Achieving Canada’s Net-Zero Ambition Requires a Paradigm Shift

Dan Wicklum:

One of the threads that goes all through the work of the Transition Accelerator is this idea of we can't rely on incremental change anymore. We can't change our systems incrementally, and yet that's what our whole system of designing and engineering and approving and financing and building systems. The new paradigm is, start in the future, design and define what you want your future to look like, your future system, and then build a pathway to it.

Michael Torrance:

Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On the show, we will talk with leading sustainability practitioners from the corporate, investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices, and our world.

Speaker 3:

The views expressed here are those of the participants and not those of Bank of Montreal, it's affiliates or subsidiaries.

Susan McGeachie:

Welcome to another episode of Sustainability Leaders. I'm Susan McGeachie, head of the BMO Climate Institute. Today we're talking about the paradigm shift required to achieve Canada's commitment to net zero. I am joined by Dan Wicklum, President and CEO of Transition Accelerator, a pan-Canadian charity that creates positive transformational system changes to solve societal challenges while supporting Canada to reach net zero greenhouse gas emissions by 2050. Dan, thanks for being here today.

Dan Wicklum:

It's my pleasure. Hello.

Susan McGeachie:

Let's start with some background on the Transition Accelerator and your path from Canada's Oil Sands Alliance to this role you're in today.

Dan Wicklum:

Yeah. We launched the accelerator about three years ago, and what we are is a pan-Canadian charity and we launched it because we thought there was a gap in the Canadian landscape on the institutions that were required to really make tangible, legitimate, quick progress to a net zero future that worked for everyone, a future that's profitable and fair and healthy and just happened to be net zero.

And when we did a strategic scan, of course we found environmental groups that form a very, very needed function on this journey. They often point out problems and speak truths to power. We have academics that do great thinking and come up with new ideas, but really aren't in the implementation space. We have industry that frankly have shareholders to be accountable to and are often in a difficult spot because they're a profitable business in the current system configuration, and yet our systems really need to be fundamentally retooled. We have governments that are accountable to electorates. So, what we thought was a new type of organization that could work with all those groups and others like Indigenous groups and define what we wanted out of the future, build the pathways, but then take practical, tangible steps.

Susan McGeachie:

I'm interested in those pathways. How do you differentiate between the dead end pathways and those pathways capable of achieving long-term targets? Can you describe your approach?

Dan Wicklum:

Yeah, maybe I'll play a little bit with that concept of what a dead end pathway is, and one of our taglines is, "Net zero changes everything." For 30 years we've been in what we talk about as an emissions reduction paradigm. So, since the United Nations Framework Convention on Climate Change, or the UNFCC, was signed in 1992, for almost all of that time, the scientists were telling us we had to reduce emissions, just reduce emissions.

And when you think about it, an emissions reduction doesn't require you to change the fundamental underlying systems of our economy. So, our energy system, frankly, can stay the same, but because frankly the whole world hasn't moved quickly enough, now the scientists are telling us that emissions reduction isn't good enough. We have to frankly eliminate emissions, of course in a net zero type of definition.

And when you take the step back and do some independent analysis, as it turns out there's almost limitless ways you can reduce emissions. Again, lots of ways you can improve the efficiency and reduce the emissions in systems, but there's actually very few systems that can be practical and be net zero. We've summarized a lot of the philosophy or the theory around this, but one of the principles on this difference between emissions reduction paradigm and emissions elimination paradigm is this notion of a dead end pathway.

So, if you picture two mountains, one is not very high, but the sides are very, very steep. So, it's a really short, steep mountain. Picture another mountain that's very high, but the sides are very gradual. And in this example here, the higher you go on the mountain, the more emissions you reduce. So, here we are in 2022, we want to get to net zero. It's going to seem very, very seductive to go up that small mountain where the sides are really, really steep, meaning you're actually reducing emissions quite quickly, but the problem is you're going to get to the top of that little mountain and you're not going to be able to reduce emissions anymore. And so, we call that a dead end.

And so, how this relates to practical example, what you're doing is if you're trying to get to net zero, but you go up that small, little mountain and hit the dead end, you will have bought a technology, locked in a technology platform that will have reduced emissions maybe even quite quickly right now, but you will have locked in those technologies and then you're going to have to walk down the mountain and then go back up the tall mountain again, right to the very top, where actually it's true net zero, at lost time and greater cost.

So, we are in this position now here, where not all technologies will get us to net zero, and we have to really be diligent on the technologies and business models and policies and regulations that are actually truly compatible on a legitimate pathway to net zero. One practical example of what it would mean is liquid natural gas to move heavy things around the landscape. So, boats, large boats or trains, or trucks. Now, if we changed off of diesel onto liquid natural gas, we might be able to reduce the emissions from those parts of our economy by maybe up to 50%, but you can't get any cleaner than a 50% reduction. So, liquid natural gas really is a dead end pathway. And you don't really have to take my word for it. When you take a look at the diesel manufacturers and the trucking companies and so on, no one's really looking at liquid natural gas, everyone's looking at other options and mostly hydrogen, frankly, some cases electricity. So, that's the concept of a dead end pathway.

Susan McGeachie:

This is critical insight for policymakers. Let's talk about your role as co-chair of Canada's Net-Zero Advisory Body or NZAB, which advises the Federal Government on one, what should the interim emission reduction targets be on the way to net zero 2050? And two, the most likely pathways to net zero.

For us, successfully engaging policymakers is a key success factor in achieving BMO's climate ambition, which is driven by our goal to help our clients achieve their own transition to net zero in an economically viable way. Successful outcomes in this strategy will not only take corporate action and access to affordable capital, but also strategic policy. Can you give us some examples of how NZAB is influencing the Canadian Government to drive a practical and economics driven approach to net zero?

Dan Wicklum:

Just a little bit about NZAB. So, the Net-Zero Advisory Body is a legislative body that became real when the Canadian Net-Zero Emissions Reduction Act was promulgated about a year ago. We are 15 Canadians that are governor and council appointees, appointed by cabinet, and we are independent. We are to bring a diversity of views and regional perspectives to NZAB and then yes, advise the government on most likely pathways and interim reduction targets on the way to 2050. Those are two pieces of mandate.

Our terms of reference contemplates things called lines of inquiry, you can just think of them as priorities. In our first year, we gave ourself the priority of governance, and we just really think that we need to have the right institutions in Canada and the right focus and relationships and capacity in our institutions. We have tended to think over time that getting to net zero or even emissions reduction, when that was the paradigm, was about really economics and technology, and I think people are quickly understanding that's just not the case.

Economic models don't make investment decisions, policies don't provide leadership. It's really about people. So, our governance priority is really around, how can we get more distributed leadership? I encourage people if they're interested more in the details of our advice, that they could take a look at the appendix at the end of the Emission Reduction Plan that's available on several Government Canada websites. And you can take a look at our 40 pieces of advice.

And the last thing I would say, Sue, is we're getting into an annual rhythm now at NZAB, and our annual report will be into the public domain before the end of the calendar year, and we will have advice on three new lines of inquiry. We're keeping governance, but the other two is an industrial policy line of inquiry and a future energy system line of inquiry.

Susan McGeachie:

I'm interested in how the US's recently released Inflation Reduction Act is going to inform some of the new recommendations that you've just described. For me, I find it a very credible example of achieving the scale of JEG reductions required while creating economic growth opportunities. They've developed a strategic value chain approach for accelerating climate solutions, the most notable example being EVs. Are there indications that Canada is following suite, or are we in danger of falling behind from a competitive perspective?

Dan Wicklum:

I think we're absolutely in danger of falling behind. And one thing that has really, really changed in the last couple years, again, net zero changes everything. Everyone has been thinking of emissions reduction over the course of the UNFCCC life history as a drag on the economy and something negative.

In the last couple years, basically all of our major trading partners, when you take the United States and the EU, UK, Korea, Australia, everyone is essentially saying, "This is a remarkable economic opportunity as well." So, we risk getting left behind unless we take very deliberate steps to very purposefully position our companies and our economies and our sectors into this new world. So, this is no longer really just an emissions reduction issue and it's no longer an emissions elimination issue. It is fundamentally a competitiveness issue. And the best example of course is the States.

We take a look at what many institutions in Canada have reacted over the years on emissions reductions and climate change. People had often said, "We can't act quicker than the United States. We can't lead because we are so tied to their economy. We're just going to disadvantage ourselves in a competitive sense." And therefore, that was the main reason we couldn't act.

Now the tables are turned, the United States is moving quicker than we are. They're investing much more deliberately to position themselves in very specific parts of the economy and frankly, they're investing more than we are. So, this is fundamentally an industrial policy issue at this point. And I think, again, net zero changes everything and that Inflation Reduction Act changes everything. And I think Canada has to really look at itself now and say, "Do all the pieces that we have right now in terms of our pathways to a net zero, do they add up not only to a credible net zero strategy, but do they add up to a credible strategy where Canada's going to be able to compete and win in this new world order?" And I think there's many people are saying that that's not the case, that we actually need to take a more deliberate approach.

Susan McGeachie:

And so many of us were always saying when the US moves, they're going to move fast. So, what actions does our government need to take now?

Dan Wicklum:

NZAB is working on this notion of industrial policy. And it's funny, in Canada, the words industrial policy have a lot of baggage. This is not our grandparents' industrial policy anymore. People tend to think the industrial policy is sort of governments picking winners and losers, but that's not really what the States is doing. The States is putting in a framework, working with industry to create roadmaps on very specific sectors, making some type of support and/or policy incentive available. And then they're letting the private sector lead. But the bottom line is, is that they're doing that on the sectors of the future. They're doing it on transportation and critical minerals, fuel cells.

So, I think the architecture is there. Some of the key work that the Transition Accelerator is doing and NZAB is doing, is often being advised by Dr. Bentley Allan, who happens to be a Transition Accelerator, a fellow, and he feels quite strongly that one of the key things that we can do is put into the public domain what he's calling competitiveness goals.

Maybe I'll play with that just a little bit here. I mean, we certainly have our emissions reduction targets, but what they are really is modeling artifacts. I mean, emissions reduction target is a number that comes out of a model, of a suite of analysis, and it doesn't really map to the real world, doesn't really map to the real economy. What we think we need to do now is take those emissions reduction targets and put in goals that backstop them and translate them into physical things that happen in the economy.

So, it's great to have an emissions reduction target for transportation. It's fantastic to have a zero emission vehicle mandate, but what does that really mean? So, the idea really is to align resources, focus government programs, focus investments from being very passive to attaining very specific competitiveness goals in critical supply chains by certain dates, that will actually drive action and investment quicker. And again, this is not government doing this in isolation, this is really based on a dialogue among government and the private sector about what is needed.

And the other thing that we think has happened is really independent intermediaries. So, when you take a look around the world, there's often an independent intermediary that is a broker between government and industry, that speeds the development of these competitiveness goals, speeds the development of sector roadmaps to back them up and in some cases even advises or takes the responsibility of allocating funds. So, those are the key pieces that we think really have to happen that would allow us to catch up to the United States.

Susan McGeachie:

Do you think net zero by 2050 is in reach?

Dan Wicklum:

I think it's going to be very difficult. I also think it's very doable. When you take a look at the change that has happened in the last two years, I think it's remarkable and all the different pieces that need to come together, we're seeing policies and regulations, financial institutions and sector are really understanding that they need to play a critical role.

I think the big thing that gives me optimism or the big thing that is just the reality that we need to keep in mind is that the past is often not a predictor of the future. I think the optimism that we have in the generation that is poised to take on leadership positions, they have remarkable optimism, they have remarkable motivation, and there really is a different mindset, where they just basically say, "Failure's not an option."

Susan McGeachie:

So, now that we have COP27 behind us and you were there, Dan, what are your takeaways from the conference and how do you think that's going to influence our trajectory in the net zero transition?

Dan Wicklum:

This was a very different COP. The Conference of the Parties, of course, are meetings associated with United Nations Framework Convention on Climate Change, the UNFCCC, that was signed in 1992. And for most of the COP meetings that happened every year since 1992, the negotiations have been around, "How much emissions do we have to reduce, and who's going to reduce on what timeframe?" And those prove to be impossible to bring to ground. The whole world dithered and now of course we've lost the window just to reduce emissions. We have to eliminate emissions by 2050. But in some regard, that hasn't made it easier, but it's made it clearer of what has to happen.

So, in previous COPs, Paris, we got to a 2050 deadline and then we shifted into this idea of, what's the nationally determined contributions? Or, how much is each country going to reduce emissions in order to feed into that 2050 goal? Those were difficult conversations, but they're done. Each country has a nationally determined contribution that they report on each year into the United Nations.

This COP is not really about setting targets. So, it wasn't the what. It was much more the how and associated issues. And there's really two issues that came up. One was the concept of a loss and damage fund where countries, frankly richer countries, could feed into a fund and compensate other countries that are being damaged or experienced losses by climate change, to compensate them. And then there was an associated issue around coming up with a deliberate timed phase out of fossil fuels.

Those are two very, very difficult conversations to have and this is really the first COP where they come up in any meaningful way, and that was reflected in how the COP played out. So, the whole COP was extended to try and get to some degree of resolution or agreement. And I think neither of the agreements are probably sufficient for the proponents that were pushing for those agreements. And of course, the other thing that happened at this COP is, boy, the world was distracted. We had two huge things happening globally that were commanding attention. The war in Ukraine, of course, and then the US midterms that were happening at the same time. So, I think it was a very different COP, moving from deciding what needed to get done to how to get done, and because the two main themes are so difficult, I think there was good progress made, but not to the extent that many wanted.

Susan McGeachie:

Thanks, Dan, for taking this time to share these insights from your analysis. Before wrapping up though, I'd like to spend a moment on your previous career before becoming immersed in addressing climate change. How does your experience as an elite athlete help you navigate the complexities of the role you're in today?

Dan Wicklum:

Well, I'm not sure if I was an elite athlete, Sue, maybe we should start there. So, I played football. My first career out of university, I did play a year for the Winnipeg Blue Bombers and was lucky enough to win a Grey Cup there. And then I played three years for the Calgary Stampeders. I think it's very debatable whether I was elite in those roles. I'm sure my old teammates would have very strong opinions about that.

But I do think that the experience of playing on a team at whatever level, or being part of a high-performance team, even if it's not in athletics, was really, really important for me and really, really important for other people. And I think it speaks to this notion of what can be accomplished if you have a group of people that are really, really motivated, really, really committed, with strong leadership and a plan. You can surprise yourself, again, about how quickly things can change, how quickly you could be effective, and success is something you really need to plan for.

One of the threads that goes all through the work of the Transition Accelerator is this idea of, we can't rely on incremental change anymore. We can't change our systems incrementally, and yet that's what our whole system of designing and engineering and approving and financing and building systems. The new paradigm is, start in the future, design and define what you want your future to look like, your future system, and then build a pathway to it.

We're never going to get in place, I think, a network of hydrogen pipelines that we need for 2050 economy, if we think about changing our existing system incrementally. I say that example, because that's exactly what Europe is doing. There's something called the Hydrogen Backbone Initiative, where 31 institutions on the continent of Europe, and think pipeline companies and governments and energy companies across about 15 countries, are defining the future pipeline system they need to pipe hydrogen around the continent to get to net zero. They're not changing the existing system incrementally. They're going into the future, defining the system that they need, and then they're building a pathway to it. That's a very, very type of athletic type of analogy where you define what your objective is, you win the championship, and then you do whatever it takes to get there. You build the pathway, you put in place the right team, the right management, you build a pathway to get there.

Susan McGeachie:

Thanks, Dan, for taking this time to share these insights from your analysis and thank you to our listeners for tuning in.

Dan Wicklum:

Thanks, Sue. I really enjoyed it, and thanks BMO for their leadership. This is a great podcast.

Michael Torrance:

Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode and to see our other podcasts, visit us at bmo.com/sustainabilityleaders. You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have. Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.

Speaker 3:

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