Welcome to episode 168 of the Energy Talks podcast. I'm Climate and energy journalist, Markham Hislop. Now today, we're gonna be returning to a theme that we've touched on in a number of episodes. And in fact, if you search the podcast using the keyword industrial, you'll find 4 related episodes, and that topic is Canada's industrial policy or more accurately, clean energy industrial policy and strategy, or as my guest, Bentley Allen, likes to call it net 0 industrial policy. So, I'm gonna we're gonna talk to Bentley Allen, who is a research director at Alberta based transition accelerator and 1 of the authors of Critical Next Steps to Ensure Canada's Future Competitiveness.
So welcome to the, well, welcome back to Energy Talks, Bentley.
It's great to be back, Marco.
Now you wrote you and Derek Eaton wrote this piece, prior to the release of the March, federal budget in March. And so before we get into the specifics discussion of your paper, I wanna talk to you about an interview that I had with Jonathan Wilkinson, who's the federal minister of natural resources. We were doing a press conference, and I asked him very specifically about, you know, how he defined and the government defined industrial policy. He said there's 3 components to it, carbon pricing, subsidies, and regulation. How do you how do you respond to that?
What do you think of that definition, that understanding of modern industrial strategy and policy?
Well, I think that, the question is appropriate because, we can really see the imprint of that particular vision of minister Wilkinson, on the budget, in chapter 3, which lays out the main in Canada plan for energy and climate. There's a, a now famous in the wonk circles anyway, now famous diagram that we refer to as the pyramid or the mountain or various things depending on who you talk to. And what it has are these various tiers of tools, stacked together. And and what they suggest is that together, Canada has multiple layers of of instruments that it can use in order to, affect industrial policy. And, what I would say is that that's great.
It's great. That diagram also has at the top of it a series of priorities that shows that the government has strategic intention to focus, the use of its instruments. And I think each of those instruments is great. There's a lot of work to do to think about how those instruments fit together. And, what I would say perhaps more pointedly, is that the instruments themselves do not constitute a strategy.
A strategy also requires a vision. It requires a clear sense of where you're going, and it requires a set of procedures or processes that allow you to understand, what it is that you're trying to achieve and to calibrate those instruments in real time in a dynamic way, in order to deliver on the goals that you're trying to achieve. And that's what I think the the memo that that you're referring to on critical steps to ensure Canada's future competitiveness really focuses on is how how would we get this process right?
Yeah. I I think if I had to describe this for listeners, the the point that you're trying to make is that we don't need more money. We need better process, and we need better strategy, and we need to we also need to have a vision. And so let's talk about that first, because I would I've had the opportunity in the last 2, 3 months to read a couple of speeches from, Americans, who are involved in the Biden administration. 1 of them is, Gina, Riamondo, who's the US secretary of commerce.
She wrote she had delivered a speech in November that lays out it's crystal clear what the Biden administration's, approach to strategic relations strategic economic relations with China. That's the focus of the speech. And the way that industrial strategy and policy are gonna be used to manage the the the America's response to that. And then there was another 1 by whose name I I can't remember the the individual, but he's the he heads up the, I think it's the president's, economic council. So, you know, fair quite influential in the Biden administration.
And then he took a little different tact on it, but but basically echoed Rio Mundo's approach. So I would say that maybe, you know, outside of the, you know, policy wonk circles, the America united the new United States' vision for a clean energy industry, is not well known. But I think within the the circle, it really is well known. I mean, it Rio Mondo just it's a it's a it's a road map. It's a blueprint.
There's no 1 can be confused about what the Americans are up to once they read that speech. There is no there is no Canadian equivalent. Would you agree?
I would agree. We haven't seen the principles of industrial strategy, articulated publicly, with the level of specificity that I think is required. I think the budget, again, as I said, it's a really important step in the right direction. It it it demonstrates that there is intent, to to develop an industrial strategy that's really clear and specific. But we we need the answers to those broader questions.
But vision also is not just, a question of of saying, we're going to, you know, build a clean energy economy here. We have that vision, I think, in the United States or in Canada. And certainly, that's the vision of the IRA and and, the other pieces of the apparatus of the industrial strategy apparatus in the United States. But we need something even more specific than that. What the Department of Energy is doing in the United States is a really crucial part of the industrial policy there.
The industrial policy is not exhausted by the tax credits. The industrial policy also manifests through these processes that are convened through the Department of Energy, laying out targets and creating supply chain models and road maps, for 20 some supply chains and industries where they're really trying to identify what are the strategic levers, how are we gonna get to these various markers, and targets that we've laid down. And they're doing that in collaboration with industry in a really, clear and consistent way. So so to do just to give you 1 example, they have stood up a public private partnership in the 0 emissions vehicle space called Livebridge. And Livebridge works as a as a space where government and industry and civil society can meet to work on strategy and really design an action plan for making the most out of the IRA credits as well as other pieces in the in the policy, apparatus in the United States.
So this piece of collaboration, this piece of targeting based on deep, deep analytics, this this wonderful expertise that the Department of Energy has built up in the United States on all these issues over the years, they're also being brought to bear, on the process. And so that vision that you're talking about, it does need to be high level, but you also it also needs to be very specific to be manifested in targets.
Yeah. I I had the opportunity to, interview the 1 of the leaders of a Texas initiative to create a hydrogen hub in Texas, and it it was part of a Department of Energy process. So these this they weren't just establishing the hub. They were put in a proposal to to establish a hub, and it was gonna be partly funded by the Department of Energy. But what it struck me I mean, you know, it's Texas.
Right? I mean, I you know, I've been in Texas. I've worked in Texas, and and it it it is a lot like Alberta in some respects. And the fellow that I was interviewing came out of the oil and gas industry, but it was a very different viewpoint than what you would find, say, in Alberta today. And it was talked about about building coalitions, building, you know, government as at the federal level and at the state level, being partners with industry, but also labor, also civil society.
He talked about he talked about equity. I mean, these were principles that I don't think we would have seen, you know, 10 years ago in, in this kind of context, and it seems like the the work that the, administration is doing and the Department of Energy is doing is changing how how work gets done down at the state level. Is that a fair comment to make?
Yeah. I think that's absolutely right. I think the hydrogen hub strategy that the United States has deployed, this was funded, even before the IRA in the in the bipartisan infrastructure law. And the the Department of Energy had been laying out the intent to do this in a strategic fashion, for years in advance of the bipartisan infrastructure law. So this this hydrogen strategy of the United States has been has been in the works, for for some time, and it was supercharged by the production tax credit that was included in the IRA.
But what you're pointing out, which is exactly right, exactly in line with, with the memo that Derek and I wrote, is that all of these other elements, these collaborative elements, the hard work of getting down to figuring out what industry is up to, how to support them, but at the same time, how to shape them and direct them in line with the vision that the government has. That this hard work, is definitely unfolding in the United States, and it's happening at multiple levels of government.
I wanna point out here because, just let's see. We're on we're recording this on a Friday. I think it was Wednesday. The Alberta government unveiled its climate and energy development plan, And it is the antithesis of what we're talking about. It is, it backward looking It it's a climate plan that envisions producing and burning more hydrocarbons to reduce emissions.
I mean, if that sounds illogical to you, it sounds illogical to the rest of us too. I mean, it it it is a digging in the heels of the status quo, and the hydrogen hub in Texas, you have the federal government, the state government, various industry players, all of them cooperating. Now look at what happens in in, in Canada, where I would say British Columbia has a strategy that more akin to what you're talking about, you and Derek are talking about. Alberta clearly does not. Even though there's a hydrogen hub in Edmonton that has emerged using these principles, it wasn't driven by the government and barely supported by it.
Saskatchewan does not. Manitoba does not. Ontario does not. Quebec is kind of leaning in that direction, and then most of the, the maritime provinces do not. So, basically, we've got 1 and a half provincial governments in Canada that's willing to work with the federal government in this kind of strategic industrial strategic strategy and policy way. I'm being pretty harsh here, and I and I acknowledge that. Am I being a little too harsh?
Well, I think we're in the early stages of of the dissemination and the reacceptance of these ideas. And therefore, what will certainly be a long learning process of developing the capacity to do this problem to do this properly. Sorry. I do think that a number of provinces are interested in working with the government and and doing so on a constructive basis. I don't think, any province has honored the market on doing this in a in an appropriate strategic fashion.
I think Quebec probably has the most to teach other jurisdictions their work in laying out a critical mineral strategy, in laying out a battery strategy, in funding organizations like Propulsion Quebec, which serves as a kind of intermediary or a public private partnership in order to catalyze the development of the cluster around 0 emissions vehicles and mobility more broadly. The use, strategic use of public money through in Verdesmont, Quebec. These are these are the kinds of things that I think other provinces can really learn from. And Ontario, I think, is starting to to get its act together as well. It has realized, that that a game is afoot and they have to play in the game.
And so regardless of politics, they are they are starting to get serious about their clean energy industrial strategy. And it certainly helped in Ontario. I think that they that they lost a couple of of perspective investments because, they couldn't guarantee the clean energy, was gonna be there, that those investments would have needed. And it's kind of, I think, they came to realize that clean energy, was an advantage for them in driving the kinds of investment that they wanna see, to build on the manufacturing base that's there in Ontario. But I wanna come back to that broader point, which is that, know, it's not just the federal government that has forgotten how to do this.
The provinces for the most part have forgotten how to do this as well. And we have a a long road of creating the intellectual and analytical capacity, that is necessary, to to really do industrial policy properly in this country. And so, what Derek and I and, our partners, at the Ivy Foundation and, at the Transition Accelerator, have decided to do along with our colleague James Meadowcroft, who we work very closely with on these issues, is launch a new center for net 0 industrial policy that will really, try to bring some of the best thinkers in the country into this space and to really do the kind of deep and hard, work of understanding how these supply chains are putting together, how we can design economic policy around them, what are these international best practices so that we can really develop the capacity that we need to get this right over the next couple of decades.
Okay. I think that this is a really important point here that the there's going to be a center for it. So now we have a space in which these kind of policy discussions can take place, in which the strategic discussions can take can take place. So tell us a little bit more about the center, when you're gonna launch it, what it's gonna do, what your goals are, that sort of thing.
Yeah. So we're gonna, launch it. As you said, we're recording this on a Friday. It'll be it'll be next week, so I'm hoping, that that the that it'll be this week when when folks hear this, and and we can do it continuous with the launch of the center. And so, you know, what we do what we're gonna do is, lay out, in the in the center launch very clear, focus areas where we think that Canada really needs, some concentrated thought.
And that will be the focus of the center is to really do that concentrated, thinking and analytical work that that we think is necessary. But of course the mission of the transition accelerator of which this center will be an initiative of the center is never just to write reports or to do thinking. We always wanna put that thinking into action. So we'll be looking for ways in order to put that thinking into action with our industry, government, academic, and civil society partners. But what we're gonna basically do is, you know, do, research and, action development, in 5 key areas.
And so the first area that we're going to look at is the area of the development of macroeconomic strategy and growth strategy. We're not really having a serious conversation about where economic growth is gonna come from in this country or what our strategy is, for leveraging, our clean energy strengths into a long term economic vision. So we need to do some serious thinking about that. And and really part of that is, you know, what is our export strategy gonna be? What do we do as oil and gas exports decline and have a really big major macroeconomic impact, on on this economy because that's exactly what's going to happen as oil and gas dollar, dollars are no longer coming into the country.
We're gonna have a big hole in our balance of payments and in our economy that we're going to need to fill. And so we really need to get strategic about about that.
If I could just jump in here, Pat, for a second. For listeners, it's really important that I because I I see on social media all the time, the contribution of to the economy, the national economy of of Canadian oil and gas gets minimized. But the fact is this is our leading export sector, and and it's 2 times the size of the auto sector, which is the next 1. Generally, oil and gas exports are in the range of a 100, 000, 000, 000 to a $120, 000, 000, 000 per year. That ain't chicken feed.
No. It's not. And, if you look down the table, the the second in the the export table after oil and gas is the automotive sector. So we're doing well in transitioning the automotive sector. But right now, we're just on target to keep our market share in automotive in terms of exports to the United States and throughout.
But if our top export disappears, which is a $120, 000, 000, 000 a year, that means we have a $120, 000, 000, 000 shortfall that we to make up. And what you would need to do is take the next 9 exports on the export table and increase them all 20%, over the the decline, that the oil and gas industry is is, almost sure to experience at this point. And so I think what that means is that, you really need to get serious about raising our level of exports in the other industries, that are on that export table. So the automotive sector, manufactured goods, minerals, metals, processed metals, which is a separate 1 from the minerals themselves from the ores. Forestry, agricultural products, all of these need export strategies, and that has to be part of what we're doing.
And certainly looking at those, opportunities that Canada has in net 0 supply chains, that's been a key focus of work for Derek and I, and we're continuing that work. And that work will be folded into the center as a second area. And then just to run through the rest of the 5 really quickly, we're also gonna look at best practices, internationally in modern industrial policy. That's what we're talking about today. That's what our memo is focused on.
And that's what a lot of our engagement, with the federal and provincial governments, is meant to to help to convey what really is modern industrial strategy and how do we do a good job of it. We're gonna continue that work. But we also, in Canada, have a really big problem with, finance and investment. How are we gonna mobilize investment? And what are we going to do in order to, make sure that we have the capital expenditure that we need in order to transition and on the pace that we transition?
There's a lot of irons in the fire on this. There's the growth fund. There's the Canadian Infrastructure Bank. There's taxonomies. There's various, government initiatives.
And we wanna try to provide support to those and really make sure that we're thinking in a strategic way about how we allocate dollars, in this country. And the final area which really, ranges across, all of the these areas is really trying to understand what are the costs of inaction? What happens if we don't, if we don't do industrial policy well? What if we do it badly? What if we spend our money ineffectively?
What if we just say that we're not in the game of industrial policy? What will happen to our competitiveness and our erosion? Really making clear the costs of of inaction. So we're gonna be working in each of those 5 areas. And like I said, we're going to be doing both analytics and action oriented work.
You, you, convened a, a summit, a 1 day summit in in Ottawa, last year about industrial policy that I was privileged to to speak at, and I sat on a panel with Michael Wernick, who's now a professor of economics at Carleton University, but is better known as clerk of the privy council for a number of years, which is basically Canada's top civil servant. I mean, this is a guy who's very influential on policy, development. And I'm gonna pick on Michael because, you know, as I kind of did at the while we were sitting on the panel, because a comment that he made is that Canada has seen this before. These big changes will muddle through. And I take, I took exception to it then, and I take exception to it now.
I I think the the the muddle through and that mindset is not uncommon in Canada. Somehow will muddle through. Is the polar opposite, a 180 degrees degrees different from the approach that you're suggesting, which I think, based on all of the interviews that I've done with experts, is is the correct approach. Do you are you running into the muddle through mindset in government, in industry, governments across the country?
I think with anything that is new and moving fast, there are going to be people who just don't have the the the the the confidence that they need in order to be bold and be brave. But I don't think that that means that that there isn't, tremendous potential for ambitious concrete action, in this country, and that there aren't a lot of really good folks both inside and outside government, that really understand what we're up against and are trying to put together the tools that we need in order to to do this well. I think it's really hard to move the federal government, because it's a really big ship. But there are definitely, folks on the decks, all hands are on the mass and various parts of the ship to try to to try to get their hands around the strategic situation. I see the same thing in industry.
I see a lot of really encouraging signs from our firms, from our entrepreneurs, from folks who work inside, big government firms here in the government. And I think that, you know, this country definitely has what it takes to do something interesting. And but, yeah, we need to be more strategic, and we can't just rely on the processes and the procedures that we have in place right now.
I would argue, Bentley and have in in columns, that part of this process like, I really appreciate the work that you and the transition accelerator are doing on the policy side, on the process side, on the intellectual side of this. And there's a part of it that is, if there's a piece missing, it's the politics side, because politics makes space for policy. And which is why I'm so opposed to the Alberta climate plan, because it it takes oxygen out of the conversation, and that's a problem. And we see that in too many other provinces. And I really appreciate the fact you're positive and you you're emphasizing, you know, lots of folks of goodwill working on this, all hands on deck.
But I would still I would still argue that despite that, that the politics around this, the narrative, the way we're talking about the clean energy, industrial transformation legs. And just again, 2, 3 days ago, we were we ran it on, the Energy Media website. You can see Fati Berl, who is the executive director of the International Energy Agency, said the, industrial, clean energy industrial transformation and the energy transition is not only accelerating, it's going so much faster than most people understand. And I would say most people in in Canada don't understand it. And the time frame in which we have to do this, to do the work you're talking about, is maybe shorter than we understand.
And this is an urgent issue. And that's why politics is important. We need to have these broader conversations and and build public support for the kind of effort that you're talking about. So we've only got another minute or 2. I'll just let you respond to that.
No. I think that's absolutely right. I I think that, we things are moving at such a high degree that what we need to build and I think this is why process is so important here. And that's why Derek and I said, okay. Wait a minute.
We're pretty sure that this budget is gonna include some some significant investments. But we think that what we really need to say here is that, you know, subsidies and investments do not constitute an industrial policy. To do industrial industrial policy well, you need to have a good process precisely because industrial policy has to be a dynamic response to an extremely rapidly shifting landscape. Right? So we had the Aira in August.
We got the EU industrial plan now. We got the Korean, Battery Alliance, which was announced, which is also has 35, 000, 000, 000 just on the battery supply chain coming out of Korea. They're already a powerhouse, and they're investing 35, 000, 000, 000 in the supply chain. Really intense competition is coming our way. And, yes, without a new process that is much more strategic than the ones that the government, has become comfortable with, we're gonna be in a very difficult position.
I I think that's absolutely correct. But it also allows me the the point to make another point that was very salient at the summit, which is that, we need to have these processes. This is what what Chuck Sable said, because industrial policy, modern industrial policy is about adapting and experimenting under those conditions of uncertainty. And without a really good process where the government can communicate with industry and expertise, independent expertise, and and get the 3 of those, groups working together in a coherent way, we're not gonna be able to adapt, and change and and respond, while charting our own strategy in an effective manner.
Bentley, we we've got to wrap this up. Good luck with the launch of the center next week. We I'm gonna have you back, to talk about this in the future because the the this I know this sounds for a lot of listeners, they're gonna go, you know, eyes glaze over. All this is, you know, very wonky. But in the practical application, what this means is the continuation of Canada as a prosperous economy, a prosperous lifestyle, the jobs that we enjoy, the wealth that we enjoy, that that's what we're talking about because this is this is a once in a 100 year, industrial revolution.
That's what the IEA says. That's what it's, it's commonly understood now, I think, at least outside of Canada, that that's what this is. And we either adapt or we pay the price in in lower wages, fewer jobs, less wealth, and a less prosperous Canada. That's that's what we're talking about, and and we need to talk about it more. So thank you very much for this, and we'll look forward to the next interview.
Thanks for having me on, Mark. It was my pleasure.