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Power Struggle
Canada's Role in the World // Jock Finlayson
Jock Finlayson brings over 3 decades of experience in economic policy, leadership, and business strategy. He has been instrumental in shaping key decisions across Canada’s energy and business sectors. As the Chief Economist of the Independent Contractors and Businesses Association and former Executive Vice President of the Business Council of British Columbia, Jock’s insights are not to be missed.
Find out why and how Canada’s diminishing role on the global stage impacts you.
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World's getting bigger, but we're actually getting smaller, notwithstanding all the population growth we're having.
Speaker 2:And is that because of certain parts of the world whose economies are growing faster, like in Asia Main?
Speaker 1:reason. The main reason is the rise of others. It's the same reason. The US isn't as dominant globally as it was four or five decades ago, although, my goodness, it's still almost a quarter of global GDP.
Speaker 2:We're 2.1%. Jock Finlayson is the go-to economist for anyone serious about understanding the future of business and energy in Canada. As the chief economist of the Independent Contractors and Businesses Association and former executive vice president of BCBC, he's been instrumental in shaping key economic policies that impact us all. With over three decades of experience and a rep, is it only three decades?
Speaker 1:More than three. We say now yeah, one has to keep the CB updated.
Speaker 2:With over four decades of experience and a reputation for cutting through the noise, finlayson delivers sharp, no-nonsense insights that challenge conventional thinking and push for bold, long-term strategies. And your voice is well-known to listeners of radio. Your face is well-known to watchers of TV over these decades. Jock, I'm glad you're here today. Thanks for coming by. Well, I'm glad you're here today. Thanks for coming by. Well, I'm looking forward to the conversation. For most economists, it's really hard for them to think in terms of how their explanations are understood by someone who isn't also an economist. But you've succeeded in that how.
Speaker 1:First of all, I'm not a technical economist. I've got a PhD in economics or econometrics and I did some academic work in economics. But I also took business and political science and other disciplines and I always enjoyed writing and communicating, which is one of the reasons I got along well with print journalists historically, and I think I developed some skills in that area. And I think I developed some skills in that area. So that helped very much in terms of being able to condense down what's going on in the business world or the economic environment into an intelligible story, if I can put it that way. So I have, you know, over time, been able to develop the ability to do that. And most people working as academic economists that's not their role. Most people working as academic economists that's not their role. They're writing and researching primarily for their peers who are also in the academic world, or they're graduate students. So it's kind of a different skill set, different focus.
Speaker 2:Well, you've done well at it, but over the time that you've been working as a think tank economist, there's been a lot of change in the world. The globalization phenomenon has gone through a lot of cycles. What are your thoughts on the trends that were the most influential in shaping your view of the world, and then how you explain the world to others?
Speaker 1:Sure. Well, I start with Canada. What is our position in the global economy and global supply chains? What do we export? What do we import? How much market power do we have? Where are we competitive? Where are we not competitive? So the biggest change I've seen over my career in that regard is more global integration In fact it's what we call globalization, although some would argue that's not reversing.
Speaker 1:But certainly for most of my career we had globalization was a trend. So more countries were becoming more open. Trade was growing faster than GDP. For us and for many other jurisdictions, capital flows were rising dramatically. Restrictions capital flows were rising dramatically. Cross-border production networks were being developed and sort of intensified. So globalization of that sort was one of the big trends in my career. But the other one, more from a Canadian point of view, is our shrinking footprint. We're small and getting smaller. A lot of people don't understand that. I think a lot of our decision makers. It's not sort of top of mind.
Speaker 2:Canada, as in.
Speaker 1:Canada. Share of global trade, share of global output, share of global market capitalization of publicly listed companies, share of large global corporations that are headquartered here. On all those kinds of metrics, we are shrinking because others are rising or outperforming us and that trend, I think, is well established and it will persist. We're getting smaller, the world's getting bigger, but we're actually getting smaller, notwithstanding all the population growth we're having.
Speaker 2:And is that because of certain parts of the world whose economies are growing faster, like in Asia?
Speaker 1:Main reason? The main reason is the rise of others. It's the same reason. The US isn't as dominant globally as it was four or five decades ago, although, my goodness, it's still almost a quarter of global GDP. We're 2.1% here and going down.
Speaker 2:It's not a criticism, it's just a data observation Do you think that makes it harder for Canadians to be able to live the way they're used to living?
Speaker 1:I think it makes it harder for our elected officials in particular to assuming they actually understand what I just described. Many of them don't. Many of them don't, but I think it makes it harder for them to do their job because the public what it requires to compete successfully in the global market and the kind of hosting conditions for business, investment and innovation that we need to develop in our own country so that we'll continue to be very successful. And we have been very successful. I mean we're stagnating at the moment and have been for a few years, but over the sweep of sort of post-World War II history, I think Canada overall did quite well, but others grew faster.
Speaker 1:So again, our footprint has diminished in size, which means we have people often say now that Canada is not taken very seriously by our allies, by our major trading partners, and I think that's true and the reasons for it include the fact that we're a smaller piece, but also that I don't think we've been very astute in maximizing whatever leverage we do have with trading partners, and I think it's a challenge going forward. There's lots of other small countries Denmark is one that I've studied, singapore certainly, even South Korea I wouldn't call it small when I think their governments and their elected officials have a better understanding and there's more of a consensus view in the society, at least at the elite level, on what they need to do to prosper, survive, right and and and maintain a high standard of living. We don't we don't have that anymore in canada.
Speaker 2:Maybe we had it in the past, but I would argue that's basically disappeared today that worries me going forward, so there are countries in the world punching above their weight. Definitely we're not one of them, but you think? That Canada is a country that has all the gifts it needs. It's got geographic proximity to a country with one quarter of the world's GDP. It's got the natural resources. It's got everything.
Speaker 1:Yeah, people call Australia the lucky country, but I actually think the term should be applied more appropriately to Canada for the reasons you've identified. And we're separated from most of the world's conflict zones by oceans. We've got a security umbrella over us, courtesy of our friends in the United States. We systematically underspend on defense and security. We're the quintessential free riders when it comes to those things. And we have this huge landmass with an absolutely unrivaled resource base and preferred access to the richest, largest market in the world. So we are extremely fortunate. Maybe that's part of the problem. We haven't developed the habits and the mindset that other places do, that face bigger challenges kind of structurally, and so we're kind of drifting along in a world.
Speaker 1:I describe Canada as a slow-moving inward jurisdiction trying to navigate its way in a fast-changing world. That poses a lot of risks and we're not doing very well, in my opinion, on that. One of the trends in our politics I see, provincially and nationally, which I don't think is healthy, is the emergence of what one might call the career politician. So these are people who spend their entire working careers in and around the domain of political life, often starting off as political assistants or constituency assistants to a member of parliament or a member of the provincial legislative assembly, and then eventually becoming elected as an MLA or an MP and spending a substantial chunk of their working career doing that without having had much in some cases any experience in other lines of work. I don't happen to think that's a very healthy way.
Speaker 2:And what was your first job even before you got into economics?
Speaker 1:Well, I actually worked in a pulp mill. Well, my family owned a retail business a furniture business so I worked in that as a kid. Family owned a retail business a furniture business so I worked in that as a kid. I worked summers as a dishwasher for the Navy. Back in the days when Canada had a bigger Navy than we do today, they had a sea cadet program at a location near where I grew up, and so I actually worked there in the summer as a civilian sort of support worker. And then, when I got out of high school, I worked in a pulp mill for a year to generate the money to go to university and not have to go into debt. I was raised in a Scottish family that had a strong aversion to debt and my parents weren't in a position to pay the full freight.
Speaker 1:Cash on the barrelhead yeah, they supported me, but anyway I was very cautious about going into debt. So I worked in a pulp mill, made tremendous money for an 18 year old unskilled production worker, lived at home and accumulated enough savings to to go to university.
Speaker 2:Was there a moment when you said, hey, this is pretty good, I might just stick around here, and no, no, I wanted out of my small town right that I grew up in and I definitely wanted to go to school, so that was never a temptation.
Speaker 1:But, when I went to school. So I did a bachelor's degree and then I worked as a legislative intern in British Columbia and there's a program for about a dozen or so recent university graduates who spent six months as an intern at Victoria In the birdcage and working half the time in a ministry and half the time working for one party caucus or the other. It was kind of randomly assigned and so I did that and I was interested in politics and government before that and then I did that for six months and then took a few months off and then I went to grad school. So my first job was a pulp mill, but my first post-university job was a legislative intern. We were paid for it.
Speaker 2:Not like today's interns. And you went down east for grad school.
Speaker 1:I went to well, I did UBC, I did a master's there, then I went to Queens and then later on I went to the US.
Speaker 2:Just going back to the pulp mill, there must have been a lot of characters there. You must have seen how things operated and then you went into explaining parts of the economy, including pulp mills.
Speaker 1:Was there something from that experience that has stayed with you? Well, being glad I got an education, that's one thing I would say. You know it was a grind Shift work. Every week you moved from day shift to afternoon shift, and the following week you moved to night shift, graveyard shift. So one didn't have too much of a social life.
Speaker 1:And I had to commute as well. I didn't live right close to the mill, I had about a 40-minute drive, so it was very well paid for unskilled labor, which is what I was a production worker but it was hard work. If I'd wanted to raise a family or something at that time it would have been more challenging, but it confirmed to me. I wanted to get an education and I certainly met people in the work site, but I was like 19, 18. And the average worker there was in their 30s or 40s, so there was a big generation gap on the crew I worked in. I was the junior, the junior grunt.
Speaker 2:Vancouver Island. Vancouver Island. Jock, I just want to read something that you've written. Canadians should insist that governments devise sensible pro-growth policies that will help lift the incomes of families and workers in the coming years.
Speaker 1:Can you take us through how you would propose to do this? Yeah well, the reason I sort of made that statement is, I think there's a disconnect when people hear about economic growth and importance of it. I think a lot of people struggle to make any connection between that and their own lives. And in the end of the day, what matters, I think, to households above all is income, the ability to earn or obtain enough funds to afford the lifestyle that you hope to achieve for yourself and your family.
Speaker 1:And in a macro setting where there's very little economic growth, it's difficult to do that, and I think we're living through that right now in Canada to some extent. So in the end, we want economic growth, not because it's good in and of itself, because it furnishes the means for a higher standard of living. A higher material standard of living gives people more income, more career opportunity, but also gives government more resources to provide services and programs that people want. It's all connected at the end. So when you have an experience like we're going through in Canada, where economic growth is very substantially lagging population growth, a, that's unusual for us, but B, it's troublesome because it means the size of the pie is not growing fast enough to keep the slices of the pie growing for a large proportion of the population.
Speaker 2:Now is this? Because there's someone who holds the levers of power who has been subject to your suggestion and has said no, no, jock, you're wrong. We don't want to do those things because it's not desirable to have that, we don't need it. It's not desirable to have that, we don't need it. Has someone actually thought this through so as to move us in the very opposite direction from what you're suggesting?
Speaker 1:Or is it?
Speaker 2:just other factors that have caused this.
Speaker 1:Well, very few decision makers in my experience in government deliberately embrace the idea that we don't need the economic growth. That's something economists. This is motherhood and apple pie we all want that.
Speaker 1:It's more that they don't. They're focused on other things, is really what I would. I mean, when I started my career, governments were more, were less preoccupied than they are today with a wide range of what I would describe as non-core economic kind of issues. So today, if you read the mandate letters that Premier Eby, for example, gave to all of his cabinet upon becoming Premier, or John Horgan before Premier Eby, or Justin Trudeau as Prime Minister, if you read those mandate letters, you will see very quickly that the bread and butter economic issues that you and I are primarily talking about today are not the dominant concern in those letters. And that means that the priorities of the ministers and their departments aren't necessarily aligned with having a strong economy, with ensuring prosperity, advances, doing the things necessary to have our own jurisdiction compete successfully in what I would describe as an unforgiving world.
Speaker 1:It's not that anyone deliberately set out to do that, it's that they got preoccupied with other things. So it's not criticism. Again, there's nobody trying to sabotage our prosperity, even in governments that I don't necessarily share their views. But they're not out to do that, but it's inadvertently that can end up. What their record becomes. What is a standard?
Speaker 2:of living.
Speaker 1:It starts with the income you or your household has available to buy goods and services. So you know housing, transportation, food entertainment, etc. So you know housing, transportation, food, entertainment, etc. From there it could expand to include the kind of housing you can live in how modern, what are the amenities, what's the square footage per person? It would certainly include access to public services. So how good is education system If you have children in school? Health services, their accessibility, their quality, lifespan, all these things get, I think, factored into a sort of academic least at the rate of inflation and hopefully more over time. You're going to struggle to maintain whatever standard of living you've currently achieved. Canada has been essentially stagnant on most indicators of living standards and income and things like that for the past, say, decade, maybe longer, and eventually that shows up, I think, in your politics with higher levels of dissatisfaction. I mean there's no quick remedy to it.
Speaker 2:Well, you've persuaded me that Canada's punching below its weight. What if it wasn't? What if Canada was punching above its weight If?
Speaker 1:you look at the list of the top thousand global companies, ranked by revenue, we don't perform that well. We don't have our share of those. Having the head offices of big companies in your jurisdiction produces huge benefits because they pay the highest salaries and wages of any part of the economy tend to be in those areas. They purchase all kinds of other business inputs from the local market legal services, financial services, engineering services. The list goes on. And those industries then do better, those supplier industries. Um, and there's even a correlation between the vibrancy of a corporate head office sector and look, and philanthropic support for, you know, charities and hospitals and universities. So we would be, we would definitely be better off as a country, and certainly as a province, if we had more head offices, if more of our existing companies were growing, scaling to the point where they become, you know, bigger corporations that are still domiciled here, and we've really struggled on those levels in recent decades.
Speaker 2:So we want to get some companies in that can pay those big salaries, so that they're trickling that money through the economy. What signs do we have to put out to make them come here rather than stay where they are or go somewhere else?
Speaker 1:Well, we are a rule of law, politically stable jurisdiction, but so is every other OECD, you know contrary. So that really isn't much of an advantage. We do have an approach to immigration, particularly compared to the United States, that's quite different, which I think is an advantage. So the United States has been making it very hard for even skilled people to migrate there. If you're a company looking to hire people if they're not already American citizens or holders of green cards, it's very, very difficult to do that. Canada, we've got a more small-L, liberal approach to immigration. We have much more immigration quantitatively. We make it easier for people here on temporary work permits to stay. We make it much for people here on temporary work permits to stay. We make it much easier for international students who are attending Canadian institutions to stay and seek employment when they complete their program than the Americans do. So there are now a lot of that's become controversial.
Speaker 2:It's become a political liability, even if it's an economic advantage.
Speaker 1:Yeah, and I mean that's really unfortunate, but the responsibility for that falls on the shoulders of the Trudeau government, because they bungled the actual execution of an immigration policy?
Speaker 2:In what way?
Speaker 1:Well, they basically stopped controlling and regulating who was coming and they admitted vastly more people quantitatively than we can really accommodate in a short period of time.
Speaker 2:Adding to the housing crunch.
Speaker 1:Yeah, so they really broke the immigration system and one hopes that we don't. I don't want to see us go the American route, where immigration becomes this poisonous topic in domestic politics, which it has not been historically in Canada. So I think we need to get back to a more sensible kind of approach to immigration. But leaving that aside, the Canadian model of being open to immigration, making it comparatively easy for people to get here and stay here, is an advantage for us in terms of corporate location decisions, companies. I've talked to lots of executives from especially the tech industry, but also some other service industries, who do see that as something in Canada which is positive. Our open approach to cultural diversity and things like that is also a net sort of benefit for a lot of business. So we have some assets. The other one is we do have a very well-educated population. Canada is near the very top of global rankings in the share of the working age population, with some kind of post-secondary credential. That's definitely an advantage that we possess.
Speaker 2:Right, so those are all in the positive, but we have this huge problem. So something's not working. What's missing in that attractant list? Sure.
Speaker 1:Well, I think the areas that we struggle are the regulatory climate for industry, especially companies in the natural resource, infrastructure and manufacturing sectors that need to get permits and approvals to build things and do things. Canada is slow and complex in all the indicators that bear on that. We make it hard rather than easy and there are historical reasons for it. But I think we've gone too far in almost asphyxiating the private sector in regulatory burden and complexity and red tape, and certainly BC is a stalwart example of that.
Speaker 1:Our tax structure and our tax mix is not well aligned, in my view, with attracting high-value business activities and top talent. Half of all the money the federal government collects and they're spending half a trillion dollars a year is coming from one source and that's personal income tax, and a big, big chunk of that is coming from the highest paid 10% of the population. I agree they should pay more than the average person in terms of a tax rate, but I think we've really gone overboard on that and that makes it hard to attract people here. From a lot of other jurisdictions. They look at the tax rates for top talent for top talent. So on the business side, on the personal side, I think we've got work to do to kind of reconfigure the tax structure to allow us to compete globally that's what we're talking about here and especially with the US, because that's the main competitor and you singled out natural resources, which would include forestry, oil and gas, mining, ag, agriculture, energy generally.
Speaker 1:Yeah, I mean, I think one of the reasons why things have gone off the rails in Canada and I say that as we come out of a threatened rail strike is our population is increasingly concentrated in seven or eight urban metropolitan areas across the country and in general Canada's got one of the highest rates of urbanization of any developed country. And immigration is sort of accentuating that because virtually all newcomers to Canada settle in urban environments of one sort or another. It's not like my grandparents came here from the US. On my mother's side they actually became ranchers in Saskatchewan because they were able to get land for peanuts. That is not the typical story of people coming to Canada today.
Speaker 1:So we have an urban and an urban kind of based population and politics, but the way we pay our way in the world, what we export, the areas we have a comparative advantage, are still quite heavily weighted to the natural resource economy.
Speaker 1:So just some numbers on that 55% of Canada's merchandise exports and it goes up and down with commodity cycles are still coming out of natural resource industries and it's gone down over time, but not that much BC, by the way. It's closer to 80% If you throw in the exports of services as well, which would be education, services, finance, tourism, things like that. Then their share of natural resources goes down, but it's still about 50% for Canada as a whole. Energy alone, of which oil and gas is 80%, is a quarter of Canada's exports. So these are the industries where we can actually produce stuff and sell it globally at a price that makes sense for us. We can afford to produce it and sell it, and the world will buy it, and it's still quite heavily tied into the resource economy. And yet around cabinet tables in Ottawa there are fewer and fewer cabinet ministers who come out of those communities who have a real grasp of the continued centrality of the resource economy to our well-being around.
Speaker 2:Innovation was premised on the idea that if you applied technology, the search for scientific advances, even breakthroughs, to the problems that we face in material use of things, we need to have a standard of living where we want that standard of living to be. If you kept doing that, investing in that, you could solve these problems. Do you feel that's still a thing?
Speaker 1:Well, I think for something like climate change, the only solution to the problem of man-made greenhouse gas emissions caused by human activity in the long run is going to be technological innovation and its widespread deployment across industry and the whole economy. It's not going to be solved with carbon taxes and clean fuel regulations and all the stuff we're doing in Canada. I mean, bill Gates argues and he's a hard person to get into a dispute with that if the world cares as much as he does about climate change, we should be devoting 1% of global GDP to basically energy-related research designed to accelerate the transition away from carbon-based fuels. That would be $1 trillion a year devoted specifically to that. So in the long run, I think if there's going to be real progress on climate, it's going to come through innovation and technology, and I think the same applies for a lot of other challenges that we're facing. And there you've got both the fundamental upstream scientific research that needs to go on, much of that in the academic context, commercialization and kind of downstream application of the fundamental knowledge, breakthroughs into the form of products and services, and innovations that can actually be deployed and taken up.
Speaker 1:Canada's pretty good at the first. We use the term punch above our wake. I would say, from what I know, we actually do quite well in a lot of areas of fundamental science research, engineering, medicine, things like that. But we're a laggard when it comes to the application and diffusion of technological innovation across the economy, for reasons I don't purport to fully understand. But the real benefit comes from the diffusion and take up at the end, not so much from the upstream development. And also we're a small part of a bigger world. Most of the scientific breakthroughs that occur in any field are not going to be originating here. They're going to be happening elsewhere, elsewhere. So the question becomes how quickly can you adapt in your own economy and society and take up and deploy these innovations so you actually get the benefit that flows from them? And there we tend to even a couple of points to the size of the Canadian economy the GDP size.
Speaker 2:That's, the Trans Mountain Pipeline expansion, the terminal right down on the water I had a look at that recently the safety on the ships on the pipeline, the layers of safety, the investments. They had a lot of conditions that they had to fulfill to get their permits but they went beyond those conditions and they've put in even more layers of safety, which in a lot of cases comes from developments in technology. So investments in R&D that have allowed that. What's your sense of what that particular project specifically means for the British Columbia economy, the Western Canadian one, what it means for the nation? Just what's an economist's view of that project?
Speaker 1:It's a great question since, as Canadian taxpayers, we all own it. Yes, not directly, it went a little over budget.
Speaker 1:My sense of it is I'm awfully glad it's completed. I just came from an energy conference in Alberta where you were also attending, and the mood in the room was noticeably brighter than two or three years earlier, and that's partly because this project has come to fruition. It's allowed us to get access to global markets for oil, which previously we did not have, and it's also allowed us to produce and export more, particularly to export more, and so it will actually contribute in a statistically meaningful sense to economic growth in Canada over the next number of years. Recognizing oil and gases are by far, by orders of magnitude, our largest export engine in Canada. You know, 25% of all of our exports, so really it makes a huge difference.
Speaker 1:Unfortunately, the Trans Mountain saga you know it was mired in extraordinary conflict, legal challenges, multiple legal challenges, federal-provincial disputes, unheard-of delays and eventually the government of Canada having to step in and take ownership of it because the private sector would not. That's a big stain on Canada's global reputation as a place to deploy capital, at least in natural resource and infrastructure development, because other countries look at that and say it's just, they can't understand. I've met with diplomats from Japan and other countries who were absolutely perplexed beyond belief at the enormous political conflict and difficulty of proceeding with that project, given that it was the twinning of an existing pipeline, and how we tied ourselves in knots over it. So I'm glad it's done, but I'm embarrassed as a Canadian, the way it eventually played out and I think it speaks volumes about how difficult we've made it in our own country to get anything done, frankly, and that to me is not a sustainable place for us to be.
Speaker 2:I'd like to quote you to you again. Almost none have a handle on the gargantuan capital investments needed to finance and engineer a rapid energy transition, or what this means for Canada's existing regulatory processes. Can you break this one down?
Speaker 1:Yeah. So you know, governments have committed to a whole bunch of different things as part of climate policy. The Trudeau government has committed to completely decarbonize electricity in Canada by 2035. They've actually got a piece of legislation that purports to do that. So if they don't do that, they'll be breaking that law. Well, their own law, I mean it can always change the law. But I mean they've said this is our goal and we're enshrining it into law. The good news is Canada's already 80% carbon-free in our production of electricity thanks to hydro, thanks to nuclear and thanks to other non-carbon-based renewable energy. In the advanced economy jurisdictions we're one of the highest in the share of non-carbon electricity produced and this federal law says we're going to in the share of non-carbon electricity produced, and this federal law says we're going to switch that other 20% that's currently hydrocarbon-based to carbon-free sources by 2035. It's kind of an arbitrary date.
Speaker 2:And most countries would like to get to 80, where we already are.
Speaker 1:Most countries would like to get to 50. Or 50. That's how far ahead we are than most. So the question becomes and I'm actually writing a paper on this right now that just looks at the decarbonization of electricity in Canada not everything else, just electricity. And what would that require? It would require us to build the equivalent of 23 site Cs that would replace the existing carbon-based power generation.
Speaker 2:That's natural gas and coal primarily.
Speaker 1:It is, yeah, and coal has largely been. It's been fully phased out in Ontario, almost phased out in Alberta. So Site C is a $16 billion hydroelectric project that we've been building in British Columbia. The concept of it actually goes back several decades but the real work on it started under the previous government and the project is being brought to fruition under the current NDP government. So it's taken longer and it's cost sort of two or three times the original estimate and it also faced significant litigation, people trying to stop it.
Speaker 1:Lots of people protesting didn't like it, even though it was a carbon-free power source that we need to meet the demand for energy in British Columbia.
Speaker 1:So it's big, it's costly, it was complicated and we'd have to do that over and over and over again, either on that scale or much smaller projects on a scale we've never imagined, in a very compressed timeframe in order to meet this 2035 target.
Speaker 1:So it's not going to be met and, in particular, we're not going to be able to remove natural gas from the power generation, from the grid in provinces like Alberta and Saskatchewan and Ontario. It's just eventually we might be able to, but we're not going to be able to do it by 2035 because our regulatory processes for approving projects and for permitting projects once they've been approved are not aligned with government's aggressive goals for decarbonization, we would have to completely revamp. In my view, we'd have to completely revamp our environmental assessment and permitting systems if we wanted to really accelerate the development of non-carbon-based power and the transmission grids necessary to connect where the power is generated with where the demand is. We would need a whole new system for doing that, compared to what we have today, and I don't see any evidence that we're getting a whole new system. So my conclusion is the federal government actually isn't serious about its clean electricity regulation policy. It's virtue signaling.
Speaker 1:Performative it's performative more than substantive, even though it's been enshrined into law, because I don't see them completely revamping the Federal Environmental Impact Assessment Act, for example. They made some changes to it, but they're trivial in comparative terms and most of the provinces, which is where this stuff actually gets built, they're not doing very much either to expedite the scale of investment and project development. We really were serious about decarbonizing the electricity system, never mind decarbonizing the whole economy. We'd have to go on a wartime footing to do it and get all the governments, all the agencies, all the processes in alignment and march down the path quickly to get there. We ain't doing that and therefore, again, I don't think our political decision makers are actually serious about what they claim to be serious.
Speaker 2:Okay, well, I'm going to draw on the great Jock Finlayson again and reflect on his writings and see what you say about this character.
Speaker 1:But on that. You should know that for part of my career I've been paid by the word.
Speaker 2:That's why there's so much writing Okay by the pound or kilo as well. Bold vision without a solid grasp of the facts and context and a realistic plan of execution amounts to hallucination. There's plenty of that in Canada today.
Speaker 1:Well, I'm glad I wrote that ago what I think about the strategies we're pursuing, supposedly to decarbonize the whole Canadian economy. I really don't think the people that claim to be pursuing this seriously are actually serious about it, or we'd be seeing a completely different approach. They're doing it because they think a large slice of the electorate is very animated by concerns over climate change perfectly legitimate and this is how they're catering. You know targets are passed. We're going to. When Gordon Campbell was premier, we had targets to slash greenhouse gas emissions by 2020, by, I think, 37% or 33% from 2005 levels. The NDP government was elected in 2017 and they changed the targets, the date for the targets, because they were told by their senior officials there's no way we're going to meet it. So they set new targets for 2030. I can tell you those won't be met either and a future government, or maybe even the same government, will have to change the targets again, because the aspiration is is misaligned with what's technically feasible, financially possible and just deliverable in the real world, even though the direction is right.
Speaker 2:Does that take us into? Okay, just deregulate everything. That's the way to get to the place we want to go to Well.
Speaker 1:The notion of deregulation implies that industries would operate without limits on their environmental footprint, including their carbon emissions. That's not on in any modern, advanced economy, or even some that aren't modern advanced. So I mean, that's not what I want to see and it's not the direction we want to go in Canada. I prefer the term smart regulation. Smart regulation for a 21st century economy. That's the philosophy I'd like to see underpinning and animating our regulatory processes and policymaking, instead of what we have today, which is an endless layering on of more complexity, constant change, virtue signaling gone mad, which really dictates a large amount of the policymaking process. These days in Canada, especially at the federal level, Very little attention paid to what's actually achievable and almost no attention paid to any sort of cost benefit calculus. So we're always going to have regulation. Industry is going to have to be held to a high standard over time. Almost every company I deal with wants that. But trying to get clarity on the rules of the road in Canada on all of these issues, especially those touching on climate and energy, has proven to be an enormous challenge, and part of it is we have the environment is a shared jurisdiction in Canada constitutionally between the government of Canada and all the provinces. So we have federal and provincial environmental assessment acts, we have permitting systems for industrial facilities Some are federal, some are provincial A lot of major projects. Almost all major projects, involve both levels of government, multiple agencies from each. That's part of the reason things get slowed down. So to me, smart regulation would aim to somehow simplify and streamline that, not necessarily watering down the standards that companies have to meet, but setting some clear rules for the road and then running with that.
Speaker 1:If Canada, if our main comparative advantage globally is the production of natural resources and natural resource-based products and it is clearly then let's aim to be the and the world wants those products. I mean at some point the world may not want natural gas, crude oil, refined petroleum products, petrochemicals, I don't know. I'm skeptical. I mean eventually, yes, but now they want them. The demand is there for all of these natural resource-based goods and also minerals and critical minerals, and metals and wood products and certainly food, all types of agri-food products. There's healthy, hearty demand for that and that's going to continue. It's going to keep growing. Why don't we aim to be the best in the world at producing this stuff? We're already good at producing, and that includes minimizing its environmental footprint, for sure, and trying to squeeze as much carbon emissions out of those industrial processes as we can. I'm all in favor of that but not by shutting them down or forcing them out of business or smothering them to death with unrealistic regulation, because that just means the production of that stuff will migrate to other jurisdictions as long as the demand is there for it.
Speaker 1:So you know LNG. Here we are sitting in Vancouver. So liquefied natural gas. A decade ago we had big aspirations to become a major producer of liquefied natural gas and there were more than a dozen project proposals on the table here in BC. In the end we ended up with one very large project which is going to complete next year and a couple of others in the queue. But in the meantime the US which I wouldn't describe as a jurisdiction known for the simplicity of doing business, necessarily they've gone from being a net importer of LNG into the world's largest exporter and they've got 13, I think last time I looked 13 operational LNG export projects up and running, actually producing, generating income, and we have none.
Speaker 2:There's now regular ships coming through Vancouver Harbor. They're coming out of Trans Mountain. There's a little fleet of them. If the name starts with Pacific Pacific something, pacific Jade, you'll see an LNG vessel on top of the ship's deck. So it's powered by LNG because that's fuel to run the engines and that's a change from the way a lot of ships still operate, which is with bunker oil, which is really dirty, nasty, heavy, a lot of sulfur in that and everyone in the world in shipping wants to comply with the regulations that are pushing them away from that, looking for cleaner sources.
Speaker 2:Hydrogen is talked about, but the thing that's actually available right now LNG, and I think seeing those ships come in it's great. That looks greener. Half the emissions of alternatives, alternative that's pretty good. Ironically and this is such a canadian story of the present day I think that ship, when it comes here, if it's out of lng, it cannot refuel that here, where we have lng in abundance, because we have natural gas that is used to make lng in abundance, but we just haven't gotten to the point where we can. We can be part of the. If there was a clean energy transition for shipping, surely that is it, but we're not even players in it, even though we have all the tools. I mean, is that emblematic of something Jock?
Speaker 1:I think so. It's the magical thinking that I think has infected Canadian discourse on a lot of these issues. So we've got to go from some carbon to none overnight through a regulation or a tax, even though the none isn't technically or economically feasible. We're a big player energy.
Speaker 1:We're the fourth largest producer of oil and the fifth largest producer of natural gas in the world and we're a big exporter of both. In the case of gas, our export performance is going to rise further. Why not aim to be the best in the world in those industries? And also metal mining and metal fabrication, upstream mining. The world needs all that and that means reducing the carbon emissions and the carbon footprint, the climate footprint, of all this industrial activity.
Speaker 1:That we should be doing and that'll be done through upstream, by reducing the carbon content of what's produced with resources, as well as through technological innovation all the way along the supply chain. So we should be big players in that. We should be focused on it. But it includes embracing a vision where we're a major, that Canada is, and will remain an important producer of natural resource-based goods. These are not sunset industries. They're not industries that should be driven out of business through taxes and regulation on the assumption something else is going to rise up to replace them, because I don't see the something else at the moment, and let's play to our strengths.
Speaker 2:One of the ideas that we're examining in the Power Struggle series is the energy trilemma, and that's the idea that you've got this three-cornered triangle with the requirements of energy that we have, which is that it's affordable and that it is reliable and secure, and also that it performs environmentally the way we want it to. So if you get those three things right, then everything's golden. If you can only get one or two of those, then you're not succeeding.
Speaker 1:Interesting.
Speaker 2:Yeah, it's a good way of conceptualizing.
Speaker 1:All three are more or less equally important, especially if you're in a relatively affluent jurisdiction like we are. We should be paying attention to the environmental consequences of human activity, including human activity-related energy production and consumption, but I don't think that can be done without having at least one eye on the affordability of the energy for consumers and businesses and second, the security and reliability of the supply. And so there's kind of a fine balance there and I think we will probably get it right going forward, after kind of a bumpy road getting to where we are today.
Speaker 2:Jock, thanks for coming on today.
Speaker 1:Great to be here, Stuart, and keep up the great work.
Speaker 2:Thank you.
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