Where is Canada? Among Leaders, Providing Energy and Fighting Climate Change

Opening remarks delivered on the Panel: “Securing Europe’s Energy Future: Canada, Where are You?” at the 2022 Riga Conference

October 20, 2022 - Riga, Latvia

Stéphane Dion - Special Envoy to the European Union and Europe and Ambassador to France

Everyone knows where Canada is. What is perhaps a little less known is how much Canada is among leaders in providing reliable energy and fighting climate change.

For a long time, Canada has been a major producer of conventional energy. It has positioned itself as a key player in the transition to a low-carbon economy. Thus, Canada stands out more than ever as a partner of choice for Europe; and Europe has every interest in signing long-term contracts and investing massively in Canada. I will briefly address each of these points, one by one.

Canada is the third exporter of crude oil, the sixth of natural gas, the sixth of coal and the sixth of uranium. Most of these exports go to the United States, which accounts for 80% of energy exports by value. Still, we export energy products to 142 countries and our exports to the U.S. allow them to increase their own exports. And Canada's ability to produce energy is constantly growing. The amount of primary energy produced by Canada in 2019 is 33% more than in 2005, while the world, on average, has increased energy production by 28% in this same period.

In 2021, there were 97 energy projects under construction in Canada and 305 planned energy projects. Oil and gas sector projects are continuing to account for the largest portion of project value, although clean technology projects are also coming to fruition in large numbers.^{Footnote 1}

Canada can provide essential resources for the energy transition to a low-carbon economy. Its critical minerals list contains 31 minerals and metals considered as essential for this transition. Canada is already an important and reliable supplier to mineral-hungry markets, including European ones. It is a top destination for investment in mining value chains and international mining finance: the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSX-V) are home to 43% of the world’s public mining companies. Canada offers unmatched opportunities for reliable production of minerals and metals used in electric vehicles, renewable energy, high-quality battery, clean technology applications, and advanced manufacturing supply chains.

Notably, Canada is one of the top four largest global producers of platinum group metals (PGMs) used in auto catalysts and in hydrogen production and fuel cells, and the second lowest cost producer of refined nickel in the world, due to coproduction of copper, cobalt, gold and PGMs. Canada has some of the largest known resources of rare earth. It has the potential to be a hub for battery-grade nickel and cobalt refining. It has some of the highest-purity hard rock deposits that are expected to produce battery-quality lithium hydroxide. Canada is the world’s largest exporter of potash, a key crop fertilizer.^{Footnote 2} I could go on and on.

Canada is, therefore, a major energy and critical resources producer. But the Government of Canada is well aware that our country needs to do more, because the world is always asking for more, including Europe, where energy and especially electricity prices have risen dramatically, even before Putin’s war.

Especially because of Putin's unjustifiable war against Ukraine, European democratic states are seeking to get out of their energy dependence on Russia, but also their dependence on critical minerals from China. As a result, there is real interest in cooperation on this front, with a stable, allied democracy, strong in technology and R&D, with a skilled work force, and blessed with abundant critical natural resources, one like Canada. This renewed interest in our country is well summed up in the following statement by German Chancellor Olaf Scholz, made on August 22 in Montreal: "Canada has as many raw materials as Russia, but the difference is that it is a reliable democracy. Therefore, a large number of new fields of cooperation can open up between us, because we share not only common values but also a similar view of the world."

Putin's war has made the transition to a carbon-neutral economy even harder to achieve. Indeed, now that Europe has to quickly wean itself off Russian gas, several countries are reverting to coal, which emits twice as much GHGs as gas. Similar surges in coal use are occurring around the world due to gas shortages and high prices.

Europe is thinking more strategically about its economic vulnerabilities and how to deal with them. Europe is looking for a policy calibrated for a world where relations of economic dependence with non-democratic countries, once essentially perceived as a means of rapprochement and engagement, are now seen more as a risk-determinant factor. A reorientation is taking place, the objective of which is to adapt to a world where the security of supplies, especially the supply of energy and raw materials, is no longer determined solely by the standard laws of supply and demand, but must be placed in a context that includes geopolitical and environmental considerations.

Specifically, Europeans are making three requests to Canada:

• to facilitate LNG to Europe within three to five years, to diversify energy supply away from Russia;
• to facilitate the development of critical mineral resources, to diversify clean energy technology supply chains; and
• to transition fuels exports over time to hydrogen.

The most pressing energy need for Europe is the supply of natural gas. As long as cheap Russian gas was a viable option, there was less demand in Europe for LNG from North America. It was then more challenging for Canadian private companies to compete. Before the pandemic economic recovery and Putin’s war caused demand for LNG to soar, global oversupply of natural gas and low prices for LNG in Europe challenged business cases for companies to invest in and build the necessary Canadian infrastructure for export to Europe. Europe was not as interested in our gas. In response to Europe’s new heavy interest in importing Canadian LNG and eventually, hydrogen, projects such as Goldboro LNG (Nova Scotia, Pieridae Energy) and Saint John LNG (New Brunswick, Repsol) are finding new life.

The Government of Canada is working with sub-national governments and industry partners to assess the viability of developing low-GHG emitting LNG capacity on Canada’s East Coast, which could result in exports to Europe in the three to five-year timeframe, but for that, the Europeans will have to guarantee long-term contracts, around twenty years long, given the very large volume of investment required. As European countries and Canada intend to be carbon neutral by 2050 (2045 for Germany), it is requested by both sides that during these years, suppliers should have a plan in place to switch to clean non-emitting hydrogen, as market demand develops.

Canada has abundant and diverse feedstocks for clean hydrogen production, pace-setting tech companies (e.g. hydrogen fuel cells), and about 15 production projects underway at various stages to grow production of hydrogen. And we just concluded an alliance with Germany to start exporting wind-generated hydrogen from Newfoundland and Labrador to Germany in 2025. We can immediately increase our exports of the technologies that produce and use hydrogen, but expansion of hydrogen infrastructure to meet Europe’s energy needs in the medium to longer term will require investments.

Long-term contracts and massive European investments in Canada are, therefore, highly desirable, to achieve our mutual energy and climate objectives. European investors will find in Canada not only the much sought-after critical resources, but also a reliable and responsible energy producer with a rules-based framework, and a formidable investment environment. In fact, Canada offers:

•  the best environment to do business in the G20 for the next five years (Economist Intelligence Unit, August 2022);
• the lowest tax treatment in the G7 for new business investment, significantly lower than in the United States (Finance Canada);
• the most educated talent pool in the OECD (OECD, Education at a Glance, September 2021);
• through 15 active free trade agreements, including the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), preferential access to a global market with a combined GDP representing 60% of the world’s output of goods and services, and home to1.5 billion consumers (IMF, World Economic Outlook, April 2022);
• the second soundest banking system of the G20 and the sixth among 141 countries (World Economic Forum, Global Competitiveness Index 2019-2020);
• the second country in the G20 for economic freedom (Heritage Foundation, Index of Economic Freedom, 2022);
• a predictable long-term carbon price, meeting the requirements of the up-coming EU Carbon Border Adjustment Mechanism;
• the sixth country in the world for wellbeing, the third for environmental quality, the first for peace and the second for democracy among G20 countries (Social Progress Imperative, November 2021; Economist Intelligence Unit, Democracy Index 2021 and Global Peace Index 2022).

In sum, Canada is here, as an essential partner for Europe, part of the solution to global energy and climate challenges.