How the U.S. election outcome could affect Canada’s environment and energy future

Specific policy issues in a U.S. election hold particular stakes for Canada, including energy and the environment, national defence, the border and migration and U.S. relations with China.

In advance of the U.S. presidential election on Nov. 3, CBC will run stories on these five issues, and how they might play out if the winner is current President Donald Trump or his Democratic challenger, Joe Biden.

Our first instalment examines one of the most striking differences between them: energy and the environment.

If Biden wins

Biden drew attention in Canada for promising to cancel the Keystone XL pipeline from Alberta, then doubling down on it. 

Rory Johnston, an energy analyst at Price Street in Toronto, said a president clearly has the legal power to revoke a permit. What’s not clear to him is whether Biden would, in precarious economic times, actually cancel a big project, which would cost jobs and anger construction unions.

The Democratic nominee has a sweeping environmental platform that goes far beyond that one pipeline pledge.

For starters, he said he’d re-join the Paris climate accord on Day 1 of his presidency. Then he would convene, shame and potentially punish other countries that slack on their carbon emissions commitments.

Within 100 days, Biden said he’d hold a global climate summit to push countries to join the U.S. in toughening their climate objectives. He said he would also demand a worldwide ban on government subsidies for fossil fuels.

Biden also intends to grade countries on their performance. He promises a global climate change report, similar to the State Department’s annual report on human rights and human trafficking. It would rank countries’ performance in meeting their Paris commitments.

If that doesn’t work, he’s threatening to wield the stick of trade tariffs. Biden said he wants to impose what he calls “carbon-adjustment fees,” or perhaps quotas, on carbon-intensive products from countries that fail to meet climate and environmental obligations.

It’s not clear how many countries Biden would target. “We can no longer separate trade policy from our climate objectives,” says Biden’s platform.

Canada is projecting a lowering of emissions but not nearly by enough to meet its Paris commitment. 

Implementing such a tariff could be tricky. To become embedded in U.S. law, it would have to get through Congress — and receiving the 51 to 60 per cent of votes required in the Senate would be a tall order.

Prime Minister Justin Trudeau called on countries to work together to solve the world’s problems in a pre-recorded video address on Friday. 11:09

Some trade analysts believe such a tactic would also be illegal protectionism under international trade law unless the U.S. imposed a similar carbon tax domestically — also a tall order. 

However, other analysts say there’s one tool Biden could use, which has become famous in the Trump era: declare carbon emissions a national security matter and apply the same trade weapon the current president used against foreign steel and aluminum.

Any regulatory moves could face another hurdle in a more hostile Supreme Court.

Speaking of the environment and trade, Biden is proposing a massive, $2 trillion green-infrastructure plan aimed at new transit, vehicles and a carbon-free power grid by 2035. Biden says the construction would be done by U.S. firms under Buy American rules.

He would also re-establish policies from the Obama era that Canada has signed onto, from methane and auto regulations to an Arctic drilling ban.

Gerald Butts, who was a former senior aide to Prime Minister Justin Trudeau and worked on some of those agreements with the U.S, said Biden’s climate policies go far beyond Obama’s and reflect a growing recognition of the environmental threat.

“Biden’s plan would have been unthinkable for a presidential nominee for a major party even one cycle ago,” said Butts, now vice-chair of the political risk consultancy Eurasia Group.

Bob Deans, a spokesman for the political action committee of the Washington-based Natural Resources Defence Council, called climate change a defining issue for this election.

“The American people are facing a stark choice in this election. Two completely different energy futures,” Deans said. “We need to be reducing our reliance on oil and gas, not locking future generations into this climate nightmare.” 

If Trump wins

In his 2016 platform, Trump promised more oil drilling, more pipelines — and less regulation. He delivered that on several fronts.

Just last month he announced a border permit for a multi-purpose rail project that, if built, could eventually ship Canadian oil through Alaska. 

Trump ditched a number of Obama’s climate rules, and left the Paris Accord. (His pullout from the Paris agreement officially goes into effect the day after this year’s election.)

Trump hasn’t published a platform for the next four years. His campaign website simply lists things he’s done to slash regulations and promote fossil-fuel development. He’s promising no major policy changes.

“We would continue what we’re doing,” Trump told The New York Times, when asked about his overall second-term plans.

As far as Canada is concerned, that means a continued commitment to the still-unbuilt Keystone XL pipeline, which would carry nearly one-fifth of the oil Canada exports to the U.S. each day.

Johnston said that pipeline isn’t, on its own, a make-or-break issue for the Canadian oilpatch, but it would help, he said.

He said the oilsands likely need two pipelines completed over the next few years out of the three major projects underway — Trans Mountain to the Pacific Coast, the Line 3 expansion to the Great Lakes and Keystone XL to the Gulf of Mexico — to avoid the type of transportation bottlenecks that have previously devastated Canadian oil prices.

“It’s never ideal to be just at the limit of your [transportation] capacity,” Johnston said.

Even with the current president’s support, Keystone XL faces challenges. The ground has been cleared for only 100 kilometres of pipe to be laid inside Canada. A border-crossing segment has been built, and 17 pump stations out of an eventual 36 along the route are under construction.

That leaves the project about two years, many hundreds of kilometres and some legal and regulatory fights shy of completion. A Supreme Court decision this summer allowed a Montana ruling to stand, which forced the pipeline company to get permits for crossing waterways. Permit hearings were scheduled for late September in Montana and North Dakota.

It’s an uncertain moment for oil — and the financial stakes for Canada are considerable. It’s Canada’s top export to the U.S., in dollar figures; Canadian oil accounts for about half of U.S. oil imports, following years of growth.

But energy giant BP projects that global oil demand has peaked. 

The U.S. Energy Information Administration projects U.S. imports will flatten out and even decline a bit. That’s happening as several automakers say they will keep building vehicles to the stricter emissions standards set in California — standards that are backed by Ottawa.

California, the largest U.S. vehicle market, recently announced it planned to ban sales of gasoline-powered cars by 2035.

Some of these changes in energy markets will proceed regardless of who’s president.

Johnston’s own projection? Barring a sudden change in the market, Canadian oil production will grow a bit for two to five years, then plateau at similar levels for decades.