Canada Will Support ‘Economically Feasible’ LNG, Freeland Says

Canada is open to supporting “economically feasible” liquefied natural gas (LNG) projects to help countries like Germany reduce reliance on coal in the midst of a global energy crunch, Finance Minister Chrystia Freeland told media Friday, at the close of annual meetings of the International Monetary Fund and World Bank in Washington, DC.

LNG “is an important transition fuel,” she declared, and “we will always be looking at economically viable LNG projects.”

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When German Chancellor Olaf Scholz visited with Prime Minister Justin Trudeau in late August, he encouraged Canada to play a “major role” in filling the gas supply gap created by Russia’s war in Ukraine, Reuters reports. At the time, however, both leaders “appeared to pour cold water on the idea of shipping Canadian natural gas to Europe,” CBC reported at the time, with Trudeau pointing to the cost and complex logistics of shipping gas from Western Canada “to a still-unbuilt liquefaction terminal” on the Atlantic coast.

“One of the challenges around LNG is the amount of investment required to build infrastructure for that,” Trudeau said. “There has never been a strong business case because of the distance from the gas fields, because of the need to transport that gas over long distances before liquefaction.”

In early July, Natural Resources Minister Jonathan Wilkinson said there would be no public finance for East Coast LNG projects.

But last week, Freeland and Wilkinson both “appeared to leave the door open to the possibility,” Reuters writes, with Freeland recounting conversations with finance ministers from other countries who wanted to burn less coal but couldn’t justify the “soaring cost” of LNG.

Even if Canada abides by Wilkinson’s earlier promises and Trudeau’s assessment of the economics of LNG, an East Coast project might still get a lifeline in the form of a US$4-billion loan guarantee that Germany put forward in 2018. But Ottawa should still steer clear of supporting a “high-stakes gamble” on a fuel that Germany and the European Union are working hard to phase out, argued clean growth economist Rachel Samson, vice president of policy at the Institute for Research on Public Policy, in an opinion piece last month.

“It is going to be difficult to watch Europe suffer through energy shortages and high prices, and Canadians will justifiably want to do ‘something’,” Samson wrote. “However, it is important to remember that LNG projects are multi-billion-dollar endeavours that require years to build and decades of profitability to pay off. The EU will be moving quickly to reduce its reliance on natural gas,” leading to “growing investment risk” for any would-be LNG exporter.

Last week, German Foreign Minister Annalena Baerbock told the Berlin Climate and Security Conference that her country is committed to keeping a 1.5°C limit on average global warming within reach, even as it scrambles to cope with Vladimir Putin’s energy supply crisis.

“Russia’s war against Ukraine and its attacks on European energy security have not weakened our resolved push for the 1.5°C goal—on the contrary,” she declared, noting the Germany is doubling down on energy efficiency and renewable energy while temporarily bringing back coal plants to guarantee energy security.

Climate change “ harms, it kills, and it displaces,” Baerbock added, and “the climate crisis is the biggest security challenge the international community faces in the 21st century.”

During her media availability in Washington, Freeland said Canada is leading, not lagging the global shift to green energy, but will still have to be the “best and fastest” at that transition after the Biden administration went all-in with its $369-billion Inflation Reduction Act. Earlier in the week, Trudeau said Ottawa was crafting new incentives for carbon capture and storage and clean energy projects to “even the playing field” between the U.S. and Canada, Bloomberg reports.

“It’s urgent,” Michael Gullo, vice president for policy at the Business Council of Canada, told the news agency. “There’s a race going on to attract billions of dollars of investment.”

The new infusion of federal cash will likely show up in Freeland’s next fiscal update, expected in December, before being finalized in her 2023 budget, Bloomberg says. But with the Finance Minister and Deputy PM talking about green investment while touting LNG, and fossils holding out for new federal subsidies before they finalize their carbon capture investment plans, it isn’t at all clear which energy path this next round of federal spending will support.