Anyone who knows me, knows that I love to go down rabbit holes. It is a part of my nature to want to know more. Anyone who has spent even a little bit of time with me would not be surprised that an ad spot on a podcast could cause me to look up a companies’ Annual Report. While, one could say that Jonathan V. Last of the Bulwark’s “Next Level” podcast and his melodious voice was to blame, this would be disingenuous.
As he read his ad copy for HelloFresh, I remembered that HelloFresh – a meal prep delivery service – was associated with a few companies including Factor; and that is when I became surprised. For in my deep dive, through the website and then through their Annual Reports, I came across a pretty innocuous paragraph which would shock most Canadian political commentators:
“According to the January 2024 update of WEO, the economy of Canada grew by 1.1 % in 2023 . Following a strong recovery from the pandemic recession, Canada’s economy has remained resilient. The unemployment rate remains low, over a million more Canadians are employed compared to when the pandemic hit, and wage growth has outpaced inflation for the past nine months. The International Monetary Fund (IMF) projects that Canada’s economic plan will deliver the strongest economic growth in the G7 next year, despite a subdued global economic outlook. Yet it continues to remain a challenging time for Canadians owing to high housing costs and still elevated consumer prices. To curb inflation the world’s central banks have implemented the steepest series of interest rate increases which has led to slowing of the Canadian economy. The government’s economic plan is helping the country navigate these economic headwinds”.
Or put differently, Canada has economic problems; but they are not existential. However, this is not what I feel when I read most of Canada’s pundits. When I read Andrew Coyne in the Globe and Mail or watch him on CBC’s the National, I don’t see this type of sober minded thoughtfulness. The impression provided by Mr. Coyne is one of panic; of desperation, of anguish. The same is true of the words coming from Jen Gerson or Matt Gurney from the Line; and Sean Speer of the Hub.
Now let me be clear. Do we have economic problems? Of course we do. Do we have a productivity problem? Yes. That is why in 1982, Pierre Elliot Trudeau – when he was alive and Prime Minister – called on Donald McDonald to study that and many other issues. It was the Donald McDonald report which Brian Mulroney used to justify the Free Trade Agreement and the North American Free Trade Agreement. It is the same productivity problem which led us to a privatisation of Petro-Canada, to the demand that Canada Post, Via Canada and our airports operate in a cost efficient manner and that we should move from a Manufacturer’s Sales Tax to our present Goods and Services Tax (GST). The productivity problem drove the Chretien Government to download services and balance the books; drove the Martin Government to cut just about every tax and fee and drove the Harper Government to deregulate and reduce the size of government. So let’s be clear minded, Canada has a legitimate productivity problem and Canada has had the same problem for the last 40 years. However, it is also true that we aren’t having adult conversations about those same economic issues.
If we were to have an adult conversation about our productivity problem, I would argue that conversation would focus on Canada’s narrative about just being hewers of lumber, land and water. Our historical economic narrative of the Fur Trade, of Prairie Beef and Wheat, of mining and oil recovery blinds us to economic traditions of a bygone era. By continuing this story, we are not seeing what our future could be. When Premier Moe, Premier Smith and the Hon. Pierre Polievre argue that Canada’s future is in the development of Natural Gas or the purification of our Bitumen resource, we should carefully analyse those words. While Canadian Fossil Fuel production has led us to the wealth that we have, we should all ask one question: should Canadians become even more efficient at Oil, Natural Gas and Coal production when those products will not be desired by many economies in the 2030s, 2040s and 2050s. As an example, since the Harper era, the European Union has been working on a “carbon tariff”. Called the Carbon Border Adjustment Mechanism (CBAM), it is set to go into force in 2026. The CBAM will add a fee to products and that fee will be based on the carbon dioxide emissions. Some of the products which are highlighted include steel, cement and electricity. So what happens when the CBAM is applied to Alberta’s exports like wheat, oil and natural gas? What happens when the CBAM is applied to Canadian Steel, Iron and Copper? Will Canadian industries be just as productive then? Rather, maybe, we might want to put the productivity problem in context and look at industries in which we can be both productive and relevant to a modern economy.
When Tristin Hopper of the National Post argues for the increased expansion of our Natural Gas or moving into the export of LNG, he conveniently ignores that the capital investment and economic return on that product takes more than a decade; and that the economies that are now taking advantage of that market invested into LNG market in the 1970s, 1980s and 1990s. The US started exporting LNG in the 1960s; while Australia did so in the 1980s. To get into that market now, as Tristin Hopper has argued, we would have to wait a decade or two to pay off the capital investment. Only then could we make a profit. While it is true that Germany, Greece and Japan want to have natural gas in the next three to five years; why should Canada build a project when the net return would only come in 2035, 2040 or 2045? It is really important to ask this question because it is quite likely that by the time anyone turns a profit on those projects, they would have to be shut down due to emissions regulations and/or the lack of customers and a market. Or put differently, we need to have an adult conversation about Canadian economic productivity and what is relevant to a modern international economy.
Productivity is important but so is economic relevancy. If you doubt that, look at Denmark, Norway or the EU as a whole. Denmark has a goal of being carbon neutral by 2035 and being run on renewable energy by 2050. At this point, more than half of their electricity is produced by wind energy. Furthermore, their ability to use biomass, solar and other technologies indicates that they will meet their goal. While they are not perfect, Denmark is well on its way to meeting their legally binding target: to cut greenhouse gas emissions by 70 percent in 2030 (from a 1990 baseline) and climate neutrality by 2050.
To Denmark’s northeast, Norway is close to reaching their own goal: to have no new internal combustion (ICE) car registrations by 2025. At present, more than 80% of new car sales are battery electric (BEV) cars; while plug-in hybrids (PHEV) make up 8% and regular hybrids (HEV) make up 6% of the Norwegian car market. What is even more interesting is that the number of electric cars (PHEV, BEV, HEV) is forecasted to overtake the number of internal combustion cars by the end of 2024, if not early 2025.
So in the near future Denmark and Norway will dramatically reduce their need for oil, natural gas and many other products which are produced in Canada. However, this is not the end of the story because
Denmark and Norway are not alone. The EU has two goals. Firstly, by 2030, they want to reduce their greenhouse gas emission by at least 55% as compared to 1990 levels. Secondly, they are looking to be carbon neutral by 2050. This means Europe itself is working on switching away from oil and natural gas, eliminating coal in their steel production and adding a price on carbon to anyone who doesn’t comply with those regulations: whether they are domestic, European or foreign participants. So, if Canadian companies want to export to Europe, if Canadians, Canadian Governments or the Canadian free market want to take full advantage of the EU-Canada Comprehensive Economic and Trade Agreement (CETA); we will have to deal with both economic productivity and economic relevance.
Or I could mention the world’s fourth largest economy: California. They are working on achieving carbon neutrality by 2045. They want to reduce greenhouse gases by 48% by 2030; which is more stringent than the statutory mandate of reducing emissions by 40% below 1990 levels by 2030. By 2045, California would be a very different state because they hope to reduce oil demand by 94% and fossil fuel demand, as a whole, by 86%. To do this, California is already making it harder to buy natural gas. Accordingly, the fourth largest economy in the world has already said that they will be decreasing one of the largest natural gas markets in the world. Again the question comes up: does it matter how productive you are when you can’t export that which you produce?
Now let me be clear, the story of increased electrification, increased energy conservation and increased energy efficiency is not a story which is isolated to the European Union and the United States alone. However, as so much of the Canadian (and Albertan) economy depends on trade, it is just as important that we have a clear conversation about our economic future. Or put another way, if we are really efficient at selling natural gas, but don’t have an interested buyer; we still be in trouble. With that being said, we have to have a less hyperbolic and more mature conversation than we had before. We need to recognize that our change should be driven not by our historic narrative of being hewers of land and water; but by a new vision. We also need to accept the one lesson that we should have learned from the Trudeau-Turner-Mulroney-Chretien-Martin-Harper-Trudeau years: taxes and free trade alone will not change the productivity crisis.
So we need to have an adult conversation to get to a new future. We need to have a new vision to get to this new place. We need to have commentators who see more than just economic productivity. So, we need to witness what is so that we can create the best possible outcome for the most people; while at the same time, we need to protect and help those who will be more damaged by this change. Because if we don’t move together, we will not get anywhere.
52 Ideas 