Climate Action Institute

Issue #03

➔ Lessons for Canada in the nuclear restart
➔ A Trump victory could shake up energy markets
➔ Climate change hits Halloween symbol
➔ Our newsletter sender handle will change to Climate Crunch from Nov.7 edition. Save our address to your contacts to avoid spam filters

Hot takes

➔ What’s new in the IEA’s latest annual report? A dedicated chapter on “Security, affordability and sustainability.” That wasn’t the case in the 2023 World Energy Outlook, and it’s about time. We maybe on the cusp of the “Age of Electricity,” the IEA suggests, but maintaining global temperature’s rise to 1.5C degrees–as set out in the Paris agreement–could easily swerve wildly to a 2.4C world if we can’t secure clean energy critical minerals and make it affordable for consumers. The good news: the surplus of energy—from LNG to solar photovoltaic—, means we could soon be in an energy buyer’s market, the IEA projects. The rise of renewables also means global carbon dioxide emissions are “set to peak soon,” the agency forecasts.

➔ Canadians can save money and enjoy a low-carbon lifestyle. That’s according to a new Clean Energy Canada report that suggests installing heat pumps and buying electric vehicles can do both (as much as $777 in monthly savings for a detached house in B.C.). But that saving hack faces a grim outlook: the end of the federal Greener Home Grants and lack of affordable EVs could make it costlier to go green very soon.

➔ A Trump victory could upend energy markets. Polls suggest the 45th U.S. president has an even chance to win the White House on Nov. 5. That would shake up geopolitics, with Iran potentially emerging as a principal target of U.S. sanctions, says RBC Capital Markets’ Helima Croft . Curbing Iran’s oil production would shore up global oil prices and invoke animal spirits among North American producers, but with consequences for Canada and the U.S.’s modest efforts to curb emissions

➔ Canada’s crumbling road and water systems face a $350B bill. Governments installed drinking, wastewater and stormwater pipes at the fastest rate on record from 2020-2022, but the bill to replace “poor” or “very poor infrastructure” has risen to $357-billion—$100-billion more than previous estimates. It’s an urgent problem with recent episodes in Vancouver, Montreal and Toronto highlighting its frequency and scale—with huge economic impacts. The insurance industry says property claims, driven by floods, now account for 36.8% of all claims.

➔ Before COP29, there’s COP16. In Cali, Columbia. It’s the first biennial UN summit on diversity since the landmark Global Diversity Framework in Montreal in 2022. Key agenda item includes a framework to address “biopiracy,” that would ensure countries are paid for, say, digital fingerprints of rare plant species that biotech companies would use to make drugs. Are you attending COP16? Send us your post-event hot take here.

➔ A series of unfortunate events hit pumpkin production. Tam Andersen—who runs Prairie Gardens in Alberta—says she lost crop early this season to unusually cold weather in June, following on from a drought that hit output last year. “It’s a response to climate change—yet again. We are calling this season the Lemony Snicket season,” she said in a phone call from her 35-acre farm in Sturgeon County. Like other farmers, she is adapting to the changing weather: next season she will plant pumpkins on higher ground to protect them from an avalanche of melting frost.

➔ Bi-Weekly Climate Action Award: To Lennard de Kler who researches wartime greenhouse gas emissions, and will lead a panel discussion at the COP29 summit in Baku, Azerbaijan, in November.

➔ Bi-Weekly Climate Fail Award: A “bonkers” British government proposal to burn imported wood, potentially from countries including North Korea and Afghanistan, to meet Net Zero goals.

The nuclear race is on

If we are nearing the Age of Electricity, as the IEA says, perhaps nuclear is already basking in its Renaissance period, driven by Big Tech. Amazon followed up its 960-megawatt contract with Talen Energy in March, with a US$500-million, 5,000MW deal with X-energy to bankroll a new generation of SMRs. Google has unveiled similar plans, while a Microsoft deal is dusting off the mothballed Three Mile Island nuclear plant, and Nvidia is eyeing Japan’s nuclear power—all to meet their insatiable artificial intelligence and datacentre demand.

While nuclear was given the green light from policymakers at COP28 in Dubai, admittedly the sector had still been waiting to “take off” – until now. The string of recent announcements has nuclear stocks flying, and meaningfully outperforming the S&P 500 on the year.

Shaz Merwat, energy policy lead, points to two key implications for Canada:

➔ Nuclear is in Canada’s wheelhouse , as we know a thing or two—or ten—about the tech. Nuclear is becoming a key provincial plank, most notably within Ontario’s plan to meet a 75% surge in demand by 2050 (to support AI demand and others). There is also room to export our expertise to those warming up to nuclear – Ontario Power Generation’s SMRs are a case in point. The U.S. is already moving swiftly in hawking its SMR tech to Asian countries.

➔ Second, it showcases the need for offtake agreements to drive deployment of new decarbonization technologies. Can Canada replicate this on the carbon capture front? The U.S. IRA provided a robust offtake mechanism with a guaranteed US$85/ton tax credit. Canada’s approach to derisk capital expenditures (investment tax credits) is economically sound, but has struggled to provide carbon price (revenue) certainty to date.

Carbon Markets For The Climate Era

Nine Canadian industries, including oil and gas, petroleum refineries, iron and steel, cement and aluminum, are vulnerable to carbon competitiveness and leakage risks, according to a new report by the newly-launched Commission on Carbon Competitiveness.

Aaron Cosbey, Chair of the Commission and one of the authors, says industrial carbon pricing (also known as large emitter trading systems, or LETS) remains the best option in the medium term.

➔ “But we found some sectors at much higher risk than others (iron & steel, basic chemicals, nitrogenous fertilizers, pulp & paper, with honorable mention to cement),” Cosbey said in an email. “In those sectors there should be more generous use of performance benchmark standards within LETS, keeping the average cost of carbon very low.”

➔ Keeping credit markets in balance will be hard as firms decarbonize, so Canada needs to start exploring options for further protection for the long term.

➔ One option? A comprehensive border carbon adjustment. But it’s potentially trade-illegal, messes with incentives in the domestic carbon market, and would kick a hornet’s nest south of the border.

➔ Another option is product-level GHG intensity standard—as a condition of sale on the domestic market (also applicable to imports).

➔ Both options need U.S. co-operation and complex instrument design. Canada needs to start working on them now, the Commission recommends. Read the full report here.

➔ Canada needs to support both legacy industries and new high-growth potential sectors to ensure long-term competitiveness, the report recommends. “Demand-vulnerable sectors may need capital for decarbonization and/or to invest in new opportunities. And high-growth sectors will have a critical need for funds to establish and grow their operations to reach commercial scale.” It must all happen in concert—and fast.

The Institute in action

➔ At Energy Disruptors on Oct. 2, John Stackhouse and Chana Martineau, AIOC CEO, discussed economic reconciliation. Read the highlights of their conversation here.

➔ On Oct. 16, Myha Truong-Regan was at Canada’s Productivity Summit in Calgary, discussing how energy transition can boost Canada’s economic growth and productivity.

➔ On World Food Day, Oct. 16, Lisa Ashton attended the Arrell Food Summit to hear stories and insights on food innovation.

➔ Lisa will also be hosting a panel on Nature Based Solution in Agricultural Landscapes at the Royal Agricultural Winter Fair on Nov. 1.

➔ What’s on the team’s reading and listening wish list: World Without End (by Jean-Marc Jancovici and Christophe Blain), The Burning Earth (by Sunil Amrith), Gambling Man—Mayoshi Son (by Lionel Barber).

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