The drama of recent months seems unprecedented, not only in terms of a sea change in political and economic affairs, but in the nature and speed of changes in the energy and environment frontier.
We are facing a global recession, a signal event so pernicious that the Conservative Canadian government has decided it is not only acceptable but necessary to run a budget deficit for years to come. In the U.S., air pollution waivers from the Environmental Protection Agency, denied during the Bush administration, are about to be granted.
California's AB 32 fuel standards, specifying permissible carbon emission limits in source fuels for gasoline, diesel and electricity imports, are being emulated throughout the U.S. western states. New standards on a host of environmental issues centred on climate change initiatives are likely in the early months of 2009. The new secretary of energy, Steve Chu, is a Nobel laureate who believes passionately in the power of renewable energy to displace carbon-rich energy generation from coal and, ultimately, even from comparatively clean-burning natural gas.
In short, there is a new sheriff in town, who demonstrates by demeanor, text and policy that he means business. Friendships cultivated over eight years of collegial relations with the Bush administration are likely to be less valuable in the future. Contributions to climate stability, coupled with responsible economic growth, can be expected to have greater currency than in the past.
So what does this mean for Alberta? Although U.S. President Barack Obama does represent a break from the past near decade, he is also the leader of a change in political position that is being felt as far away as China. Recognition that climate change has been accelerated by past and current energy and development strategies is increasingly shaping most political agendas.
With that "dawning" comes the incentive to capitalize on industries and policies that will minimize demand destruction that can destabilize local economies, and develop responsible environmental regulation and legislation that preserves or creates competitive advantage. Alberta is a poster child for this set of opportunities, especially given its vast, technologically accessible hydrocarbon reserves. Although demand for fuels derived from the oilsands has fallen somewhat, the long-term path is clearly positive in terms of demand for the entire suite of products that are available from this source.
The devil, of course, is in the details. The new rules for reducing emissions will put additional pressure on an automobile industry that is already struggling, notwithstanding the fact that such rules are aimed at creating a much more stable industry for the future. The knock-on from this further pressure on the auto industry will affect the Canadian economy generally. To the extent that future investment in fuel derived from unconventional oil sources is affected, Alberta is particularly affected.
Seen from the other side of the coin, however, there is great promise in treating these issues as challenging problems to be solved. In other words, opportunity is knocking.
It's important to keep in mind that compliance with new rules, standards and regulations or policies is not a net loss to the economy. It typically represents a shift from one sector to another, incenting net growth overall if handled well.
In the short term at least, the Obama revolution, especially as it affects business and the environment, is likely to succeed. Ignoring the fundaments of the new policies could bring serious consequences, especially for the Alberta export market. Shifting to address the new rules, however, has great promise.
First and foremost, Alberta, led by the policy and regulatory bodies within the province, must demonstrate that the products available for export meet or will meet emerging environmental standards. In this regard, Alberta can and should become the standard by which new hydrocarbon products can be judged, creating an early comparative advantage.
There are many ways to achieve this end, from cleaning up the origins and byproducts of oilsands operations, all the way to cleaner tailings pond disposal and fuel substitution that cuts the volume of natural gas utilized in production. It will undoubtedly include green credit accounting that is based in renewable energy production and successful carbon capture and sequestration (geological storage). Initiatives in these areas can be valuable not just in meeting new standards, but in defining the role and scope of those standards in the future. Examples of the new Alberta Advantage include better transmission systems that can export, import and balance electricity flows from Canada to and from the U.S.
An expansion of the Alberta grid could ultimately gain access to hydro power in the far North, along with the embedded green attributes.
Developing a co-operative geothermal project with the U.S. Department of Energy could bring diverse benefits, including new investment opportunities, knowledge and engineering exchanges, and substitution of a cleaner power source for coal.
In the end, surviving this political and economic sea change may be as much about perception as reality. Fighting back, lobbying intensely to have standards repealed is likely to be tantamount to giving away future profits. The economic recovery will come, but it won't bring back the rules or even the companies we had last year.
Barack Obama is not just about throwing out the old order; his administration is about a wave of change overtaking every developed and developing nation on Earth to various degrees - addressing a sense of common threat to the environment, while preserving economic advantage and growth. The future is tilting toward Obama. But there is no reason to let his ship leave without forging strong ties to a new, forward-looking and acting Alberta.
(Michal C. Moore is a senior fellow at the Institute for Sustainable Energy, Environment and Economy.)
