Will Carney learn from Trudeau’s mistakes?

If Prime Minister Mark Carney intends to transition the country’s economy off fossil fuels to respond to the climate crisis, he will have to navigate complex political terrain and avoid the pitfalls of his predecessor, experts say.

The new balance of power in the House of Commons seriously threatens climate action for a handful of reasons. Because the Liberals secured a minority government, extra attention will need to be paid by Carney to keep the NDP and Bloc Quebecois on his side to advance climate regulations and legislation. But Carney will also find himself under immense pressure from the Prairie provinces, the Conservative Party of Canada and the fossil fuel and banking industries to roll back climate policies. 

Among the policies already under fire are the proposed cap on oil and gas emissions, clean electricity regulations, the impact assessment act and the competition act’s rules that prohibit greenwashing. 

Ahead of the election, 14 oil and gas executives penned an open letter demanding the federal government repeal a slew of policies designed to cut emissions and protect the environment. And days after the election, Alberta Premier Danielle Smith upped the ante after previously endorsing the industry’s wishlist. 

On Thursday, she said she was referring federal clean electricity regulations to the Court of Appeal of Alberta, calling it “unconstitutional” federal overreach and claiming the federal government refused to collaborate with her province. (In fact, the final clean electricity regulations were weakened following consultations with Alberta and Saskatchewan). The comments came days after requesting the federal government “reset the relationship with Alberta.”

“I will not permit the status quo to continue,” she said in a statement Tuesday. “Albertans are proud Canadians that want this nation to be strong, prosperous and united, but we will no longer tolerate having our industries threatened and our resources landlocked by Ottawa."

In broad strokes, that’s the fossil fuel pressure that will be brought to bear on Carney: cave to the oil and gas sector’s wishlists or face a separatist movement whose flames are fanned by Smith. 

James Rowe, an associate professor at the University of Victoria, agrees Carney will face tremendous pressure to develop more fossil fuel infrastructure and support further oil and gas extraction. But he said Carney should recognize the political dynamics driving Smith’s antagonism toward Ottawa and understand he is operating from a place of strength. 

“It's useful for her politically to have a foil, and there's really little he can do that will satisfy her,” he said. But because Alberta is scheduled to have an election in 2027 (which would fall within Carney’s mandate should his minority government hold) and Smith is exploiting a national emergency to stoke an unpopular Alberta separatist movement, Carney should recognize she’s “vulnerable,” Rowe said. 

Throughout the federal campaign, Carney spoke of an all-of-the-above energy strategy to make Canada a superpower in both renewables and fossil fuels. As previously reported by Canada’s National Observer, pursuing both isn’t a credible strategy from a climate point of view. But it is popular with Canadians, according to polls. 

Carney may understand the climate file well, but he’s also proven himself to be a “pretty savvy political animal,” Rowe said. “Part of that is the willingness to sacrifice principles for strategic maneuvering and power. 

“He's obviously willing to do that, despite his knowledge on the file, so he might be prone to moving in the [more fossil fuel] direction that isn't actually wise atmospherically or financially, but might have some political yields,” he said. 

Learning from the Trudeau trap

If there is one major lesson to learn from the Trudeau era when it comes to climate policies, it’s that the fossil fuel industry won’t be satisfied with anything short of full-throated support, experts say. When former prime minister Justin Trudeau first came to power he, like Carney, pledged to lower emissions and expand fossil fuel infrastructure. 

The “grand bargain” that was struck was essentially that Ottawa would buy the Trans Mountain pipeline, but it would also put in place a carbon price. The idea was to satisfy competing demands from the oil and gas sector and environmentalists. Seven years later, the consumer carbon price is dead, the industrial carbon price is under fire, Trans Mountain’s price tag has escalated by tens of billions of dollars and Liberals were still accused of being anti-pipeline throughout the campaign. 

Richard Brooks, climate finance director with Stand.earth, said in an interview that Trudeau’s decision to offer the oil and gas industry Trans Mountain, hoping “it would shut up everybody in Alberta,” backfired. All it did was embolden the fossil fuel industry to push Liberals harder because they learned that if they pressure the government enough, they can get a multi-billion dollar pipeline built with taxpayer money, he said. 

“If you give in too many times, eventually people are going to say, ‘this is how you get business done and we're going to just keep screaming louder for more,’” he said. “I think there's a risk here with Carney that he will take the same approach, that he'll say let's do this for Alberta and we'll quiet them down.”

Trans Mountain was “just a huge black hole of resources,” Rowe said. “Political capital and actual capital, and to what end? 

“Despite those massive investments and all of the acrimony that got generated around that project, what yield did it really offer to the Liberals?” he said “So, I think Carney would hopefully take a lesson to be careful with that kind of approach.”

Fork in the road

Carney will also face pressure to roll back climate-related policies from the financial sector. As votes were still being tallied Tuesday, Canada’s largest bank RBC scrapped its goal of providing $500 billion worth of sustainable finance by the end of this year, blaming Canada’s anti-greenwashing rules. 

As previously reported by Canada’s National Observer, sustainable financing has been a prime target for greenwashing. Canadian banks, including RBC, loaned Enbridge over $1 billion to help it expand its fossil fuel pipeline network using “sustainability-linked” loans, which experts called a “slap in the face” to stated efforts to cut emissions. 

Given Carney was at the forefront of advocating for the financial sector to recognize the risks of climate change — spearheading the Glasgow Financial Alliance for Net-Zero that banks, including RBC, signed up for before quitting earlier this year — it’s possible he’ll see banks retreating from sustainable finance as crossing a line, said Brooks.

“He is very deeply associated and personally connected to these banks,” he said. Carney “will take offence that they are not in line with his values, which is to see climate action, and [hopefully] that will empower him to step in and use the instruments he has available to him as the federal government to regulate and legislate action from Canadian financial institutions.”

[Photo: Richard Brooks from Stand.earth reacts while listening to the virtual Royal Bank of Canada annual general meeting, in Toronto on Thursday, April 7, 2022. (Christopher Katsarov/National Observer)]

But Carney is hesitant to regulate banks to the fullest extent. Previously, he said he does not support legislation like the Climate Aligned Finance Act that would require federally regulated financial institutions, such as banks and pension funds, to align their portfolios with Canada’s emission reduction targets. Carney told a Senate committee last year he disagrees with the bill because it “dictates” how banks should adjust their practices with “punitive” rules.

This is a fork-in-the-road moment for Carney. He can either choose to transform the Canadian economy into one that is climate resilient and contribute to emissions reductions around the world, or continue supporting the fossil fuel industry’s expansion as this country has done for decades, Brooks said.

Four years ago, Canada’s climate watchdog Jerry DeMarco laid bare, across a series of scathing reports, decades of failure. He accused the Trudeau government of “policy incoherence” as it attempted to both curb emissions and grow the fossil fuel sector, likening it to some departments pushing a boulder up a hill, while other departments pushed it back down. 

“The incoherent approach doesn't make sense — taxpayer dollars are finite, investment dollars from carbon markets are finite as well — and we can't be wasting them on paying for east west pipelines, or accelerating new projects to export LNG to Asia when demand for LNG in Asia is actually dropping,” Brooks said.

And as a global banker, Carney understands this, he said. 

“It really is a moment of choice for him, as it is with any politician when you've got your values, you've got your knowledge and experience, and then you've got external factors that bring their own pressure on you,” he said. 

Countervailing pressure

Alberta, Saskatchewan, Bay Street and the fossil fuel industry are all expected to push Carney hard for their pro-oil and gas priorities, but counter pressure exists too. 

This is where Quebec enters the frame. Liberals won 43 seats in Quebec on Monday — more than the party won when Trudeau cruised to his majority government in 2015 and a significant step up from the 35 the Grits won in 2021.

Polling consistently shows Quebec voters are the most concerned about climate change in the country. And Bloc Québécois leader Yves-François Blanchet, whose party could make or break Carney’s minority government, said there is no future for oil and gas in the province on Wednesday.

If Carney is politically strategic, he must consider how to hold onto the support Quebec voters offered him, Rowe said. Liberals “barely made any gains in Alberta and Saskatchewan, and so they don't have much to lose there,” he said, adding that the party can’t afford to alienate people in Quebec. 

Rowe says because Carney will be contending with a minority government, the NDP will still have influence even if the party is significantly diminished. But because polling suggests climate action is not a top priority for the public, it will be up to the climate movement to bring the issue back into national prominence, he said. 

Many in the environmental movement are advocating to use the national emergency caused by the US trade war as an opportunity to transition off fossil fuels and build a clean, resilient economy. 

“Prime Minister Carney says we must do the impossible at speeds we haven’t seen in generations, and that starts with leaving fossil fuel nostalgia behind,” said Amara Possian, with 350 Canada, in a statement. “To protect Canada from climate chaos and Trump’s trade war, he must invest in the clean energy future we deserve.”