Climate Crunch: Unpacking Trump's climate agenda

Issue #04

➔ The scrap over the cap
➔ What the Trump climate show means for Canada
➔ Pathways charts a CCS path
➔ COP 29’s calendar conflict

Hot takes

➔ Alberta’s major carbon capture project revs up. Pathways Alliance’s request for proposals from pipe manufacturers and talks with Ottawa on funding, signal progress on the long-awaited project. Proposed by six major oilsands companies, the $16.5 billion CCS project involves transporting carbon from 20 oilsands facilities by pipeline to a storage terminal in Alberta’s Cold Lake area, reducing emissions by 22 megatonnes a year, or around 10% of sector emissions. It could be a game-changer—a tired cliché, we admit—but a deserving label given the considerable scale of collaboration and ambition.

➔ There’s a gaggle of climate reports out there—it must be COP season. The world needs to cough up around US$9 trillion more annually on climate financing to meet its Paris Agreement targets, notes a 100-page UN Emission Gap Report 2024, in what seems to be an avalanche of analysis pre-COP in Baku, Azerbaijan. The IEA also recently dropped Tome No. 1 (the 398-page World Energy Outlook) and Tome No. 2 (the 573-page Energy Technology Perspectives 2024)—with an Energy Efficiency 2024 report planned for today—IEA reports are considered benchmarks and widely referenced. A separate UN report on national climate plans and a Greenhouse Bulletin is also prime reading material for delegates on their long Toronto/Calgary flights to Baku.

➔ COP16 ended in disarray. Delegates at the global event on bio-diversity in Cali, Colombia, dithered over nature funding and targets for this decade. Many developing nations’ delegates didn’t have the funds—symptomatic of the problem—to change flights and left the summit without a deal. There were some breakthroughs though, including a global levy on products using genetic data from nature, and a “watershed” decision to include Indigenous communities’ voice in future decisions on nature conservation.

The Simpsons—as it often does—predicted it. Billionaires are eyeing ways to block the sun with Bill Gates and OpenAI CEO Sam Altman among major backers. Mr Burns’ tried something similar in the famously prescient animated series. Solar radiation management aims to cool the planet by intentionally reflecting increasing amounts of incoming sunlight back to space. Insurers have warned of unintended climate changes that could trigger international conflicts. It also does little to reduce greenhouse emissions. Last year, the UN said deploying the technology was “unwise.” Would it stop the billionaires?

Bi-Weekly Climate Action Award: To researchers at Zhengzhou University in China and the University of South Australia for developing  a fabric that counters heatwaves. Unlike conventional fabrics that retain heat, the textiles comprise three layers engineered to optimize cooling.

Bi-Weekly Climate Fail Ward: To the Kremlin for withholding vital Arctic climate change data from NATO. Russia is also pursuing a widescale disinformation campaign against decarbonization, the Western military alliance has warned.

Unpacking Trump 2.0’s Climate Playbook

Donald Trump has stormed back into the White House, raising critical questions around U.S. climate policy especially the Inflation Reduction Act, President Joe Biden’s signature climate law, and the Paris deal. While a second Trump innings may not necessarily wreck global climate policy—it could certainly look different in a few years’ time.

What happens to IRA now?: Trump has threatened to rescind all unspent funds from the Inflation Reduction Act, but it may be tricky as many Republican states and districts benefit bigly from the law (see table). Some analysts argue the rollout is too advanced to be axed, but Trump can certainly insist on a reset: a repackaged and rebranded policy, with some technologies getting more love than others. (For example, Trump considers wind energy “disgusting,” which could knock the wind out of that sector). Renewable stocks’ swoon after Trump’s win suggests low-carbon energy investors are anxious.

Life after Paris: Trump pulled the U.S. out of the global climate deal in his first term—he could do so again. UN chief Antonio Guterres thinks a second U.S. exit could “cripple” the Paris climate agreement. But there may be life beyond Paris. In Trump’s universe, allies will have to learn to jump headlong into new policy wormholes. Perhaps it could mean an America-led energy and climate club of allies that excludes China. It could also lead to a reset on many fronts in the form of new climate targets for 2030 and 2050 and policies that weigh energy security and affordability as equally as emissions—policies that are more palatable to businesses and consumers. Bespoke climate solutions rather than the grand one-size-fits-all policies that many countries are reluctant to pursue.

“Fun” with CUSMA: The next renegotiation phase with Canada’s CUSMA (ex-NAFTA) members U.S. and Mexico in 2026 might be more intense under a Trump administration, which is seeking more protections for the American auto industry. “Oh, I’m going to have a lot of fun,” Trump noted, ominously. But it may not be a bad omen for Canada, especially with an ace up its sleeve: critical minerals. Metals were not a major issue in the last CUSMA negotiations, but Canada could leverage them now. Trump’s focus on dissociating from China’s energy supply chain helps Ottawa make the case for a strong Canadian auto supply-chain (from nickel to cobalt, batteries and car assembly) across the 401 belt all the way to Michigan. That would ring-fence us from Trump’s plans to put tariffs on any product imported to the U.S.

What would Elon Musk do?: The billionaire Trump backer (and possibly his future government efficiency czar), is deeply invested in the North American auto market as the head of Tesla. While the president-elect rails against China’s manufacturing sector, Musk relies heavily on the country’s production base. It could lead to interesting conflicts and crosswinds, and perhaps opportunities for the Canadian auto supply chain to become a viable alternative. Ambitious, yes, but it’s no time to be a wilting violet.

Fuelling emissions: Trump’s call on U.S. oil and gas producers to “drill, baby, drill,” would send U.S. emissions higher, especially in an era of rapid deregulation. He would also likely insist that Canada, America’s largest source for imported oil, keep its oil spigots open to ensure affordability. That could complicate Ottawa’s recently proposed oil and gas emissions cap draft (see next item below). Whoever gets to negotiates trade, climate and energy policies with the new Trump administration will need to find a new balance between Canada’s ambitions and needs and a new American reality.

The scrap over the cap

The federal government’s draft regulations for the oil and gas greenhouse gas pollution cap was met with predictable bemusement by Alberta. The draft rules, possibly the most contentious Liberal climate policy, resembles its proposed framework in December 2023 of a cap and trade system.

• Reining in emissions. The emission cap will be set in 2029, for compliance beginning in 2030, with allowances provided freely and set at 27% below reported 2026 emissions. Allowances (i.e. physical emissions) must represent a minimum of 80% of total emissions, with emissions credits and payments into a decarbonization fund providing the remaining flexibility.
• Here’s how the math works. Starting in 2030, emissions will need to be 27% lower than 2026 level. Here’s the rub: where will emissions be in 2026? Based on energy policy lead Shaz Merwat’s math, Ottawa is modelling a 22% decline in emissions over the next two years—that seems (a little) ambitious. If one assumes oil and gas upstream emissions remain flat over the next two years, the 2030 cap equates to emissions being down 15% relative to the Paris baseline (2005), or conceivably up 7% after incorporating compliance flexibility. Cue the outrage from environmentalists.
• Don’t forget methane. It’s expected to represent at least half of the emissions decline. Canadian historical oil and gas emissions were revised upwards by 12% this year, partly due to underestimating the greenhouse gas warming potential of methane. Canada has already planned methane regulations to reduce methane emissions 75% from 2012 levels by 2030. For a hard-to-abate sector, methane is not the hardest problem to overcome.Time to reset carbon markets? The move adds another layer of complexity to Canada’s patchwork of carbon markets. As we highlighted in a recent report, provincial fragmentation undermines carbon market’s potential. Businesses repeatedly cite regulatory uncertainty and lack of harmonization as impediments to moving forward with investment decisions.
• Where do we go from here? Formal consultations start now, with a final proposal expected in spring. Alberta Premier Danielle Smith says she is considering “every legal option” to fight the cap. It’s also worth asking whether the Liberals will be in power till October 2025 to push through these policies, especially as a Conservative party rising in the polls is pledging to “scrap the cap.”

COP29: CALENDAR CONFLICTS

Quite a few executives have struck Baku, Azerbiajan—host of the UN climate-change conference No. 29—off their calendar, partly due to U.S. elections. It didn’t help that New York Climate Week dazzled this year, negating the need for many to travel 9,000 kilometres to bump into the same folks a month later. Inexplicably, COP also partly coincides with the G20 leaders’ summit taking place Nov. 18 and 19 at the other end of the globe: Rio de Janeiro. Talk about a climate calendar conflict.

Still, for those lucky enough to attend Azerbaijan and sample local delicacies such as kabab, plov and dolma (hat-tip: Baku-born Farhad Panahov), or steal a few hours to visit the Old City, here’s what else is on the table:

COP Lite. Joe Biden and other heavyweights are expected to skip the event. But that means more room for NGOs and delegates from developing countries.

Baku is Part II of a troika of summits: COP28 host UAE teamed up with Azerbaijan and COP30 host Brazil—the COP Presidencies Troika—to hammer out a “Roadmap to Mission 1.5°C.” COP28 was about Global Stocktaking (i.e. what’s needed), COP29 is about financing, and Brazil will oversee a new round of nationally determined contributions (NDCs), or each country’s climate plans.

Waiting for NDCs: That’s another reason Baku might be a subdued affair as most countries only reveal their updated NDC by next February. UN wants nations to be ambitious, but since the last NDCs were rolled out in 2020/21 there has been a change of personnel at the top in several countries, and decidedly less consumer and business appetite for ambitious climate policies.

Baku’s big moment: Consensus on financing alone could be Baku’s big win. Cash-strapped EU wants China to foot some of the world’s climate bill, which could come to $1 trillion a year. Expanding the donor base of countries is a “prerequisite” for an ambitious new post-2025 New Collective Quantified Goal (NCQG), to replace the US$100-billion annual climate commitment. Expect many fights on who foots the bill.

Gas-lighting: COP28 famously signed-off by noting it was the “beginning of the end” of fossil fuels. Gas powerhouse Azerbaijan seems less ambitious on that front. Expect Europe to square off against oil producing countries—again.

Racking up green storage:  COP28 was methane and nuclear’s moment. Azerbaijan is proposing countries commit to a new pledge for 1,500 gigawatt of energy storage capacity by 2030. Other proposals include reducing tourism sector emissions, and creating a global market for clean hydrogen.

The Institute In Action

➔ Ag policy lead Lisa Ashton hosted a panel on Nature Based Solution in Agricultural Landscapes at the Royal Agricultural Winter Fair on Nov 1. Read the three key takeaways from the discussion here.

➔ On Nov. 4, we made our second stop on our Food for Thought tour in Montreal, where Institute head John Stackhouse heard from innovators on their playbook to cut costs and reduce emissions.

What’s on the team’s reading wish list: Revenge of the Tipping Point (Malcolm Gladwell), Climate Capitalism (Akshat Rathi), Not The End of the World (Hannah Ritchie), Fire Weather (John Vaillant), Vampire State: The Rise and Fall of the Chinese Economy (Ian Williams). Read John’s book blog here.

ICYMI

➔ Planet-heating pollutants in atmosphere hit record levels in 2023

➔ Move over millennials, climate activism is no longer a young person’s game

➔ Podcast: Meet the First Nation building an LNG project in B.C.

➔ How vintage Nike Airs exposed a flaw in a US$700-million carbon market

➔ Rebuild or retreat? Homeowners face tough decisions after repeat flooding 

Catch up on our latest work:

➔ Biotech boom: Canada’s life sciences revolution (podcast)

➔ AIOC: A bridge builder helping unlock Indigenous potential

➔ Immigration changes cloud Ontario’s economic outlook

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