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Journalist Markham Hislop interviews leading energy experts from around the world about the energy transition and climate change.
Welcome to episode 304 of the Energy Talks podcast. I'm energy and climate journalist, Markham Hislop. On April 16th, about 2 weeks ago, US climate envoy John Podesta gave an historic speech to the Columbia Global Energy Summit that has received almost no attention in Canada even though it may rewrite the rules based international system that has governed trade since World War 2. The new White House Climate and Trade Task Force will introduce new rules and penalties for countries like China that sell goods and services goods and services to the United States with high embedded carbon emissions. Quote, here in the US, we want our manufacturers to be the cleanest and most competitive in the world, end quote, Podesta said.
Markham:Make no mistake. The creation of the task force is the beginning of a new phase in the global energy transition. My guest, Canadian economist, doctor Chris Bottai, was in the room when John Podesta gave his speech. I'm eager to get his take on where the US is going with this new approach and what it means for American allies like Canada. So welcome to the interview, Chris.
Chris:Hi. Great to be here, Markham. Well, it's good to have you back.
Markham:I mean, we've I've done a lot of interviews with you over the years, many of them on video, not enough of them in the podcast. So, the podcast, of course, is our sort of long form energy journalism where we have conversations as opposed to be doing newsy items. And I think that this is the topic that really does require, a long a longer conversation because of its importance. Now you were there. You listened to the speech.
Markham:Give me your impression. What was what was announced, and give me your impressions about it. Yeah.
Chris:I know. This that's a really, really good question. We hadn't been expecting this. And then what was interesting is that Podesta was simply supposed to have a fireside chat with Jason board off the head of Cloud Center for Columbia Global Energy Policy. And instead, at the relatively last moment, he asked for the podium to give a speech and it was a very carefully crafted speech.
Chris:And you could tell he was reading line by line from it. He was not to deviate from it whatsoever. Any and it's online. It's for available. Just search Google search, White House, Podesta, April 6th April 16th, Columbia.
Chris:And if you read it carefully, there's a lot in there. Basically By
Markham:the way, I I did read it carefully,
Chris:speech could be on par with Winston Churchill's speed iron curtain speech in in the early forties after World War 2. In terms of the Yeah, in terms of the redefinition of how we look at global trade. So at the end of World War 2, basically everything outside of North America was broken, busted and blown up or worn out one way or the other. The US was the banker for the world, it was the you know, it was it got to set the rules for global trade and the international order thereafter. It's called the Bretton Woods System, the IMF, the OECD, and a whole bunch of institutions were born at that point point in time.
Chris:And all our global trade rules were set at that point in time. And they were set up for that that era is just to solve that era's problems. And a lot of those were in reflection of what happened in the 1930s, where a lot of protectionism kicked in at the wrong moment and crap, basic crash, the global economy down about 30% in the early 1930s. So the whole point of all this was not to lock up free trade is to keep free trade going no matter what, you know, and get all the benefits globally, get all the benefits of of it globally. Now, the problem is it was acknowledged at the time that it was supposed to have 3 to at least 2 legs.
Chris:There was free trade, and a and a free trade and and a financial element, but it was also supposed to have a a workers' rights or labor element to it. And that was never settled. Right. A third element kicked in in the sixties seventies that they understood was missing from Bretton Woods was the environmental was the environmental part. And there are some clauses 2021 in the WTO that allow you to say, I'm not I'm gonna put tariffs on this or I'm gonna prefer domestic supply for these security reasons or what have you.
Chris:But they're very vague, and the language in their end is from the early 19 forties fifties. The problem is what's happened is you no one when China was brought into the WTO in the early in 2000 3, I believe, or 2,001 or 2003, no one understood how fast how fast they would become so productive they ended up all sorts of manufacturing and industry globally started collapsing, what have you in Europe, in the US, what have you, all sorts of part regions far started falling apart because of this. But it's also on the back of an extremely GHG intense production chain. So their electricity is very GHG intense. Their workers' rights, obviously, there's all sorts of issues there with this in with in the Uighurs and what have you.
Chris:We've effectively become somewhat dependent on a supply chain that goes straight back into very GHG intense Chinese electricity and questionable workers' rights. Sorry. Go ahead.
Markham:I wanted to make a point here, and you mentioned the word vulnerability. And I often bring up a speech that was given in November of 2022 by secretary of commerce, Gina Raimondo. And she said that in the 1st year of the pandemic, so that would be 2020, that the Americans woke up, and this is her words, woke up to the threat posed by the their vulnerability to Chinese supply chains. That really set off a nuclear bomb in the policymaker's thinking in the US about how to approach, China, how to approach the global energy transition. And out of that flowed the US Infrastructure Act, the Chips Act, the Inflation Reduction Act.
Markham:And so I I just wanted to flag that sense of vulnerability, that has a, I think, a lot to do with what we saw what we're seeing from Podesta's announcement.
Chris:I I would argue, Markham, that the old trade order died in November 2016, when when Trump won, when basically the Rust Belt states that that consistently voted blue switched to red. And it was a very strong signal that the global trade system is not, was not working for the US US anymore and for US workers and for the US middle class. And I think that is what that is the fundamental thing they're send it setting out to repair is the it's the it's protecting it's protecting their own into a certain degree, but the Europeans are very much in the same boat with them. Now so what you're seeing now, all of Trump's tariffs on steel on all sorts of the random things that he did over 4 years to friends and foe foe like that that was like a backlash to exactly what we've been talking about. What the Biden administration is trying to do is think through this far more carefully.
Chris:They're throwing out the old the old rule book. Right? The old WTO rule book. They'd obviously like to keep the better bits of it, but their first priority is their own. And that's quite that's quite understandable.
Chris:And what we're going to see is if we see a second Biden administration is you're gonna see a whole new set of trade rules emerge, and they're going to they're going to prior prioritize security of supply for key for critical supplies in the US. They're going to prioritize their workforce. It's going to they're gonna prioritize the environment, which I think is extremely, extremely important. The GHG intensity of goods coming in, and they are spending a tremendous amount of money on the supply side with chips, the the the the Infrastructure Act and the in the inflation reduction act, in order to build up innovation and supply side, and they're putting on demand. But now now they now they're gonna have to start put thinking about putting up barriers in order to protect those investments, which is what the Europeans have to do with border carbon adjustments.
Markham:Yeah. Exactly. You know? And the border carbon adjustment is is kind of a is a form of carbon pricing, and carbon pricing is verboten in the US. You cannot talk about a carbon tax that won't fly.
Markham:I mean, I know they, you know, California has cap and trade and so on, but, generally, at the federal level, it just is recognized that it it won't fly. But you'll have to you'll have to punish. You have to do something about these embedded carbon emissions, and this is, my as I was reading Podesta's speech, it was like, oh, this is carbon pricing, in another without calling it carbon pricing.
Chris:Well, imagine the way the the administration thinks of it. I'm pretty sure Podesta thinks of it this way is you US menu they think of UNUS manufacturing as being relatively clean, which is true, especially electricity, what have you. Arguably, Canadian manufacturing is even cleaner. Right? But we don't benefit from that at this point in time.
Chris:They want what the the several bills that are moving around the US Congress and Senate right now are treating US intensity as a factor of 1. And anybody who's above 1 is going to get penalized and into GHG intensity of 1 forgiven product is gonna get penalized coming into this country into the country. Now it's de facto a form of carbon pricing. But the question is, what's the stringency? Because that that's gonna you know, what's that dollar per ton shadow price that's sitting on there?
Chris:They can't do domestic prior carbon pricing. Right? But they are doing all these subsidies. And I wouldn't be surprised if they take if they level up the level of subsidy with the charge that's coming in in some way.
Markham:Well, let's talk about the 3 parts of the task force that Podesta described in his speech. And the first one is develop a climate and trade policy toolkit. And he said at that time, in the speech, he said that the US has an open mind about what approaches are most effective at addressing carbon leakage, carbon dumping, and embodied carbon in general. So it sounds like they probably have some ideas of these, but they're not ready to go public with them yet. They were gonna flesh them out a little bit more.
Chris:I think that's code that's code for they're willing to do bipartisan work with Republicans willing to advance bills in terms of structure. So there are several bills moving, both Democratic and Republican and bipartisan bill bills moving around. It's code that they're willing to talk with all of these folks to build the support necessary to get through something from Congress.
Markham:Oh, interesting. Vanessa also mentioned the negotiations that are led by US trade representative Katherine Tai for EU and US global arrangement on steel and aluminum. And I know you do a lot you pay a lot of attention because I see you on Twitter all the time talking about it, about decarbonizing steel, production in particular. So I I imagine that you have been following these negotiations. What can you tell us about those, and how might they be relevant in this context?
Chris:Yeah. No. This this is super interesting. So back, the the EU operates a very standard economist from The Economist textbook, emissions trading system called the EU ETS. Right.
Chris:And they've been gradually expanding the sectors covered by it, taking away the free permits, and and raising the price by tightening the number of permits. The problem is the price is starting to get pretty high. It got up over a €100 per ton there for a little while, 91100. It's backed off to 60 because it's been so effective at driving emissions out of the electricity sector. And it's just the way a cap and trade works.
Chris:But the problem is once you start get getting to that strength of that strength of of price and it's applied to all emissions, you have start having to those industries that are subjected to them in in the bubble. Right? So what the idea is and start they've started measurements already of GHG intensity of commodities moving in and out of the European Union. In oct I believe it's January 1, 2026. They're going to start actually pricing, steel and a few and a few other commodities moving up.
Chris:Now this is really upset a lot of developing countries, specifically India. But the problem is they can't have the ETS at the stringency it's at without the border carbon adjustment. Now their assumption was that their trading partners would all just put on carbon pricing and just negate it and and keep the money themselves, not they wouldn't collect the money that those form. But the problem is it's the the EU system was like this. It ran into the US system like this because the US can't do bore domestic carbon pricing.
Chris:Right? So you you've got them you've got the US negotiators talking or you negotiators talking this way, the US negotiators talking basically 90 degrees to each other, they have to find a way to find some sort of equivalence. And this is where these bills in the US Congress start to matter. Right? Like, if the Europeans can accept all this all the subsidies the US is putting on their domestic industry plus some sort of border carbon intensity or carbon pricing mechanism as and as being equivalent to the CBAM and the internal EU ETS, we're gonna be alright.
Chris:But the problem is it's when you get you know, and if you're in Europe and the Americans can accept the European version, we'll get to some sort of agreement. But they've been 2 years trying to get to an agreement and got nowhere, and they had to halt it before the elections. Where we're gonna have problems is if the really old US Steel Mills, the ones running blast furnaces and not electric arc and and DRI, try to export into the European Union because that's when the Europeans will, by law, be obliged to charge a very hefty car border carbon price and start, basically, a trade war with the US. But they've they've gotta find some sort of equivalence agreement.
Markham:Okay. Then we're gonna keep an eye on that because that's, obviously really important. I wanna talk about the second thing that Podesta announced, credible, robust, and granular data to implement smart climate and trade policies. And now I have some personal context here. You know economist, Kevin Byrne of S&P Global.
Chris:Mhmm.
Markham:And I've been interviewing Kevin probably for about 10 years because he started work doing emissions in the, Alberta oil sands. And over time, as, emissions intensity has become a greater and greater competitive issue and a trade issue, Kevin has now been drafted to head up the global team at S&P Global around emissions intensity measurement. And the the thinking there, he ex he told me, is that as that becomes more of a competitive issue, then companies are going to wanna know with great specificity what their emissions intensity, is and that of their competitors. So this becomes now a business issue to have access to this data, and that was the first thing I thought of when I read Podesta's comments about data.
Chris:Yep. So the again, the Europeans are about 5 years ahead, 5 to 10 years ahead of everybody else on this. They've been talking about a CBAM for almost a decade now, and they really got serious about it. About 5 years ago, they started the process of working up the measurement systems for that it's insanely complex. But they're effectively by doing it, they're almost setting a template for how it could be done.
Chris:The question is where it runs into collision with how the Americans want to do it, but they haven't decided on system yet. Like, that is that is a fundamental problem. The Americans have barely even begun the process of setting up a data intensity measurement standard, whereas Europeans are quite a ways down the road, and nobody else has even begun. Look, even they're not even off off the deck. I really hope can can this talk to you about border carbon adjustments.
Chris:I really hope someone in statistics scanner, environment Canada, and our Canada is doing work on this because it takes a while to figure it out.
Markham:Now about 3 months ago, I contacted, Environment and Climate Change Canada, about this very question, and they sent me a spreadsheet of, emissions data, broken down by province, by economic sector, by economic subsector. I mean, there's a lot of data in there. Yep. And that it doesn't go down to the facility, level, but it it's pretty it's pretty granular. And my impression was when I'm going through that data, that that somebody's been paying attention to this.
Markham:And I know from my conversations with Kevin that there have been a lot of discussions about methodology. How do you measure something? What assumptions go into the math that that determine the number that you eventually come up with for emissions intensity? So given that we're we're not just starting, we've clearly been doing something along this line for a period of time. In your opinion, where is Canada relative to the EU and the US in this approach to data?
Chris:I I think to be honest, I think we're going to be okay. We're not that far behind. Our data collection has been a little haphazard over the years. It suffered a real hit during the Harper years. It it had it was world class before that.
Chris:They've they've done a lot of work to repair it since. The Europeans are gonna be dealing applying CBAM and doing their measurement at the facility level. Right? So that's a standard we've got to hit. So this comes back to my earlier point about the Americans, 80% of their steel is extremely clean, Right?
Chris:Can go straight into the EU, no border carbon charge whatsoever. Roughly 20% of it is very problematic. It's it's very old blast furnaces. Right? So the EU is more than willing to look at the facility level where that steel came from and charge on on that basis.
Chris:So what you might just see is is still swapping between destined destinations. I I think we're gonna be alright. The prob where this is gonna run into problems is where the EU has one method, like boundary definition, what's measured, what what are the what are the benchmarks for data that's not known, What method the Americans use? What method we use? And what rather the rest of the g 7 and the Indians use?
Chris:Like, we need a common system. Like, we need an ISO for this. Right? And we're not we're not there yet.
Markham:I I wanna ask you the the implications for the Alberta oil sands because, that is the bulk of the oil that gets exported from Canada. Canada is the world's 4th largest oil producer. We are not small potatoes when it comes to this. We we do about 5,000,000 barrels, and the the oil sands and, again, this gets back to Kevin Burns, S and P Global data. 68 kilograms of c 02e per barrel, which is very high, very high.
Markham:The, I think that this the, Norwegians are down around 9
Chris:Mhmm.
Markham:Kilograms, something like that. So that gives for for comparison. But in the averages are hidden small uneconomic inefficient, projects. I shouldn't say uneconomic, but in inefficient up to as high as a 160 kilograms of c 02e, a 120 kilograms of c02e. I cannot believe like, I could see the Americans.
Markham:If you're looking at 44 kilograms of c 02e, which is the most efficient modern oil sands plants, you know, that compared to 31 kilograms, which is the US national average, you say, okay. You know, we'll we'll figure that out. But at a 160 kilograms, that's gotta that's got to be a problem if they we try to export that over the border.
Chris:Yeah. And you're you're touching on something that's become very salient. Okay. So as the satellites circling around the earth and measure methane and co 2, they get better and better and their resolution gets higher and higher. What we're realizing is a lot of the messians are coming from super emitter events.
Chris:Right? So you've got maybe 80% of the pack is we're doing okay. Right? But you've got a few places where something happens at a whole lot of methane gets blown off or a whole lot of CO twos being used. Now those satellites are just gonna get better and better.
Chris:They're gonna be used they they can be used on a legal basis for for they're down to the pixel, like the, you know, meter squared level where you can assign it to a facility. I I think we have to tighten like, Canada's got pretty deep, like, you've there's 2 components to that to that emissions intensity per barrel, right? There's the c o two component, which is the combustion c o two and the process c o two. And then there's the methy the fugitive methane component. And our fugitive methane rules vary a lot across the country, and it did depend on process.
Chris:But BC is global class in terms of fugitives. Right? Even for, what for its Alberta's kinda 1 1.1.1%, 1.7%, depending on where you're where you're sitting. It's okay. It needs to come down 75% down to point below 0.5.
Chris:Doable. Saskatchewan's got issues. It's 10% across because it's all heavy oil. Right? A lot of associated, a lot of associates associated gas coming up.
Chris:It's being flared. Flaring is never really complete generally unless you're running cyclones. It's these intensity bear per barrel measurements can get very granular. Anyway, you you've got a point to make.
Markham:Well, I I do. And that and that is the associated gas in Saskatchewan. So that's that's one issue. The problem is that in the oil sands, it produces very little methane. It's not fugitive methane emissions that are the problem in the oil sands.
Markham:That is a problem in the conventional and in the gas.
Chris:They use a lot of methane to make steam to extract sand extract the bitumen. Yes. Yes. So it is a problem.
Markham:Yes. When you when you're burning it, that's exactly right. I mean, that's the bulk of the of the oil sands emissions, right, is burning that natural gas to make to make the steam. And within the context of this discussion, last week, Cenovus Energies, which is Cenovus is one of the big oil sands producers, one of the big 4. And it's I think he's now, chairman of the board.
Markham:He was CEO, and that's, Alex, Poorbay. And he wrote an open letter bemoaning the fact that Canada hasn't come to the table with tens of 1,000,000,000 of dollars to pay for carbon capture, to make you know, to to lower the emissions from the the oil sands. Given what Podesta announced on April 16th and given the trends that you're talking about now, you can see why oil sands CEOs are absolutely frantic to get that money in. The pressure is on now as far as I can see to lower emissions because of what's coming, and this is fairly new. And now that's my take on it.
Markham:Do you think I'm accurate or not?
Chris:No. I I think you're I think you're on the ball. I I do think, though, an industry has to pay for all its own costs itself and still be competitive. Right? Like, we can't subsidize it with taxpayer dollars.
Chris:The first CCS plant, yes, to prove the concept. Right? And I've got a couple of different types. But, no, that money shouldn't be coming out of the Canadian taxpayers' pocket. It should be coming they should be able to sell their product at sufficient profit with adequate emissions controls on all emissions controls or not operate.
Chris:Like, most into like, if I don't have insurance, if I do if I do things that cost other people's money, other people money in my own business, I will be charged for it. I will go to jail or what have you. Why, like, why is this different for them?
Markham:I'll I'll tell you why it's different. And this came out in the net zero, modeling that Canadian Energy Regulator did, last year. And I interviewed the chief economist whose name escapes me, just at the moment. But what he said, and I went back and checked the modeling because this is quite fascinating. He said, if the oil sands producers are re are, required to pay their own climate policy compliance costs, it will it will make them uncompetitive.
Markham:And as prices fall into the 20 thirties, we will see a large contraction of supply in the oil sands, meaning, companies are gonna go bankrupt. They're gonna reduce their supply. And and and I'm not talking about, you know, from 3.5 to 3,200,000 barrels a day. I'm talking about 3,500,000 to, like, 1,600,000 barrels a day. It's a major, major contraction.
Markham:If they have to pay for their own GHG reducing activities, they will be not be able to compete, once we hit peak oil demand and prices begin to begin to fall. That's that's what's on the table here, and I think that's why the Pathways Alliance, which is the Oil Sands Trade Association, that's why the CEOs like Purbay are stepping up the public pressure. And they don't talk about that. Right? They don't they don't none of that gets put into the public conversation, and I really think it needs to.
Chris:Well, the simple fact is if we're going to stay within the 1 and a half to 2 c window, there's a there's a consistency across studies that crude oil production and consumption is going to fall 70 to 80%, we're going to need that last 20 for chemical feedstocks, and someone's going to provide it. And the IEA, this is the numbers you're getting here, they go from Canada drops from like 4 or 5000000 barrels per day down to 1.52. Right? That's that's the that's the part that we end up being competitive for. Now that's, okay, yeah, that's that's bad for the industrial and wages and what have you for the existing.
Chris:But we've got 30 years. We've got 25 years to reorientate that industry into making net zero synthetic chemicals, net 0 aviation fuel, chemical precursors, all sorts of things. Right? Our fiber. So all all those skills are completely applicable to the the the commodities of the few the clean commodities of the future, but they have to get on it now.
Markham:But that's the problem, Chris. And I've made this argument in columns is that Alberta, where all of this activity takes place, Alberta is the land of incumbents. And incumbents, as many experts have told me over the years, always gatekeep change. And they always when you're an incumbent, you have 3 options. You can build a, a completely new business model.
Markham:You can reengineer your existing business model, or you can double down on the the the existing business model you've got. And I think after Suncor abandoned any kind of energy transition, strategies last year, it's pretty clear that Alberta Oil and Gas has has doubled down on the status quo. They are trying to resist change. They're not trying to cooperate with and facilitate change. And that becomes a major, major problem for Canadian energy and climate policy.
Markham:It already is. I mean, it's why we're seeing the big fights between, premier, Danielle Smith and prime minister, Justin Trudeau over these kinds of issues. And this leads me to the third point that Podesta made, and it was more it's more of a vague, signal, but it's the one that actually caught my attention the most. The task force will identify what more we can do at home and abroad to further position producers to thrive in this new race to the top environment. That means that we are it's an admission that the US is in a global clean energy arms race with the EU and with, with China.
Markham:And the the American government is taking it very, very seriously, and there's no way that producers as big as the Alberta oil sands or maybe it's electricity system. Whatever it is, they're not gonna be able to slip by unnoticed.
Chris:No. And that's absolutely true. We the we need a national okay. This is the thing is Canada is a federation. Right?
Chris:And we've handed a lot of powers and a lot of decision making to our to our provinces, both structurally and by matters of of, you know, sort of just common practice. That which means that we now count on the provinces on building net zero industrial structure plans for themselves, industrial policy, or just plans for the future one way or the other. And arguably, I'm not really worried about British Columbia. I'm not worried about Quebec at all. I'm getting less and less worried about Ontario.
Chris:I think they're starting to wake up and smell the coffee in terms of electric vehicle manufacturing, nuclear, you know, the things that they're that they're good at. I am very worried about Alberta. I'm worried like, just the the moratorium they put on effective moratorium they put on wind and solar is now cut off, they were the fastest growing wind and solar operators in the country that cut that off. Right? They you know, you've got the investments from Dow Chemical and what have you.
Chris:There's a few other bright points, but, you know, Alberta could make hay out of this. Alberta, Saskatchewan could very much make hay out of the net syrup, the clean industrial global clean energy transition, and they're choosing to go another path. And the ultimate price will not be paid by the companies, they will move on, their CEOs will collect their pay, collect their bonuses and paychecks and move on somewhere else. But the the workforce is there and the provinces and the capacity to pay for public goods will suffer if those jurisdictions are not competitive going by, you know, 20 years from now?
Markham:Chris, this has been our argument for the last 4 or 5 years at Energy Media. We have argued this over and over and over again. This is we're thumping this tub as hard as we can. I agree with you 100 100%, especially about the the argument that Alberta, could actually make hay with this. You know?
Markham:We've talked about how, the Alberta could transition the, oil sands and its bitumen, from making feedstock for refineries into making feedstock for carbon fiber and and asphalt binder and activated carbon and other things, and and how they can use, you know, capture c o two, to make, products like vodka and cloth and and what have you. So there this is the the problem is the, it seems to me that what Podesta announced, 2 weeks ago was essentially it kicked up the American response to the energy transition by another a factor of 1 or 2. Like, it was very, very important. And as a supplier, you know, we're one of the hinterlands that supplies the metropolis with its raw materials and and other inputs, it behooves us to pay as Canadians to pay attention to this. This is a huge signal from Washington that the game has changed, and I did a Google, search to see if any there were any news stories that had run about Podesta's speech, not a one.
Chris:Yeah. What what oh, what's interesting is if you compare like, if you were to compare Alberta to Texas, what's going on in Texas? They're absorbing an incredible amount of sun and wind very, very quickly. They have the most the most open permitting regime in the US. And it's stunning to watch it happen, adding batteries, what have you, there's hiccups along the way, but they're transitioning their electricity system extremely quickly.
Chris:And all along all along that South Coast there in Louisiana and Texas, they are putting in the beginnings of clean of net zero industrial hubs. You've got CCS clusters, hide hydrogen clusters, clean chemical clusters. They're working really hard to get CCS permitting p b to work. Yeah. Sure.
Chris:A lot of this is not popular with people, but this is part of the transition, the deep industrial transition. And Texas is going to be just fine.
Markham:Yeah. Well, what the the stuff that you're describing, though, those hubs, for example, coming out of the inflation reduction act.
Chris:Yes. They are. And and and also the the one before, the the the IIJA, the big infrastructure act. Yep.
Markham:Yeah. Exactly. And you've got people like and I I bring up Jigger Shaw all the time because he's so well known. You know, the the former clean energy investor, now runs the Department of Energy's loan program, has got tens of 1,000,000,000 of dollars, and he runs around the country as an evangelist for these kinds of projects. And he's been pushing hydrogen hubs, for example.
Markham:He's been pushing virtual power plants, and that is has accelerated the acceptance in the US of that kind of an approach. And I know he's been active in Texas in setting up some of these, some of these hubs that you've been talking about. Whereas in Canada oh, and by the way, the other thing is that, even though Texas, talks a good game about preventing the US federal overreach in in in the state and so on, When it comes to these kinds of activities, it's basically hands up. It hasn't taken any specific measures that I've noticed, you know, to stop the federal government from doing what it's doing. Unlike the when they sued the Obama administration over the clean power plant,
Chris:There, they
Markham:had an active pushback. Here, they're just sort of tolerating it because it's, you know, 1,000,000,000 100 of 1,000,000,000 of dollars flowing into the state. Whereas in Alberta, the Alberta government has passed the sovereignty act. It's it's active it's basically saying, that every federal dollar that gets spent in Alberta has to be approved by the Alberta government, and it is putting up barrier after barrier after barrier. Some of them are legal.
Markham:Some of them are you know, they're they're questionable constitution constitutionally, but they're doing it. And the politically, they're putting up a fence around the province exactly the opposite of what Texas is doing. And that is a big problem because Alberta is 38% of Canadian emissions, even though it's only 12% of the the population, and it really is, at the end of the day, the heavy industry center of Canada. If it doesn't transition, we're in big trouble.
Chris:No. And the problem is they've been playing a game for about 5 odd years now. We're just delayed, delayed, delayed, delayed until the conservatives get in. Right. And then the conservatives, they figure they'll cut the gut the, I don't, you know, parts of the conservative party may wanna gut climate policy, but I think very smart bits of it realize that the game has shifted.
Chris:The Americans have shifted. The Europeans have shifted. The Chinese like, literally, the Chinese have completely revolutionized the global auto industry at this point in time and soon the freight truck industry. Right? So it's reality has moved on without us.
Chris:And just assuming ClimateVol is gonna go away is a loser's game at this point.
Markham:That's exactly right. And and it's very short term thinking in in order and if you're looking at it from the CEO's point of view, look. If when Alex Pourbaix was sitting in the CEO's chair at at Synovus, If you look at their investor presentations, they are, promising investors that they will return 75% to 87% of of their company's free cash flow. Now I had, venerable energy economist, Phil Verlager, on a couple of times. And he said, when the investors start demanding that level of return Yes.
Markham:In the form of share back, buybacks, and, it's basically they're asking for their capital back.
Chris:Yeah. It's it's a shutting down of the industry.
Markham:Yes. Exactly right. And so what they have to what they're doing is the CEOs are playing this very they're they're walking this knife edge where they have to keep their investors happy. They want they don't want their stock price to tank. They don't wanna be fired because they, you know, their stock price fell by $50 or whatever it is.
Markham:And and at the same time, they have to look like they're they're playing the game, the long term game, where they're put you know, responding to climate policy, and they're they're gonna be competitive. They're gonna be the last barrel standing. It's commonly heard in Alberta. And but behind the scenes, it it basically as as Berlager said, it's a sunset industry, and they're shutting it down.
Chris:With all sorts of implications. Oh,
Markham:massive. Because oil and gas is Canada's biggest export sector by a factor of at least 2. It's huge.
Chris:Yeah. No. And it's too bad. Like, not that long ago, we it was auto parts.
Markham:Yeah. Not and and auto parts now would come in number 2 at about $60,000,000,000 in oil and gas is out around a 120,000,000,000. Most of it would be US, of course. But this is the Podesta speech is another milestone in the in that tells us it signifies to the extent to which the global system energy system and the other systems that support it is changing, and how rapidly it's changing and how thoroughly it's changing. And Canada parts of Canada get it.
Markham:I think in BC and Quebec that we absolute you know, those those provinces absolutely do, but other parts don't, and that is not a good recipe for a successful adaptation to change.
Chris:What I found interesting about Podesta speech is they'd been working for a couple years trying to get a deal with the Right? And there was some frustration, because literally, they're not talking the same language with each other. I'm not worried about that in the long haul. They'll find all the grounds for agreement. But what he laid down is that no matter what anybody else does, the US is going to plunge forward with some with their own version of trade and climate policy.
Chris:And, you know, if we're not aligned with that, we're gonna get burned.
Markham:Yeah. And and thus far, we are not aligned with it, and, we've they tried. I'll give the Trudeau government credit for this. They have, over the course of the last, especially since 2019, they are trying to align those policies. They're trying to put in, you know, the, carbon, a carbon price, that works, carbon system that works, clean, electricity standards and clean fuel standards and and so on.
Markham:But being met with so much, pushback from the provinces that it makes implementation very, very difficult and as as made us laggards in this space instead of, the, instead of leaders. And that's that doesn't bode well.
Chris:Well, one there's another thing in Podesta's speech speech they might wanna mark. He said, we're not pulling the ladder up after us. We're gonna climb, but we're not pulling the ladder up after us. So what I read into that is we're gonna we're gonna help along, and we're gonna work with anybody who's working in the same direction as us. I'm especially gonna help pull up, we're gonna pull up our our less fortunate allies.
Chris:I'm not I'm not talking Canada. I'm thinking like our allies in the developing world that are aligned with us. We will haul them up with us. But the indication is anybody who comes crossways of them is gonna run a cup of tea.
Markham:Well, look. I I one of the thing Podesta also mentioned a COP 28 that that vice president, Kamala Harris launched the clean energy supply chain collaborative. And and he specifically said like minded countries, and they're gonna create high quality, secure, and diverse clean energy supply chains for all of those clean energy technologies, you know, like battery batteries and and electrolyzers and EVs and on and on. And and that would seem to be an an indicator, you know, that if you wanna play ball, you if you wanna, play in this game, that you need to get into these initiatives and work with the Americans. And I wanna talk just briefly to wrap up our interview about the recent announcement, just a few days ago that Honda is going to spend $15,000,000,000 to build an EV plant, an EV hub in Canada.
Markham:This is big news. And just as predictable as the rising of the sun in the east is all of your conventional economic, economist colleagues, who shall go unnamed to protect the guilty, immediately came out and criticized it as corporate welfare and we're you know, we could spend that money somewhere better. And I will give you my standard response to that. You can either build it like China did, or you can buy it. If you don't build it, you have to buy it.
Markham:And if you don't do either of those things, you're not gonna get to play in the clean energy economy of the future. And Canada, to its credit, is at least trying to buy its way in. You know, it it's we I think the provincial and federal governments are are putting up about $5,000,000,000 of that 15,000,000,000 to get Honda. But that's the price to play in this poker game. And if you're not prepared to pay for it, if you're if we're gonna if we're gonna whine and snivel about every, you know, dollar that we put out like this to to make sure that we build these supply chains and the industry, that that is not a good sign.
Chris:I I would put these 1,000,000,000 that everyone keeps getting excited about, like, 5, 10, 15,000,000,000. Like, our economy's well into the trillions at this point, but on an annual basis, you know, government expenditure is, you know, 100 and 100 and 100 of 1,000,000,000 every every year one way or the other. The Europeans are spending this kind of money. The Americans are spending this kind of money. The Chinese and their own equivalents have been spending this money for 20 20 odd years, and they built it.
Chris:This is the price like, imagine your economy is like supertanker going in one direction. There's a cost to spinning the rotor. Right, and pushing off in another direction that like, say you're heading towards the rocks with your super can tanker. There is a cost to shifting off to the clean to to the channel without rocks in it. I I look at this these as rudder moves more than more than anything else.
Chris:So they're signaling. Now I I might argue some some more 1,000,000,000 for electricity infrastructure, to, you know, to beef it up across the country from
Markham:from And there's a high high voltage in Providence.
Chris:Yeah. And and also the the this the high nameplate stuff, like high voltage energized, but also just help for the utility, like, right down to the to the, to the voltage, shifters in in our neighborhoods and what have you. So the Brent the French word came in and not the English word. I don't know why. But it's like it's from top bottom to top.
Chris:We're working with the 19 fifties arc electricity transmission architecture. We need 100 of 1,000,000,000 of investment over a couple of decades to bring it into the modern era where electrons can flow wherever they want, wherever they're coming from, right, in terms of supply, demand, what have you. That we need that too on top of these nameplate things. So, anyway
Markham:A month ago, and you and then the context for the my my next comment is the moratorium that premier Danielle Smith announced in August of last year, then, ended formally ended on February 29th, but introduced enough rules that it's now become kind of a soft moratorium. It will greatly impede the expansion of wind and solar, in Alberta even while she says that they're gonna promote it. But here's the context for the interview I did a month ago with Ata Ramon, who is the grid planner for the Alberta Electric System Operator. And and I asked Ada about these kinds of things because my context for this is the Americans and the Europeans and the Chinese who are building out these electricity systems just as you described. They're transforming their power grids in real time.
Markham:They're modernizing them. And and I sort of laid that out for Ada, and I said, like, what's going on in in Alberta? Alberta seems to be behind. He says he he denied that, of course, because that's his responsibility. I get it.
Markham:But but he did say he said, look. We're gonna we're gonna integrate a lot more wind and solar into our power grid, and we're already investigating and implementing many of the power controls, digital controls, power electronics, high voltage, you know, changes to transmission. All of that is either underway or we're studying it, and we'll be doing it in the near future. He gave a very, very different view of how of the, Alberta power grid than you would ever get from the premier.
Chris:Yes.
Markham:And and and it's fascinating to me that the the agency, the technical people who keep the lights on in Alberta see the power grid so differently from the politicians and the policymakers. And and that that that seems to be a conflict there. And maybe maybe the politicians, their rhetoric is nothing no more than that and and, you know, the the real work that needs to be done will get done anyway because that's technically required. But I what I fear is that the hesitancy, the conservatism of people like Danielle Smith will impede the work of people like Otto Ramon. That's what I worry about.
Chris:I I have no worries about the technical competency of Alberta to transition. Right, like the engineers, the workers, the labor, the what have you. And it was happening anyway. And to my experience, it's culturally probably the most entrepreneurial province that we have going. Right?
Chris:The resisting such a business model as the clean energy transition, it's a bit of a weird almost it's like reflexive social media phenomenon. Like, it's I I don't understand it. I get I get the idea. It's attached to incumbents, and they're and they're supporting it and what have you. But there is there is no resisting.
Chris:So it will happen anyway, but it can happen slowly, you know, faster and cheaply or slowly and more expensively. Right? And, you know, and investors, people with all their 100 of 1,000,000 of 1,000,000,000 of their own money coming to regions to invest in factories and invest in in all sorts of things. They see these kinds of things where they're gonna put their money where it's safest from from any sort of political risk.
Markham:Well, Chris, that's probably a a good note on which to end, because the argument that you just made is literally the argument we're making now and have made for for a number of years. And, there are we could have a very spirited discussion about why it's like that and how that operates in the Alberta context. We've done a lot of work here at Energy Media about and understanding that, but that's grist for another, podcast interview. Chris, this has been fascinating. I I learned a lot today about what's going on at the international level and, how all of this how Podesta's speech fits into the broader context, which I did not understand as I read it.
Markham:I, you know, I got understood some of it, but you've really helped me put it into the broader context. So thank you very much for this.
Chris:My pleasure as always, Mark, and thank you very much for the conversation.