An Ideas-Based Online Magazine of the Global Network for Advanced Management

Is the U.S. Executive Order on Energy an Opportunity for Canada and Mexico?

It is among those nations that claim to be the most civilized, those that profess to be guided by a knowledge of laws of nature, those that most glory in the advance of science, that we find the greatest apathy, the greatest recklessness, in continually rendering impure this all-important necessity of life…
 —Alfred Russel Wallace,
Man’s Place in the Universe, 1903

On March 27, 2017, President Trump signed an executive order on “promoting energy independence and economic growth” that rolled back key Obama-era climate policies. More specifically, emissions rules for power plants (known as the Clean Power Plan), limits on methane leaks, a moratorium on federal coal leasing, and the use of the social cost of carbon to guide government actions have all been rescinded.

What the order does not say is whether the U.S. will stay or withdraw from the Paris climate deal, which suggests that this is still under discussion. As the second biggest polluter behind China, the U.S. plays a key role in meeting the Paris goal of keeping the planet’s warming under 2 degrees Celsius. 

Irene Henriques
Irene Henriques

This order, however, should not come as a surprise, as the repeal of U.S. climate regulations and the unshackling of the fossil fuel industry were part and parcel of Trump’s campaign promises. Moreover, as with previous executive orders, this order will be challenged by a host of groups.  

So why should we be worried? First, the order increases uncertainty. Current U.S. investment in clean energy may be impacted. As Europe and China continue to invest in clean energy technologies in response to the climate change threat, the order will undoubtedly reduce the U.S.’s ability to foster clean-tech, and alternative energy innovations and industry, thereby reducing its competitiveness and ability to transition to a low-carbon economy. Given the U.S. leadership in innovation, this will be a tremendous loss to society as a whole.  

Second, the U.S. order may also incite calls in Mexico and Canada to abandon their environmental/climate change efforts so as to remain “competitive.” In Canada, for example, the opposition party is calling on Prime Minister Trudeau to abandon its proposed price on carbon in light of the U.S. executive order. Yes, the international context matters, but do we want to go down the same path as the U.S.? The scientific and academic communities have spent two decades studying climate change. This research has shown that climate change is real and worsening, and will have both a human toll and cost cities billions of dollars in damage every year if efforts are not undertaken.  

Successful business and government leaders look at the facts and project into the future. Their strategic and policy decisions are based on what they believe the world will look like tomorrow. The threat of stranded or unrecoverable coal, oil, and gas reserves is real, and a financial risk that many investors are seriously considering when deciding where to place their money. Countries dependent on the fossil fuel sector need to take this risk seriously. The long-term competitiveness of these countries will depend on how they transition to a low-carbon economy. 

Both Canada and Mexico have enormous clean energy resources. Canada has a massive natural potential for the development of renewables, including wind and solar resources, tidal and geothermal energy, and hydro, while Mexico has huge wind and solar potential.

With the U.S. reneging on its climate leadership, Canada and Mexico should take the baton and become the North American leaders. A new industry is being built around renewables (e.g., the electric car), and it is imperative that we participate in its development. In doing so, Mexico and Canada, their citizens, and their businesses will be better prepared for the transition to the low-carbon economy.

Climate change is a global issue that must be addressed as a team: when one player/country falters; the others must step up for everyone to prosper. It is a long-term economic reality that governments and businesses must address. And it is not only an energy security issue; it is a national and food security issue. We all share one planet, and the planet must be protected. Cooperation at all levels—from governments (federal, provincial, state, territorial, municipal), industry, non-governmental organizations, indigenous peoples, and civil society—is needed to move us from a state of reaction and defensiveness to a state of pro-activity and adaptability. Let’s not let this order stop our progress.

Irene Henriques is a Visiting Distinguished Professor at EGADE Business School and Professor of Economics and Sustainability at Schulich School of Business, York University, Toronto.

Perspectives Topics