Playing Poker with Power Plants

This week's Clean Electricity Regulations show Canada’s long game on slashing carbon emissions. The fossil fuel lobby is not winning.

Michał Parzuchowski/Unsplash

For nearly a decade, the Trudeau government has been accused of playing a bad game of three-dimensional chess as it tried to balance the urgency of the climate crisis with the stridency of the fossil fuel lobby and its political enablers.

But gradually, federal climate and energy strategy has begun to look more like a game of poker—in which case it must be the highest-stakes game in history, with hundreds of millions of tonnes of emissions on the table.

With the release of the federal Clean Electricity Regulations this week, Ottawa is finally showing its hand. If the crowds aren’t going wild, they probably should be.

And, weirdly, we may just look back one day and force ourselves to thank the fossil lobby for setting its own trap.

Playing a Longer Game

When their climate strategy first began to emerge, it seemed as though Prime Minister Justin Trudeau and his ministers were trying to please everyone but satisfying no one.

They introduced a price on carbon pollution, then sent billions of taxpayers’ dollars to a company in Texas to buy us all an oil and gas pipeline, a sprawling construction megaproject whose price has since ballooned from $7.4 to $30.9 billion.

While all of that was going on, Trudeau told the big CERAWeek oil and gas conference in Houston that “no country would find 173 billion barrels of oil in the ground and just leave them there.”

Ottawa announced a groundbreaking phaseout of fossil fuel subsidies, but didn’t exclude fossil companies from the public financing available to any industry—even though no other line of business accounts for 28% of the country’s carbon emissions or leads all sectors in annual emission increases. (Surely some smart federal analyst could have figured that one out?)

The net result: It’s always easy to find climate hawks who mistrust and reflexively criticize anything Ottawa says or does. Even though direct authority over natural resources lies with the provinces, and as Environment and Climate Minister Steven Guilbeault observed earlier this year, provincial obstruction is the biggest obstacle to ambitious climate strategy.

But if you’ve been keeping score, the picture began to shift nearly 18 months ago.

Setting the Stage

Flash back to April, 2022, when Finance Minister Chrystia Freeland unveiled a budget that promised $7.1 billion in subsidies for carbon capture and storage (CCS) technology. Climate policy and technology analysts in Canada and the U.S. had spent months raising legitimate, evidence-based concerns about whether any subsidy at all was needed or justified. So at first glance, the new funding was easy to interpret as yet another federal capitulation to a relentless fossil fuel lobby.

Except that the facts didn’t fit the frame.

• The subsidy excluded CCS for use in enhanced oil recovery (EOR), a technique that involves injecting captured carbon into depleted wells to extract even more oil. As recently as January 2021, 81% of carbon captured worldwide had been put to that use. Some Alberta fossil producers were predictably displeased to see EOR left out of the tax credit.

• When then-CEOs Alex Pourbaix of Cenovus Energy and Mark Little of Suncor Energy first kicked off the lobby campaign for the tax credit, they said it would cost about $75 billion to decarbonize oil sands production by 2050 (with no accounting for the 80% or more of emissions that occur after their product reaches its end user). They were looking to taxpayers to cover about $50 billion of that total.

• In the end, they got $7.1 billion rather than $50 billion, a 2030 target date rather than 2050, and a 37.5 to 50% share of total investment rather than the 65 to 75% they were demanding.

“It’s as if Ottawa just called the industry’s bet,” CBC business reporter Kyle Bakx wrote at the time.

“For more than a decade, the oilpatch has pitched a particular solution to its problem of being the largest source of carbon emissions in the country—to bury them,” he noted. “As the need for the world to act on climate change grows, and the pressure on the oilpatch mounts, the industry has increasingly pushed for more government support to develop, construct, and scale up carbon capture and storage.”

Now, for better or worse, Ottawa was coming to the table. “Attached to the funding, though, comes a stiff warning from the federal government for the sector not to drag its feet but, instead, to turn talk into action and deliver on its promises—and quickly,” Bakx said, with a subsidy that scales up through this decade but is cut in half from 2030 on.

Since then, the Pathways Alliance, whose six members account for 95% of the country’s oil sands production, have flatly refused to support a 2030 emissions cap, and made it clear they won’t invest their recent obscene, record profits in what they’ve been touting as their own preferred decarbonization strategy. Not without ever more lavish taxpayer support. And not after Guilbeault told them not to expect any further federal subsidies.

Instead, the tens of billions of dollars in investment tax credits in the 2023 budget are mostly earmarked for cleaner, greener technologies that will help drive down emissions and carve out a place for Canada in tomorrow’s economy, rather than propping up a polluting industry entering its sunset.

Calling the Industry’s Bluff

The rest of the story played out Thursday, when Guilbeault published his long-awaited Clean Electricity Regulations. When the new rules take effect in 2035, they’ll still allow provincial utilities and private power producers to generate electricity from gas if that’s their choice. But only if they can cut their carbon emissions by about 95% compared to the most efficient gas plants now in operation.

Guilbeault and senior federal officials steadfastly maintained that their “technology-neutral” approach to the regulations will let provinces decide their own electricity mix—as they are entitled to do under the Canadian Constitution—as long as they adhere to an absolutely essential climate pollution target that the federal government has jurisdiction to set. Gas plants can only come close to that standard by bolting on CCS equipment and, even more speculatively, getting it to work consistently and affordably. But while Ottawa says it’s confident that CCS can deliver, the regulation is meant to leave that decision where it belongs, with the provinces.

“CCS is just one way of complying with these proposed regulations and we don’t prescribe how technologies meet it,” a federal spokesperson told The Energy Mix in an email Thursday. “What we require is that they reach the performance standard we’ve set without defining which technologies or measures provinces should use to achieve it.”

On LinkedIn, cleantech watcher Michael Barnard said the federal government has just called the industry’s bluff.

For well over a decade the fossil fuel industry has been maintaining that carbon capture and hydrogen are ready for action and fit for purpose. Now both Canada and the USA are requiring that electrical generation plants use these technologies to radically cut their emissions by 2030 and 2035.

In the Texas Hold'em games I used to play a lot of, we referred to that as calling their bluff. As every attempt to bolt carbon capture onto coal or gas plants globally has failed economically even when the CO2 was used for enhanced oil recovery, it just wasn't that convincing. Daniel Negreanu they aren't.

It doesn’t get any better for the fossil lobby when you realize that the alternatives are practical, affordable, and ready for prime time. On Thursday, Canadian Renewable Energy Association President and CEO Vittoria Bellissimo said solar, wind, and energy storage can backstop the federal plan by delivering more than 5,000 megawatts of new capacity per year: “Because they work, because they are ready today, and because they are the most affordable way to meet Canada’s net-zero target.”

One of my all-time favourite Far Side cartoons by the brilliant Gary Larson is captioned Why Dogs Should Never Play Poker. It shows a game in progress with one of the dogs excitedly wagging its tail while all the other players at the table fold their hands.

That way of being, along with a deep, personal aversion to gambling of all kinds, also explains why I never should and never do play poker. So if even I could spot the industry’s bluff, it must have been pretty obvious, and pretty ridiculous.

What’s vastly more important is that Guilbeault and his team must have spotted it, too. And when Pourbaix opened the door with his off-the-wall subsidy demands, they wisely walked through it.

Cue the Apocalyptic Response

None of this was enough to avert the predictable, apocalyptic nonsense from Premiers Danielle Smith of Alberta and Scott Moe of Saskatchewan.

Smith declared the carefully-crafted draft rules “unconstitutional and irresponsible” and vowed that her province will “chart its own path” to decarbonize its grid by 2050—far too late to make a clean electricity system the cornerstone of the climate transition we need.

Moe inaccurately claimed the regulation “will drive electricity rates through the roof and leave Saskatchewan with an unreliable power supply,” despite analysis showing a 10 to 12% cost saving for consumers and a federal commitment to cover more than half the incremental cost of decarbonizing provincial grids. “Our government will not let the federal government do that to Saskatchewan people,” he thundered.

But you have to ask—what did they expect, in a summer of record wildfire losses in Canada and record, killer heatwaves around the world?

More than two years after the International Energy Agency called for no new oil, gas, or coal development in a 1.5°C climate scenario?

Several months after the Intergovernmental Panel on Climate Change identified solar, wind, and methane controls in the fossil industry as the cheapest ways to get the deepest possible emission reductions through 2030, with CCS capable of delivering about one-tenth the benefit at far higher cost?

And after the two premiers’ fossil industry patrons set their own trap by so vastly overplaying their hand?

Get set for an avalanche of overheated rhetoric as the Clean Electricity Regulations make their way through a 16-month process of consultation and revision. While it’s happening, try to bear in mind that all the evidence—on the urgency of the crisis, the need to decarbonize, the precariousness of fossil fuels and CCS, and the powerful opportunity in renewable energy and energy storage—all of it supports what the feds are doing.

For bonus points, the next time you need a target for the rage and grief and fear we all feel as the climate emergency grabs us by the throat, consider directing that energy at your provincial government and telling them to stop making a tough but doable plan even tougher and more complicated.

And meanwhile, just ask yourself: If you were holding as bad a hand as the fossil industry’s, would you want to take it into a high-stakes poker game?

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Mitchell Beer traces his background in renewable energy and energy efficiency back to 1977, in climate change to 1997. Now he and the rest of the Energy Mix team scan 1,200 news headlines a week to pull together The Energy Mix, The Energy Mix Weekender, and our newest weekly e-digest, Cities & Communities.

You can also bookmark our website for the latest news throughout the week.

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