 20 per cent that’s going to be, you know, really difficult to do. So, I think the overall quite a cautionary tale for us to look at.

Leighton: Yeah, yeah, for sure. Now, speaking of energy production, there’s been some discussion at COP26 and even outside that on limiting production. What does that mean for Canadian business and Canadian consumers?

Mark: Well, I think it means a couple of different things. So, in the context of, for instance, you know, energy, you know, electricity production and to the extent that people are using those types of hydrocarbon sources, I mean, scarcity means that, you know, prices are going to go up. I mean, you don’t have to spend too much time thinking about it to see that that’s the kind-of the logical outcome.

And if that chaotic transition occurs, I mean, you’re going to see unreliable outcomes for consumers who need to use these energy products. And I think it’s easy to say that at a very abstract level. But again, I kind-of go back to the report from SNC and you know, when you’re looking at some of these projections. I mean, we’re talking a lot about electric vehicles, but like, where does the electricity come from? You don’t kind-of plug it into the wall and it appears out of thin air. I mean, there has to be a sustainable plan to get us there. And again, even with EVs [electric vehicles], I mean, as much as you know, it’s popular to talk about it and we all like to think we are going to have a Tesla the next time we go to buy a car, you know, the majority of engines on the road are still combustion engines, right? And so, and there’s a huge range of applications for oil and gas products as well.

So, I mean, they’re an integral part of the Canadian economy from that standpoint. But even if you look at a macro level as well, you think about the exports, think about the royalties that are provided through the tax base. You know, it’s integral to the success of the economy and just sort-of capping production, you know, there’s going to be some, some impacts that are going to be felt and I should say, even for some there will be notable impacts, I think that are felt.

Leighton: And then, what do we do?

Mark: Well, that then that’s exactly it. I mean, we can talk a little bit later about sort-of just transition and all of the sort-of terminology around that. But you know, these are real people and it’s real livelihoods that are there. And so, it’s not sort-of, it’s not like flicking a switch and saying, we’re going to find new solutions. I mean, it genuinely is a transition and it has to be done in a sustainable and in a predictable manner. And again, I’ll come back to the Europe example. I mean, I think if you don’t do it, predictably, we can see the consequences there.

Leighton: Yeah, yeah, exactly. What would you like to see from either a policy or advocacy perspective when it comes to energy and industry about these issues you’ve been talking about?

Mark: Yeah. So I mean, there’s a whole bunch of things that, you know, we could spend several podcast episodes perhaps unpacking, but I mean, one key thing is getting Ottawa, and I use the word Ottawa very intentionally in this context, to understand that although government has a role, a lot of it’s providing support to the energy industry, which is doing a lot of the innovation and that has the baseline brain power, if I can put it that way to really drive forward the solutions that need to be executed. And a lot of them are capital intensive and very expensive.

And again, I’ll come back to the Oil Sands Pathway group. There’s a lot of really good resources. And I would, you know, but I’m not just saying this because some of them are members of ours, but quite generally, I would encourage your listeners if they haven’t already to go check out that content. One example, for instance, I had been looking at there was some of the members currently looking at detailed project plans for kind-of a phase one feasibility study, looking at CO2 transportation and a storage hub and some of the great engineering work that’s going on to carry carbon capture at multiple oil sands facilities as an example.

And so, in just picking up on that point as well, I mean, we’re looking quite closely at what’s going to happen with the CCUS investment tax credit discussions. You know, there have been, the consultation earlier this year. So that is sort-of one item. Another item as well is what happens with sustainable finance and common approaches to that. We’ve seen a proliferation of frameworks and this is something that we’ve heard time and time again from our members that we need to have consolidation in these things instead of just layering on one thing after another.

Being the Canadian Chamber, we also think internationally about Ottawa issues and one of the things that is critical for our government to plug into right now is the work that the U.S. Department of Energy is doing through its supply chain review. And so, for your listeners who may not be familiar, earlier this year, President Biden had commissioned a series of supply chain reviews to various U.S. government departments. There were the 100-day reviews and those came out in the spring, and there’s been a series of one-year reviews. So, the U.S. Department of Defense is doing one and the U.S. Department of Energy is doing another. And that’s, I think, a critical piece for us to engage with as the Canadian business community and as the federal government to make sure American policymakers understand the importance of Canada to the U.S.’s own energy security.

Leighton: Now, a lot of talk about energy obviously is focused on Alberta, but the energy sector obviously exists in other provinces. Can you talk about what energy means to other provinces like B.C. and the East Coast as well as nationally?

Mark: Yeah. So, I mean, you could again spend a few different podcast episodes unpacking this. But I think the point really to make here is, you know, if you look at this from the Ontario perspective and of course, you are having some guy from Ontario on the podcast giving you an Ontario-centric view of the world. But you know, if you look at some of the supply chain impacts, I mean, there there’s huge benefits for Ontario businesses who provide whether it’s physical, you know, machinery or other input components or who provide services, engineering services or maintenance services or whatnot to, you know, the energy sector out in your part of the country.

Looking at some of the recent stats, you know, roughly kind-of $2.4 billion of supply chain interest in Ontario, another $535 billion out in B.C. So, I think, yes, the energy might be physically in the ground, in your neck of the woods, but the supply chain is national across the country. If you look out east, for instance, the Newfoundland public finances and the economy rely heavily on the oil and gas sector. And you know, when the prices had gone down, you’d seen the fairly substantial negative effect that that had on the Newfoundland provincial public finances.

So again, a critical part there that’s paying for hospitals and schools and bridges and all sorts of other things that are under the provincial government. And again, at the risk of stating the obvious, I mean, as much as we’re all talking about EVs [electric vehicles], I said a moment ago, let’s not forget, most people still have combustion engine vehicles, right? And that’s got to come from somewhere.

Leighton: Exactly. Now let’s shift gears a little bit here. We’re about to enter another parliamentary session in the coming weeks. What can we expect as it relates to Canadian business and the energy sector?

Mark: So, I mean, I don’t think we want to dance around the issue. It’s going to be a challenging environment for the business community. You know, we didn’t see a whole lot in the various platforms talked about real core economic issues. Yes, the economy was in there, but it wasn’t the kind-of overarching theme, and so I think as advocacy organizations, it’s going to be really behooved or important for us more correctly sorry, to kind-of, you know, deliver that importance to policymakers about economic competitiveness and a focus on economic growth.

When you look at also what the kind-of political geometry is like in Parliament, if the government’s working a lot with the NDP of course, that will also pose potential challenges, you know, for the energy sector. And so, we’ll see kind-of what that will look like. And this government’s made quite clear that climate change along with childcare, is going to be a major priority for them. And I think for your listeners out West, if you look at where the kind-of centre of gravity is in this government, it is a very, you know, Ontario- and Quebec-centric government based on where their caucus members are mostly located. And so, really underscoring the importance of the energy sector to the economy as a whole is also going to be quite important.

Leighton: Exactly. I completely agree with that one. Now we’re also hearing about and you alluded to it earlier, just transition legislation. Now, if that’s the case, can you talk a little bit about what that is and what implications that could have on Canadian business and the energy sector?

Mark: So, it is a pretty nebulous concept. I mean, if you talk to folks, they’ll give you all sorts of different answers as to what it means. What I would say is the oil and gas sector, you know, these are well-paying jobs for Canadians. And if the plan is to have a sort-of a social safety net created that would replicate that, like that’s going to be really expensive. And conversely, if it’s a social safety net that’s not paying as much, then it’s going to be financially deflating and you’re going to see people’s take-home pay that would be, you know, rapidly sort-of decrease versus what it is now. And so, I don’t know what it means.

I don’t know exactly where it’s going to go. Well, maybe we can talk about labour market support mechanisms that are for every sector of the economy, not just energy, but just transition does feel quite, quite woolly still at this stage. And what I would say too is, instead of trying to erase an industry and you know, you have these kind-of proactive, sort-of, you know, transition measures that are unclear and I think not perhaps branded in a very helpful manner. We should be talking instead about how we can be supporting the industry in the transition and support the investments that companies are trying to make in the transition to have a lower carbon footprint.

Leighton: Okay, great. Anything else you wanted to add, Mark?

Mark: No, no. I mean, I think just to say that, you know, for your listeners who are, I’m assuming, kind-of interested in public policy issues. I mean, we are heading into what’s going to be a fairly difficult period. I think COP[26] is setting the baseline for the discussion around the energy sector in Canada and climate change and, you know, net zero 2050. We’re all kind-of talking about it now. And so, I certainly would really encourage your listeners to get engaged and get active. And if you’re with a company, then working through your sector associations, working through the Chamber. I mean, we’re here in Ottawa to be the advocates for industry and certainly if folks want to reach out or get in touch, always happy to chat.

Leighton: Great. Well, yeah, we’re all in this together. So, thanks very much, Mark, for being on the show.

Mark: Well, thanks for having me on. It was a real pleasure and hopefully we can come back at some point soon.

Leighton: For sure, always lots to talk about.

Mark: Yeah, definitely.

Leighton: Well, that was our conversation with Mark Agnew, senior vice-president in policy and government relations with the Canadian Chamber of Commerce. Stay tuned for our next Energy Examined podcast. And if you like this one, please share it with a friend and make sure you subscribe on whatever podcast you have. For more stories and interviews on Canada’s energy industry, check out our website, context.capp.ca.