The economic advantages of renewable energy, accentuated by new federal incentives for low-carbon investment, may be driving a wedge between kindred conservative governments in Ontario and Alberta.
The “bromance” between Premiers Doug Ford and Jason Kenney that was seen to have peaked almost exactly two years ago with a Scrap the Carbon Tax rally in Calgary, only to cool down by February 2020, now seems in danger of foundering, CBC reports, a victim of new economic forces that are forcing a reckoning on the part of private investors, as well.
“Sophisticated new analysis shows that the interests of the fossil fuel-based economy so important to places like Alberta no longer coincide with the well-being of the country’s centres of finance and industry, principally—but not only—in Ontario,” writes business columnist Don Pittis. “Those in the know say the private sector is already embroiled in its own painful energy investment transition” along similar lines.
Not long after the Doug Ford government targeted carbon pricing, renewable energy, energy efficiency, and the green transition in a bruising provincial election campaign, Queen’s University sustainable finance specialist Ryan Riordan told Pittis the mood in Ontario’s investment community is shifting. “I think particularly the provincial government is at an inflection point,” he said. “It’s just hard to ignore what’s gone on in the world in the last three or four years, and I think that’s also had an impact on people in Ontario.”
Research at Riordan’s Institute for Sustainable Finance “shows that it’s become increasingly clear that the success of Ontario’s financial and industrial sectors depends on a quick move toward a low-carbon transition,” Pittis writes. “What others have called ‘fossil fuel entanglement’ [and many others have called ‘stranded asset risk’—Ed.] has meant the province and even Canada’s respected pension and banking sectors may have been acting against their own best interests by investing in a fossil fuel sector that could see sharp losses.”
Riordan said the market signals pointing to a rapid transition off high-carbon investment are becoming more and more obvious. “The biggest one was ExxonMobil leaving the Dow Jones index,” he told Pittis. “I think that’s just the tip of the iceberg, and this is just not what’s on most institutional investors’ wish lists,” with the fossil market declining and tech companies that don’t depend on carbon on the rise.
Pittis cites Clean Energy Canada Executive Director Merran Smith and Shift:Action Director Adam Scott in an analysis that shows insurance and pension fund managers “struggling to make the transition” to carbon-free investing. “New developments—including expectations that Ford [Motor Company] will build electric cars in Oakville—are forcing Ontario into the realization that its future economic advantage is more closely aligned with making the shift to a low-carbon economy based on an entirely different energy source,” he writes. And “as former Bank of Canada and Bank of England governor Mark Carney has repeatedly warned, decarbonizing the global economy means that at some point in the coming decades, the value of fossil fuel assets will fall toward zero.”
“While inevitably the Alberta oil and gas economy will continue to suffer from the rush for the door,” Pittis adds, citing Scott, “the success of the Ontario-centred finance sector will depend on getting out of those positions before they lose their value.”
Get the rest of Don Pittis’ analysis here.