The new climate in Ottawa

I was in Ottawa this week, and sensed more than the seasons were changing.??

The political winds of change can be felt up and down the Rideau, as can the mood on climate. That was evident from the start of the Canadian Climate Institute / Institut climatique du Canada ’s annual conference, held in the Shaw Centre overlooking both the Rideau Canal and Parliament Hill. A wonkier gathering that’s normally about emissions was all about the economy.

Welcome to the new age of climate competitiveness. And It’s not just a Canadian phenomenon. Speakers from the U.S., Britain and continental Europe spoke of a new focus on the economic imperatives — and opportunities — of climate action. Alok Sharma, a former British cabinet minister and head of COP26 in Glasgow, put the new geo-reality this way: “Climate security, energy security and national security are totally interlinked.”

Here’s some of what else I took away:

1. The great decoupling is underway. We heard from several speakers who shared evidence that higher GDP can be achieved with lower emissions. Britain may be the poster child, by halving emissions since 1990 while growing the economy by 80 per cent. A big reason: coal used to account for 40% of its energy supply; now it’s zero. This decoupling is hugely important for the big developing nations — China and India, but also Indonesia, Nigeria, Brazil and Turkey — that have ambitious economic growth plans and climate goals for the decades ahead.

2. The United States is the world’s new energy superpower. In a little over a decade, the U.S. has gone from energy importer to massive exporter, and it’s aiming to keep growing with every form of energy. Take the Inflation Reduction Act. It’s notionally about climate action, but really it’s an energy plan that, according to its architect Brian Deese, is surpassing all expectations. IRA has led to $100 billion of federal spending — and $500 billion of private spending, accounting for half of all private investment this year. It’s helping the U.S. produce more renewable electricity, nuclear energy, geothermal, hydrogen and abated natural gas than ever — and as Deese told us, “it’s changing the economic geography of the U.S.” Some 80% of the money has gone to Republican-leaning counties, meaning political change may not lead to policy change.?

3.?A new space race for clean tech is underway. The U.S. is focussed on more than its own energy needs. Deese pitched a Marshall Plan for clean tech, to underwrite the export of low-emissions energy technologies to developing countries. And he suggested Canada may want to join arms. Washington is not the only one with ambitions. Ed Miliband, Britain’s new minister of energy security, told the conference that it wants to be a “clean energy superpower,” and just sanctioned 2 gigawatts of new clean power. Quebec has a similar ambition; Hydro Quebec has mapped out a $185-billion expansion plan, including 10,000 new megawatts of wind power and 5,000 kilometers of transmission lines. And then there’s China, the world’s leading clean tech power, which is showing no signs of letting up in its pursuit of energy-needy export markets.

4. All that demand is driving up costs. Try competing with Saudi Arabia for a new wind turbine, or the United Arab Emirates for solar panels, and you’ll get a sense of the new economics of decarbonization. Given the mismatch of supply and demand, the cost of pretty much everything in the transition is going up. Turbine prices are up 25% in four years. Lead times for transformers can run seven years. And good luck hiring 10,000 electricians for a project. It’s one reason we may see more state involvement over the next decade, as only governments can provide the long-term contracts that suppliers now demand and the risk capital to finance these big bets on net zero.

5. How do you spell critical minerals? C-a-n-a-d-a. Every international speaker referenced Canada’s special advantage with critical minerals, and yet also wondered why we are so slow to develop and export them. An industry panel blamed it on government for both slow decision-making and an emphasis on perfection over speed. One executive challenged the federal and provincial governments to make “fast and urgent decisions” on some big projects, to put Canada back on the minerals map.?