It has been suggested that Canada’s 2021 federal election did not change much, voters have sent Members of Parliament back to Ottawa with another minority and a message to get to work. They have decided on similar levels of support for the traditional mainstay parties, similar levels of seats, and of course a continued minority government led by Prime Minister Trudeau.
While this analysis is accurate, it glosses over important nuances that could alter the Canadian political landscape. Specifically, the declaration from all parties for the first time that; climate change is real and must be addressed with a reduction in emissions in an accelerated timeline.
While each party has a different way of addressing this declaration (and the merits of each can be debated), one thing is clear – Canada’s political leadership, across all parties, is focused on how to reduce emissions in Canada, not if it should be done.
But the question remains how?
As the energy sector in Canada continues to be heavily impacted by major parties’ decisions, perhaps the question is better put as simply “what’s next?” and how can energy companies make decisions now that position themselves for future success as Ottawa’s decisions come into play.
We put these important questions to the Honourable Lisa Raitt, current Vice-Chair, Global Investment Banking at CIBC Capital Markets, but also known as the former Minister of Natural Resources for Canada as well as Deputy Leader of the Conservative Party of Canada. In a fireside chat, Lisa and I discussed where we’re all going and what she’s watching.
Further, Stephen Smart SVP and General Manager for Western Canada moderated a panel of H+K energy experts from across the country with SVP and National Energy + Industrials Sector Lead Matt Gibson, Vice-President Pierre Tremblay and Senior Account Director Natalie Sigalet, weighing in on their pan-Canadian view from their homes in Ontario, Quebec and Alberta.
Here’s what we learned:
1. New Political Positions
Coming into the campaign, Conservative Party of Canada leader Erin O’Toole tried, and came up short, on having his party pass a resolution declaring climate change as real and man-made. While the vote came up short and caused a few bad media cycles, Erin O’Toole remained undeterred leaning into the position and declaring that he as the leader would set the direction of the party. A bold move for O’Toole and further evidence of a push to the middle, as many see the Liberals moving further left to challenge the NDP for seats in urban centres.
For his part, the Liberal leader and the continuing Prime Minister spent much of the campaign expressing his desire to fight climate change and cap emissions and economic policy, which is an interesting choice given that our own polling (found here) would show that on economic issues, the Conservatives take the day. Recasting ‘climate change policies’ as ‘economic policies’ could see the Liberals lose their considerable advantage with voters who cast their ballots solely on environmental issues.
2. The 905 Stronghold
The election paints a stark picture of the electorate in some of the most populous regions, and in some of the most remote ridings as well. The Liberals are the clear victors in populated urban centres while much of the suburban and rural areas of the country remain solidly blue. Perhaps the biggest illustration is the vote-rich band of ridings around the city of Toronto referred to as the 905. These ridings to the west, east, and north of the formal City of Toronto parameters, are home to voters who famously significantly influence how the country is governed.
Big gains in this region previously, for the Conservatives, kept Stephen Harper the Prime Minister for ten years. Currently, the stronghold on 905 seats by the Liberals ensures the Trudeau government remains in power. This belt of voters is filled with families with children and mortgages, Toronto commuters and former city of Toronto dwellers, who all currently prefer the Liberals over the Conservatives, this is even more so the case with 905 female voters.
While energy policy per se is not a major driver of votes here, climate change and emissions reductions are a big part of the mindset. We expect that energy and environment policies from both the Conservatives and the Liberals will largely reflect the mindset and desires of this key demographic.
3. A Big Future for Small Modular Reactors
The long-promised “nuclear renaissance” appears to be on Canada’s doorstep, at least for policymakers and energy insiders. Small Modular Reactors (SMRs) have long been seen as the future of emissions-free power, despite considerable divides across the political spectrum on the use of and future for nuclear energy.
The governing Liberals, through the Minister of Natural Resources Canada, opined that SMRs were “key to meeting our Paris Accord agreements.” In what clearly was a coordinated message with the Biden administration, who used very similar words a few days later, this pronouncement was the first time in a considerable period where the Liberal Party has cautiously embraced nuclear power. The Conservatives continue to be large supporters of the technology and Erin O’Toole was the only leader to mention nuclear or SMRs in the campaign with a passing reference in the English debate.
We expect to see a big push by the federal government into SMRs, despite the long timelines and short minority government horizon. We anticipate that public policy questions on energy will slowly move from “renewable power” to “emissions-free power,” a small language distinction with a big difference for Canada and, arguably, the world, as the search for technology to solve climate challenges continues.
4. The New Brain Drain
Prior to the campaign, the Prime Minister placed a great amount of his political capital into the “The Just Transition.” A set of policies meant to systematically move from carbon energy industries to a new place reflects the intent to get to net-zero emissions. It has been a long time since a Prime Minister named Trudeau has tried to reorient the economy of energy-producing provinces and the population in those provinces continues to be wary of such moves.
During our fireside chat with the Hon. Lisa Raitt, we discussed the delicate balancing act that the government must walk on with the Just Transition. While there can be cries of shutting down oil and gas extraction, and by extension shutting down Canadian operations, but this would be seen as counterproductive by many. Any transition must recognize the expertise, R&D, and infrastructure of our existing energy companies. A premature transition could see the very expertise needed to transition depart from our energy sector as companies experience constraints due to politics over economics.
At H+K, our energy + industrials experts in policy, communications, advocacy and public affairs are on top of the latest political, technological and economic developments – and, more crucially, we are always looking around the corner to see what’s next for the energy sector.