Natural Resources Minister Warns Canada Must Accelerate Energy Transition for Economic Security
Original published in the Financial Post, More from the Financial Post Here
Western countries must catch up to China which is leading on multiple fronts, says Jonathan Wilkinson
China has gained an advantage in three industries that are essential to the energy transition — renewable energy, zero emission vehicles and critical minerals, Canada’s Natural Resources Minister Jonathan Wilkinson warned Thursday.
“China has made a very thoughtful and strategic bet on the energy transition,” he said, “and any western countries that actually want to ensure long-term prosperity better get going.”
Wilkinson was speaking on Feb. 15 at the Canada-United Kingdom Industrial Decarbonization Forum at the Canada House in London about the role government can play in the energy transition.
Having arrived in London from Paris, where he attended a meeting of the International Energy Association (IEA) along with his counterparts from nearly 50 countries, he framed the transition as a matter of energy security.
Wilkinson said the IEA was formed in the 1970s so that oil-consuming countries such as the United States and Canada could respond to the oil embargo that Arab members of the Organization of the Petroleum Exporting Countries (OPEC) had enacted at the time. These days, however, he noted the IEA has evolved into a leader in charting strategies in the energy transition.
“We have to be thoughtful about the fact that the peak for oil and gas and coal will happen this decade, according to the IEA,” he said, “and there will be a decline as we see more technologies like electric vehicles deployed in larger and larger numbers.”
The obvious response for the oil and gas industry is to invest in decarbonization technologies and prepare for demand for non-combustible products, such as petrochemicals and other solvents, and plastics, Wilkinson said.
In addition to managing Canada’s oil and gas sector through the transition, he said he also has to think about how to create new industries that can compete as the energy transition accelerates.
One of the advantages of the transition is that renewable energy is “intensely local,” he said. If you build solar and wind farms, you don’t need to import your energy supply. In that way, the transition can be a bulwark against geopolitical events such as an oil embargo.
“The one caveat is we have to ensure that as we move through this transition, we don’t end up in the same situation with another strategic commodity,” he said.
Wilkinson said China controls the bulk of critical mineral production — meaning the mines producing the metals and other elements needed for renewable technologies — in addition to controlling much of the processing. Even in Australia, the lithium processing plants are owned by China, he said.
China is also now the largest developer and deployer of renewable energy, and the first- or second-largest developer and user of EVs.
Its growing edge in the EV industry is generating more headlines and attention. On Jan. 24, Tesla Inc. chief executive Elon Musk told analysts on an earnings call that Chinese auto companies are the “most competitive car companies” in the world.
“Frankly, I think if there are not trade barriers established, they will pretty much demolish most other car companies in the world,” he said.
Although Wilkinson did not mention trade barriers, he said that relying on free-market principles to bring energy transition technologies to market is not likely to work because the “long cycle” of many technologies means it can take years to develop a product and bring it to market.
“It’s not like an app where you can design the app in a few months and all of a sudden you’re able to generate revenues,” he said. “That means governments have a role to play.”
He said tax incentives and other programs that provide capital to companies are examples of the instruments his government is already using.
“This isn’t something we’re doing because we like solar and we like wind and we like biomass and we don’t like oil and gas,” he said. “Climate change is real, climate change is happening and we are running out of time.”
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