Canadians are meek and mild, she argues, pointing to a recent conversation she had in Houston about the coming energy “revolution.” The American approach, she says is: “Let’s grab the bull by horns, wrestle it to the ground, and we will be number one.”
Raitt will be honored Thursday evening at a testimonial dinner, lauded by the PPF for “her openness and honesty, and her drive to get difficult things done.”
Raitt spoke to POLITICO, a media partner of the PPF event, about climate targets, carbon taxes and what it will take for Canada to compete.
The April 21 conversation has been edited for length and clarity.
The prime minister and the Ontario premier just shared details of what it took to land the Volkswagen deal — C$7 billion, including C$13 billion in ongoing subsidies. I’m curious about your reaction.
Two things have happened. Yes, they finally disclosed how much money was on the table — what it took in order to land the deal. But it comes on the heels of a speech Chrystia Freeland gave last week in the United States where she cautioned that, basically, we can’t compete on all these things all the time — that it would be a race to the bottom if we’re always trying to compete with one another.
I found it interesting she would say that [after] doing this deal, which implies to me that we don’t have a lot of these deals we can do in Canada. We can’t compete with the United States blow for blow. This one we won. But this government is going to have to be judicious in what they choose to invest their money in. Because clearly the name of the game in the world now is government investment in new technologies, or transitioned energies — that’s where people are competing.
The industry minister called this deal a game changer. Do you think it could become an election issue?
I don’t think it’s an election issue. The sheer size of it is a bit startling for people to hear how much money that has been put in by the federal government. But I don’t think people are in disagreement, especially in this part of Ontario. They understand the importance of having auto manufacturing as part of our economy. And if that’s the price to compete, that’s the price to compete.
It’s good that they kind of ripped off the Band-Aid and told everybody how much it was, instead of keeping it a secret because Canadians want and need to understand the cost of transition to net zero because it’s not free, and it’s not cheap.
When the U.S. passed the Inflation Reduction Act, everyone celebrated the fact Canada-made EVs would qualify for the tax credits. You were also flagging the implications of the $360 billion earmarked for climate and energy measures. What are you thinking now?
Our eyes need to be wide open. In the United States, it’s not just about a race to net zero for them by 2050. They’re not the ones that are obsessed — and that is my word: obsessed — with hitting targets that have been set for them in legislation.
Canada is. Canada is very much thinking constantly about how to reduce emissions, both in terms of incentivizing money or investments or products or changes. And, as well, bringing in the regulation — that’s the stick.
We now know we can’t compete on everything, there are certain things we’re going to compete on. We better pick them and figure it out and make sure we’re competitive. But the most important piece right now is to make sure you’re lining up with the United States. This isn’t about decarbonization in the U.S.; this is about moving those giant supply chains for clean energy, clean tech, out of China and Asia and into the United States.
This IRA goes along with the CHIPS Act and goes along with the infrastructure that they passed as well. Those three things work together to rebuild America’s rust belt. And that’s what they’re doing. They’re creating jobs, they’re hoisting manufacturing back to them. We’ve got to be clear-eyed as to the public policy levers that they’re using to do that, and be ready to compete and complement.
It’s been observed that when Joe Biden talks about this work, he talks in terms of jobs. And, as you say, when Canada speaks about it, it’s in terms of targets.
Yeah, 100 percent. This government’s North Star is about hitting targets to 2030 and targets in 2050 that we set for ourselves.
In the United States, they’re thinking about creating good middle-class jobs. And Joe Biden is not shy about talking about it from his point of view.
If you tell this government in Canada that you want to open up new oil and gas production, they’re gonna look at you like you have three heads. Joe Biden uses the State of the Union to chastise oil companies for not doing more in terms of producing oil and gas.
Think about the juxtaposition of those two things. Here we are in Canada desperately trying to come up with ways — or the government is — to curtail production. And on the other side of the fence, they’re saying, why aren’t you doing more?
That is certainly an argument from Alberta.
I’m not critical that we set goals and we try to attain them. We have to be realistic. But we have to be cognizant of the motivations of other countries around the world and not be the Boy Scout all the time. You do sometimes have to think about yourselves and make sure you’re doing everything you can to place your country in the best possible position to take advantage of what’s going on.
What should the government be thinking about?
It’s easy. There’s only one area that we can beat the United States on as a result of our parliamentary system. That is in the permitting and processing of applications for new infrastructure. The government has all the power in the world, and they can absolutely clear the path and streamline environmental assessments and process and permitting for any of these major projects.
The U.S. has a number of things that they have to go through, and it is tied up — and can be tied up — with civil lawsuits. In Canada, you have a lot more power and, and a lot more ability with a majority-minority kind of government.
For me, the clear advantage we have is, first of all, willingness of Indigenous peoples to be involved in some of these projects, which they are, and helping them with the equity side of it. But secondly, just putting the focus in Ottawa, setting up the critical go-teams to stick with these projects and not let them fall through cracks of procedural confusion. Just assign somebody to sherpa the project from beginning to end and get it built. That’s where we can beat the U.S.
The clean energy task force set up during the Biden-Trudeau bilateral has a one-year timeline. What does that signify to you?
It’s not going to be an ongoing process, I guess is what it signifies. To me, that means that they’re coming back with a report and not trying to solve problems.
Critical minerals were folded into that work. The regulatory piece seems to be a big part of whatever comes next. Is that your understanding?
That’s exactly it. It’s everything because in order for the companies to get investment — i.e. from banks — they’re going to have to show they have eliminated a lot of the uncertainty in the project.
One of the biggest pieces of uncertainty has to do with the time it takes to get all your regulatory pieces sorted out and put together so that you can proceed with the project. If you have a really good timeline and an eye on, not only goals and targets, but on promises that it’s going to be done in a certain period of time, then you will get a much quicker turnaround in terms of trying to cobble together the finance.
Mark Carney said there is capital around the world just waiting to flow in. And I’m going to believe him because I think he knows what he’s talking about. Investors are ready to take part in the clean energy transition. But you’ve got to derisk it. One of the biggest sources of risk is uncertainty about whether or not you can proceed.
The U.S. is going to struggle with that — they haven’t figured it out, they don’t have the power to necessarily get it all done. They only have 10 years for all of these income tax credits and production credits. So, they’ve got to move. But we can move quicker and match where we can.
The last budget made the case that this is not just an environmental imperative, it’s an economic one as well. Is that your sense from where you sit at CIBC?
Yes, it is. Let’s say that the Biden Democrats don’t get elected in the next election. Does that mean the Inflation Reduction Act is going to be turned on its head and basically discontinued? The answer is “no” because the majority of the investments that have currently been put together under the IRA are creating jobs in Republican areas.
So, they’re going to be benefiting from the work the IRA is doing to rebuild these manufacturing centers in these old places where coal was mined or coal was burned. And that’s going to be a positive. The Republicans aren’t going to turn their back on that. So the IRA and the programming with it has sticking power. And that’s a really important piece.
You spend a lot of time with people who are thinking about these issues. What are their top concerns?
It depends on where you are. The United States is completely different from Canada. The United States is not trying to figure out how to not use gas and power plants, which is what we’re trying to do, which is really difficult, hard and expensive.
The United States is proceeding in a very different way. They’re not doing carbon tax, nor will they ever do a carbon tax. And they are going to pump a lot of money into it and just really get their economy going. And if they reduce emissions along the way, the more the better.
In Canada, we have turned hitting these targets almost into a religion — it’s incredibly important for us. Our success and failure as a nation is tied up to whether or not we hit these numbers, which is the case. We are highly dependent upon technology that has not yet been developed to get there. That’s a problem.
Canada’s climate watchdog recently warned that Canada must shift gears or there’s no coming back. Do you sense that urgency in the places where you are?
The bulk of the work I’m seeing at CIBC in this space is for U.S. investing. And that’s really being driven by the IRA, which has a sunset of 10 years. Therefore, there is an urgency, but it’s not tied to impacts of climate change — it’s completely tied to when this investment credit is going to run out.
What else should we be talking about related to Canada, the United States and the IRA?
I think the big one is the political debate around carbon tax.
There is no question Conservatives will remove the carbon tax — that is what they’re going to be running on. What does that mean in terms of the financing of these big projects? That’s a serious conversation to have.
That’s what banks are going to ask. They’re gonna say, “OK, Company X, you’re relying upon carbon credits of this much flowing to you because of a carbon tax or a carbon price to price on carbon. What happens if there’s no price on carbon? What happens if we go in the U.S. kind of style? What does it look like then?” And that is a real question.
The government has this thing called “contract for differences” that they’ve asked one of their agencies to look at. We’ll see where that ends up.
When you wrote for POLITICO in April 2021, you pointed to the U.K. and said the conversation there around emissions reductions seemed to be apolitical. Do you think it’s possible in this current environment to get to that place in Canada?
No. I think the sides have been drawn up on this. The government shoulders a lot of the burden of responsibility for that stark division. They used very charged language about people who didn’t agree with a carbon tax and called them lots of different names.
We spent a lot of time and money fighting over these things. And that is a shame. If we were more focused on what to do together than we were on carbon taxes, we’d be a lot further ahead.
Other countries have recognized it’s just a non-starter because of the pushback against taxes as a way in which to price carbon. I know everyone tells you it’s the most efficient way to do it. The government will say the majority of the money goes back into pockets, but it’s still the fight that people coalesce around, as opposed to working together to try to figure out what the path forward is going to be.