Investment

Joe Oliver: Will the Liberals adopt an unhinged Senate bill discouraging fossil fuel investment?

Published

1 year ago

June 29, 2023

Minister of Environment and Climate Change Steven Guilbeault during Question Period in the House of Commons on Parliament Hill in Ottawa. Photo by Patrick Doyle/The Canadian Press files

Sir John A. Macdonald called the Senate “a place of sober second thought,” which may have reflected his appreciation for at least occasional sobriety. But Bill S-243, the “Climate-Aligned Finance Act,” is the antithesis of thoughtful reconsideration. Its declared purpose is to regulate investment practices so as to reduce the risks both that financial institutions pose to the climate and that climate change poses to financial institutions. In fact, it would undermine free markets, with potentially debilitating consequences for financial institutions, the energy sector and the Canadian economy in general.

Independent Senator Rosa Galvez’ private member’s bill could have legs if the government decides the time is right to ratchet up its climate agenda by muscling in on the financial sector. After all, Minister of the Environment and Climate Change Steven Guilbeault has never been a model of restraint. At a minimum, the bill shows how far some parliamentarians are prepared to take us down the road of climate change dogmatism.

The bill aims to help Canada achieve the goals of the Paris Accord: net-zero emissions by 2050, preventing global temperatures from rising more than 1.5 degrees Celsius over pre-industrial levels and radical suppression of new fossil fuel exploration and infrastructure. The bill encompasses direct and indirect emissions and all upstream and downstream value chain emissions, i.e. pretty well everything. And carbon capture and storage will not absolve emitters: for financial institutions the bill aims for absolute-zero rather than net-zero emissions.

The bill targets federal financial crown corporations, banks, trust and loan companies, pension funds and credit unions. It covers every type of debt or equity financing of exploration, extraction, production, transportation, storage, exportation, refining or retailing of oil, gas or coal and their combustion for energy generation in a power plant — basically, everything Canada needs to remain an industrial society.

The bill is not merely aspirational. It induces compliance via supervision, including by the Office of the Superintendent of Financial Institutions (OSFI) the bank regulator, which it tasks with developing capital adequacy guidelines. However, the bill itself mandates specific increased capital-risk weights of 1,250 per cent for debt exposure to new fossil fuel resources or infrastructure and 150 per cent or more for any loan to an existing fossil fuel activity. This arbitrarily increases the amount of capital a bank must hold for the credit and market risks of a given loan. Such strict requirements, which far exceed international norms, would make access to capital much more expensive. The bill also empowers OSFI to impose a capital surcharge related to how much a financial institution facilitates emissions and to order compliance with the Act’s objectives.

The bill would effectively discourage — in some cases probably even block — financing of pipeline operators, natural gas distributors and fuel companies (even those with significant green affiliates who are transitioning to net zero). By including downstream emissions, the onerous risk weightings could extend to: goods and services inputs, waste disposal, business travel, delivery services and even financing of sparkling water companies (since carbonation is a pollutant) and the cattle industry (because of cow flatulence). There is virtually no limit to how expansively Environment Canada officials might interpret their new powers’ reach.

The bill also encroaches on corporate governance. At least one member of certain crown corporation boards must be a “person with climate expertise,” such as someone “who has acute lived experience related to the physical or economic damages of climate change.” After three years, the boards of banks and other financial institutions must exclude anyone who: owns shares in a company “offside the commitments,” has served on its board, or was an employee or lobbyist for it in the past five years. Also, directors have to act in alignment with the bill’s objectives or are disqualified to serve.

The bill’s unhinged displacement of the market would be a vainglorious gesture in a world where greenhouse gases continue to hit historically high levels, big emitters like China and India put development ahead of climate change and fossil fuels continue to account for 80 per cent of energy.

Some supporters argue the bill is aspirational — asking for the moon in hopes of merely moving the dial. But what could be more irresponsible than proposing dystopian legislation on the grounds its final wording won’t be so bad? And in a fevered pre-election environment, with a strident political base demanding action and the need to assuage a restive NDP partner, anything is possible from a government notorious for prioritizing partisanship over principle. Especially if the rallying cry is, to paraphrase 1964 Republican presidential candidate Barry Goldwater, “Extremism in defence of the climate is no vice. Moderation in pursuit of net zero is no virtue.”

No doubt climate alarmists will find it reassuring that the bill is extreme, with no hint of moderation. Reasonable Canadians should be alarmed.

Joe Oliver was minister of natural resources and then minister of finance in the Harper government.

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

3 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

3 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

4 weeks ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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