Can Carney transform Canada from climate laggard to leader?
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Welcome to Xero. I'm Akshat Rati. This week, Carnie's climate carnival. Over the last few months, there's been a big question hanging over Canada. Who will be its next prime minister?

Would the country move closer to its southern neighbor? Or would it rebuke the bellicose U.S. president who seems determined to make Canada the 51st state? Look, I called him Governor Trudeau because they should be in the 51st state, really. It would make a great state and the people of Canada like it. This week, we got the answer. Canada went to the polls and elected Mark Carney as prime minister. Quelle bonsoir. C'est une bonne bonsoir. I have a question. Who's ready?

Who's ready? Carney is a relative newcomer to politics. He had never run for a political office until he was elected to be leader of Canada's Liberal Party in March, replacing Justin Trudeau. But he is well known as a figure in international finance, previously heading the Bank of Canada through the 2008 financial crisis and the Bank of England through Brexit. Also briefly, until January, he was chair of Bloomberg Inc.,

Now he's been elected and he has a lot on his plate. How to manage Canada's trade relationship with the U.S., which takes 80% of its exports. How to deal with the rising risk of a recession. How to build up defenses that are currently dependent on the U.S. being a reliable ally.

And all that will have to happen alongside getting Canada back on track to meet its climate goals. Carney understands the climate challenge more deeply than almost any world leader in power right now.

Before becoming Prime Minister, he was the United Nations Special Envoy for Climate Action and Finance. He was also co-chair for the Glasgow Financial Alliance for Net Zero, better known as GFANS. Carney also comes from a country which has one of the world's highest emissions per capita. Higher even than the US. And Canada is way off its legally mandated goal to reach net zero by 2050.

Since Zero hosted Justin Trudeau on this podcast in 2022, the country has made some progress. Emissions from the power sector have fallen, and rapidly. But Canada's oil and gas emissions are rising. So how exactly is this all going to play out? Will Carney raise climate back up the political agenda as he has done in the world of finance?

And is Canada ready to step up on the world stage to lead on climate? To find out, I'm joined by my colleague, Bloomberg Green senior reporter and former Toronto bureau chief, Danielle Bokov. Dani, welcome to the show. Nice to be here. Now, it's quite rare to have so much international focus on a Canadian election. So we have something to thank Donald Trump after all, right?

Yeah, I mean, it's sort of damning with faint praise. I guess I think if you ask most Canadians, they would say they would rather not be wrestling with some of the issues that we're all wrestling with right now. But it is certainly true.

that this election was fought largely over how Canada is going to respond to various threats posed by US President Donald Trump's policies. He has threatened to annex the country with economic force, which has not been taken with much joy here, as you can imagine.

And he's also, you know, the tariffs are a huge threat to Canada. Our militaries are very integrated. So there are a lot of things that are front of mind for Canadians right now, on top of a host of domestic issues we were worried about as well. So all of that has really shaped the election. And it has certainly provided Mark Carney with a moment that I think he would not have otherwise had.

So we're going to focus on all those different things. But just before we get into the elections and the outcomes and where we are going to go as a result of Mark Carney's new found mandate, let's just get some context for the audience. Before Carney, there was Justin Trudeau as the prime minister of Canada for 10 years. And he came with real hope as a champion for climate issues. He was one of the first guests we had on Zero, which is a privilege to have a world leader on.

And when we sat down with him, despite his stance on climate, Canada hadn't made very much progress on emissions. Do you think from a climate perspective...

Did Trudeau live up to his expectations? Trudeau left office. He resigned as the head of the Liberal Party, handed the reins to Carney, who called a snap election. So things have been moving very quickly in Canada. He went out, former Prime Minister Trudeau went out on a real low. Almost everyone was disenchanted with him, including climate activists in a lot of ways. He came in vowing to tackle climate change.

And if you look at where our emissions are relative to where they needed to go, you could certainly argue that he didn't make nearly enough progress. But I do think history is going to remember his accomplishments on this front as well. He implemented some very significant policies in a country that has always been very heavily dependent on resource extraction. That's not easy to do. The big one was carbon pricing, which I know you've written about a lot. Several provinces fought that. He got it through the Supreme Court.

upheld it. He pushed through an industrial carbon tax, which was also enormously important. He implemented investment tax credits to encourage clean energy, including carbon capture, enormous subsidies for EV batteries to try to compete with Biden's IRA. And I guess you

You know, he is also the one that legislated that Canada had to reach a net zero emissions economy by 2050. So all of that, I think, was very important. But if you look at how far we have to close the gap with emissions, there is a long way to go. So we'll come to Carney's specific policies on climate next.

at least as far as they've been articulated so far. But before we get there, just talk us through Makarni as a person. What do we know? How do you think that's going to feed into his leadership of Canada? He is, in some ways, a different breed of politician than what we have seen before in Canada. And it's quite interesting because throughout the campaign, he argued that, in fact, he's not a politician. He'd never been elected to anything.

in Canada until this vote or elsewhere. And this is true. It is also true that he clearly has very sound political instincts. And it is fair to say, I think, that his career trajectory would not have been as impressive as it has been without pretty sharp political acumen.

He went to Harvard. He went to Oxford, studied economics, worked for Goldman Sachs, led two central banks. He was the chair of Brookfield Asset Management. He also served as the chair of Bloomberg Inc., we should say. People describe him quite often as a centrist, as a technocrat. He's known as someone who doesn't suffer fools lightly.

And if you look at the jobs that he has taken in the public sector, it seems very clear that he is somebody that really likes to have impact. So I think, you know, in many ways, this moment has been kind of the culmination of what all of the pieces have been building towards. The conservatives, interestingly, you know, who he was neck and neck with through most of this race, tried to use that background against him. And they did get some traction calling him a globalist.

The campaign was a short one because the snap election gives you only a few weeks to get to the point of actually convincing voters to vote for you. How was he on the campaign? Yeah, in some ways, I think he ran a campaign that was almost note perfect. So he soft launched his campaign on The Daily Show with Jon Stewart, the U.S. news satire program. And he was a very, very good candidate.

He ran a series of campaign ads with Canadian comedian Mike Myers at the hockey rink. He played a lot of hockey. You know, he is he is an impressive person. He runs marathons, highly disciplined, comes across as very intelligent. But I think and this really worked in his favor.

A big complaint of Justin Trudeau was his delivery when speaking to people. And whether or not you think it's fair, a common criticism was that he just sounded sort of perpetually condescending.

Mark Carney has been accused by the conservatives of being elitist, globalist, as was Justin Trudeau. But I think those accusations get a lot more traction when the subject of them sounds like he thinks that he is smarter than you are. And the

There were a few moments in the campaign where Carney seemed to lose patience with the reporters and the people that he was speaking to. But for the most part, I think he sounded like an adult speaking to adults. He didn't talk down to people. And this is a moment in Canada where many people have said we want, especially dealing with U.S. President Donald Trump, an adult in the room. We'll be back with more of my conversation with Danny Bokov after this short break.

By the way, if you are enjoying this episode, please take a moment to rate and review the show on Apple Podcasts and Spotify. Your feedback really matters. Thank you.

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You'll love the presentations you can easily design with Canva. Your clients and coworkers will too. Love your work with Canva presentations at canva.com. Now that Carney is in the hot seat, there's a lot that he's going to have to deal with on the trade front, on security, on the economy, which might go into recession.

In such a moment, how much of a priority can climate change be for him? I mean, that is the huge question that people are going to be asking who care about this issue. We even saw it in the campaign. Neither candidate spoke much about climate. Not surprising on the conservative side, as their platform was very dominated with supporting oil and gas. You know, Mark Carney released a climate platform, but it was quite light on details and

And he didn't talk about it a lot. So I think you're right. I think that what people want to hear right now is how are you going to deal with Donald Trump? How are you going to prop up the Canadian economy? How are you going to address a lot of really longstanding concerns about a fraying social net, housing affordability? Things are quite tough for a lot of people in Canada. And we saw that in the election results. I mean, it was a very, very close race and climate was not central to the platforms of either

And this is not a first. We've seen in recent elections that climate hasn't become the top priority as it was in some of the previous elections in Canada or in Australia or in the UK.

The UK election just happened. Climate wasn't a priority. And yet when the government did come in, it recognized that there is no way around an understanding of climate policy because it's so integrated with what the rest of the economy does. So when we come to Canada, we know that even in the brief time that he was prime minister before the snap election, one of the first things that Carney did was to scrap the consumer carbon tax.

Now, the consumer carbon tax from the analysis that the Canadian Climate Institute has put out would have contributed about 10% of the reductions towards its 2030 goals. The other carbon tax, the industrial carbon tax, which Kanye did not cancel,

is likely to contribute 30 to 40% of the emissions. So first, why do you think Carney, as somebody who understands the climate issue, went about actually cancelling the consumer carbon tax at all? It was political expediency, full stop.

The consumer tax, for better or for worse, was hugely divisive. The Conservatives were very successful at making it a very divisive issue. It taxed gasoline at the pump. I mentioned that Canadians are struggling. That is a hot-button issue here.

It did redistribute the income to provinces and territories, most of which was then mailed out to Canadians as rebate checks. Despite this, it was very unpopular. People didn't understand it. The

And in fact, when Carney canceled it, he said, this is too divisive. That's why I'm canceling it. But he promised that he would put green consumer incentives in place that would be just as effective. So we will see what will come from those. And do you think the industrial carbon tax will stay because the conservatives were even arguing to get rid of that?

I think it will stay. There hasn't been any indication that Carney will get rid of that. He is also very market focused, as I'm sure you know, deep sustainable finance background. So a lot of his other measures are also around sort of carbon pricing, carbon markets. He wants to develop a carbon border adjustment mechanism. That was one of the things in his platform. So

Again, there is a lot that he is saying that he would like to do. It's just very broad strokes. And there's a lot of things where we need more clarity. For example, what his views are towards conventional energy, which all have to be revealed. Well, if we take a look at his policy platform, one of the rhetorical things that he made a point of saying

speaking about again and again throughout the campaign was that he wants to turn Canada into an energy superpower that combines, as he put, conventional energy resources with our unlimited potential when it comes to clean, affordable energy. How exactly do you interpret that turning into policies?

I think this may be one of those areas where you really see that political acumen that I mentioned, because he repeated that wording in his victory speech as well about making Canada a superpower and conventional and clean energy. It's time to build Canada into an energy superpower in both clean and conventional energy.

And it's time to build an industrial strategy that makes Canada more competitive while fighting climate change. The choice of that wording, he didn't say in oil and gas and clean energy. He said conventional energy. We have had nuclear energy for a long time. We have hydro. There are many types of energy in Canada that are low emissions besides the newer forms like solar energy, for example.

So I think a lot of people assumed that he meant new pipelines to carry oil and gas. And there was certainly political currency to be gained in the oil rich provinces by letting that assumption stand. I've spoken to a number of experts about this. If you look at what's happened to oil prices in the last year, this is not an easy industry to prop up.

Pipelines take a lot of time to build. They take huge amounts of money to build. There are layers of environmental approvals that are required. Carney refused to scrap one impact assessment bill that the Conservatives say delays pipeline.

So I think he has a lot of wiggle room in that sentence, conventional and clean energy, to lean to the clean side. The question remains whether or not he will. But if you go back to Trudeau and our interview of him in 2022 versus now, the one place where we have seen Canada's emissions start to decline is in the electricity sector because of this access to clean conventional but also clean new energy that's coming on board.

The place where emissions have actually gone up in those years is oil and gas industry. And that is now the largest sector when it comes to Canadian emissions.

And as much as he has wiggle room in that phrasing of conventional and clean, he also did say point blank, we're going to have to think about building pipelines to export fossil fuels to other parts of the world because we are so reliant on exporting to the US. So do you think because of the stresses on his job right now, which are much more economic and trade related,

there is a risk and a real risk of climate goals falling on the wayside. You know, I want to be optimistic about this. So, yes, of course, there is a risk. It is easier or it would be easier to increase the flow of oil and gas to the West Coast and to Asia than it would be to get it all the way across the country to Europe.

I think, again, from speaking to experts on this, it really depends on whether or not he's willing to announce sort of massive subsidies for the industry. If you look at, you mentioned that emissions went up for the oil and gas sector, and it's true. So our climate targets in Canada are to see emissions cut from 40% to 45% from 2005 levels by 2030. Over that same period, fossil fuel emissions rose

rose with increased production because production went up 242%. But a lot of that was skewed by investment in the early 2000s, the early aughts, and it has disappeared for the most part. Companies are not that interested in pouring money into this sector. Oil prices are not robust. It costs a lot of money. There is a sense that this is an industry that is really focused on kind of wringing the last profit out of it while it can.

So I think he would have to step in quite heavily.

to make that a central part of Canada's new economy. And it may be that, I hope, at this point, the lower hanging fruit may actually be some of the cleaner energy options. How do you think he's going to bring in his expertise in climate finance, which he's developed over his time in the UN as a champion of climate finance, as the chair of Brookfield Asset Management, which is one of the largest investors in renewables?

And of course, as somebody who on a global stage talks about the need for climate finance.

Can he bring that in any way to the current Canadian situation? Again, his platform has not been fully fleshed out yet, but he has talked about a carbon border adjustment mechanism, which is something that we are seeing on the global stage. I think Europe has one, the UK is announcing one. A big question around that, which I know you'll be probably focusing on, is whether or not it includes scope three. Because for Canada, that's a huge issue, right? It's nice if we can get off...

lightly by saying that we make our production of oil and gas cleaner, but it really matters when you then sell it to your clients and they burn it, right? That is also part of the global footprint for oil and gas. He also has sort of the global contacts and the relationships

that I think on the world stage could make Canada finally pull its own weight on some of these issues. He served as the UN Special Envoy on Climate Action and Finance for five years. He was a founder and co-chair of the Glasgow Financial Alliance for Net Zero. So in some ways, I think that you could say that he is probably best placed of any world leader to make really substantive change on climate change.

There is a moment here that could be of enormous importance if it doesn't get derailed by these more imminent pressures around dealing with the United States and some of the domestic problems that Canada has. And that to me has been a change that I've observed over this year, right? When

Trump came to power in January, there was this void that was felt, which wasn't the case the last time he was in the White House, where there were world leaders like Justin Trudeau and Angela Merkel and David Cameron in power, pushing back against Trump's anti-climate stance. In January, it felt like Keir Starmer wasn't really standing up. Justin Trudeau was so weak

We had maybe the European leader Ursula von der Leyen speak up a little bit, Brazilian leaders speak up a little bit, but there clearly seemed like a void at the global leadership level.

And in three months, that's changing. We had China's Xi Jinping talk recently about how China is committed to its climate goals and they're going to put out a new set of ambitious climate targets later this year. Now we have an election of Carney, who arguably, as you say, is probably the most well-versed climate leader in

Do you think I'm reading too much here that finally we are starting to see a bulwark of world leaders actually stand up for climate issues given how central they are to everything around economy and trade and competitiveness and that Carney could really bring

that central focus to an issue which has felt like it has fallen by the wayside? I think you could even flip the question and look at it that maybe the world has finally made enough progress in all of these areas that the tide can't be turned and it simply makes sense to start to reinforce them, right? A key message for Mark Carney has been about making Canada's economy more resilient and

And what does that look like? There is a huge opportunity to kind of integrate climate into electric vehicles, batteries, clean energy, hydro, nuclear areas where Canada has traditionally had an advantage already. Even critical minerals and metals that are used for batteries and decarbonization and electrification of the world are

People will often look at extractive industries as not being very climate friendly, but we need those metals and minerals for decarbonizing. So there is a benefit, obviously, to taking them out as well. It is only week one. It's early to say, but I think that we could see some really substantive change. Now, it's a five-year term, and that means Carnie will get time to actually put these policies in place again.

At the same time, as you and I track very closely in our day jobs, extreme weather events, we expect them to keep rising. And there have been some spectacular ones in Canada in recent years, including that long period of wildfires that turned

you know, not just Canadian air terrible, but air in places like New York and, you know, turning the skies orange. The damages are in the billions of dollars. So how much do you think the Canadian public will stick with climate policies given extreme weather events and given the popularity and unpopularity of climate policies?

There were towns in Alberta, which is really the oil epicenter for Canada, the oil sands epicenter, that were tremendously hard hit by those wildfires. So again, using that political acumen, there is definitely an opportunity here to try to remind people that we are living with consequences every day in Canada from failing to address emissions quickly enough. Now,

Justin Trudeau was the first world leader we had on Xero. And Dani, you and I prepped for that interview and it was a really fun interview to do. It's time we get Makarni on the pod. Absolutely. I would like to co-host. We've got that bit in. So let's keep our fingers crossed. Wonderful. Thank you, Dani. Take care. Thank you for listening to Xero. And now for the sound of the week.

That's the sound of water freezing to ice in just one of a million lakes in Canada. And a good reminder that Canada's large Arctic region is under tremendous stress from climate change. Something our guest today, Danny Bokov, writes about frequently. We'll add links in the show notes. If you liked this episode, please take a moment to rate and review the show on Apple Podcasts and Spotify. Share this episode with a friend or with your favorite Canadian.

This episode was produced by Oscar Boyd. Bloomberg's head of podcast is Sage Bauman and head of talk is Brendan Newnham. Our theme music is composed by Wonderly. Special thanks to Somersadi, Moses Andim and Siobhan Wagner. I'm Akshat Rati, back soon.