The Three Amigos and the Next Phase in Clean Energy and Innovation Policy

The Three Amigos and the Next Phase in Clean Energy and Innovation Policy

At the 29 June 2016 “three amigos summit,” North American leaders announced an ongoing partnership in addressing climate, clean energy, and environment. In many ways, this is welcome news, marking a unique moment when leaders leverage their mutual concerns for continental integration and climate change. At the same time, this partnership is just the beginning of the broader political/economic transformation essential for any hope of meaningfully confronting climate change. Here are three questions to help us ponder this “new era” in clean energy and innovation policy:

1) Why do we need to embark on “new era” of clean energy?

The short answer: climate change. The longer answer: North Americans, particularly Canadians and Americans, contribute disproportionately to climate change and therefore have a greater responsibility to mitigate it. The World Resources Institute notes that Canada, the US, and Mexico are all in the top ten per capita emitters of greenhouse gasses (GHGs) in the world (including land use change and forestry), with Canadians holding the distinction of being the worst per capita emitters. Historically Canada has contributed about 2% of global GHG emissions, and yet its population is equivalent to less than 0.5% of the world’s population. Since 1990, the three North American nations have contributed nearly one-third of the world’s GHGs.

Add to this the pledge that G7 leaders made last year to completely phase out fossil fuel use by the end of this century, and another pledge that G20 leaders made in 2009 to phase out subsidies to the fossil fuel sector. Decarbonizing the global economy is a gargantuan task. If we hope to accomplish this within the next eight decades, we need to take steps now.

2) What are the “signposts” of the new era?

A key Canadian signpost is a demonstrated political commitment to addressing climate change. The creation of a new governmental approach to climate change includes express participation at the Paris climate talks last year, a new high-profile cabinet position with an enhanced portfolio, and renewed dialogue between the federal and provincial governments.

A second signpost is the recent “Memorandum of Understanding Concerning Climate Change and Energy Collaboration,” signed in February 2016 by all three North American partners, which aims to enhance energy information sharing and building new markets for clean energy and low carbon innovations (a sort of precursor to this new agreement, dubbed “green NAFTA”).

A third signpost is the shift in thinking about the centrality of Alberta’s oil sands to North American energy security. This includes renewed emphasis on US shale operations, the US decision to reject Keystone XL, the declining price of oil, and the emerging consensus about curtailing oil sands growth, as evidenced by a recent call for a moratorium signed by 100 leading scientists in the US and CanadaThe idea of “leaving oil in the ground” is no longer the heretical notion it has been.

A related signpost involves changes to the supply, demand, and price of both oil and renewables. Not only has the price of oil faced a dramatic downturn since its record highs only a few years ago, it has become increasingly volatile, as the Wall Street Journal has noted, with price swings much larger than in previous years. At the same time, the cost of both solar and wind has decreased dramatically in the last five years (58% for wind and 78% for solar), making these technologies more affordable, but also more profitable, signalling to investors that renewables are more stable than fossil fuels. The overall trend of investment in clean energy — wind, solar, hydro, biomass, and biogas — has been tremendous, with Clean Energy Canada reporting $45 billion in spending over the last five years.

3) What are some key challenges facing this transformation?

Despite impressive momentum behind North America’s clean energy transition, a number of challenges remain, among them the politics of defining clean energy in the first place! The case for solar and wind might be a slam-dunk, but all forms of energy have their “dirty” sides. Various jurisdictions naturally want to make the most of the resources available to them; for instance, British Columbia’s major push to brand liquefied natural gas as “clean” rather than a slightly less polluting fossil fuel. Nuclear energy, embraced by various environmental groups and specifically mentioned in the agreement, faces difficult politics surrounding whether or not atomic energy should be part of the climate change solution. Hydro too presents environmental challenges relating to flooding, altered watersheds, and wildlife habitat destruction.

There is, ultimately, a lack of consensus about the best economic tools to promote clean energy innovation in the context of climate change. Should we shift subsidies from polluting industries to clean ones? How would this occur equitably without political interference or corruption? Should we tax carbon (as in British Columbia and Alberta) or use a “cap and trade” system (as in Quebec and Ontario)? There are plenty of ideas for economic policies to transition to a green economy but not everyone agrees on which is best!

A third major challenge is that the overwhelming focus has been on “greening the electrical grid” without the commensurate attention to electrifying those sectors run primarily on fossil fuels. Even if we completely greened Canada’s grid, GHG emissions would only drop by 12% since agriculture, transportation, oil and gas, and the so-called “emissions-intensive and trade-exposed industries” are not yet powered by electricity. This is only tacitly mentioned in the new partnership.

This partnership is a step in the right direction, since the three amigos must embark on a new era of clean energy development to reverse the bad habits of the past and achieve international climate change commitments. This “new era” emphasizes decarbonization through innovation, investment, and international co-operation on low carbon energy and green technologies. But challenges remain, including the problems of defining “clean energy,” inter-jurisdictional policy coherence, pricing carbon, encouraging innovation, and revolutionizing the way we use energy, not just how we make it.

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