Globe editorial: How to stop China from owning the green energy future? Dig, Canada, dig

In the 2000s, as Germany sought a steady stream of cheap and reliable energy, it teamed up with Russian natural gas. It seemed like good business back then, but since Russia’s invasion of Ukraine, Germany and other European countries have had no choice but to scout for new supplies and suppliers. Germany will need several years to wean itself from Russian gas; By then, Vladimir Putin will have his finger on the whistle. Electricity prices are at record highs today, with gas eight times more expensive than Ontario.

The pact between Germany and Russia has been standard in recent decades. Globalization was underway, and the possibility that a major trading partner could start a land war in Europe, or use energy as a tool of extortion to support that war, was dismissed.

Which brings us to a possible future dependency – to green energy. China controls about two-thirds of the world’s lithium refining, an essential part of batteries — and therefore electric vehicles. It also manufactures three quarters of the world’s solar panels.

This is not exactly the same as the gas situation between Russia and Germany. Europe needs daily gas supplies; Being cut off from EV batteries or solar panels is not going to turn western economies upside down today or tomorrow. But the West, including Canada, must not depend on a Chinese-dominated green energy supply chain that could be decades from now what oil and gas is today.

Avoiding a dangerous addiction has become a central issue in Washington policymaking. To counter China, industrial development will be supported with billions of dollars pledged through a series of recent bills passed by Congress. The latest and greatest is the landmark Inflation Reduction Act, the title of which belies its mission: it is primarily about reducing pollution, not inflation. It aims to cut emissions by 40 percent by 2030, in part by launching a wave of America’s green industry. It’s aimed squarely at China as the law puts solar and electric vehicles at the center of its $370 billion package of public dollars.

The tally is a big win for Canada, one that looked like it was going to be a big loss. An earlier version of the bill had an EV subsidy dependent on Buy American. The final version has subsidies for electric vehicles built in north America, which should be a boon to Canada’s Ontario-centric auto industry. In its speech from the throne last week, the province’s progressive-conservative government trumpeted the potential to become a leader in electric vehicles, citing $16 billion in publicly supported private investment over the past two years.

Ontario’s throne speech also spoke of a bright future for critical minerals like lithium, describing it as “unprecedented” potential — but no major investments so far. Canada was once a world-leading mining country and the TSX remains a world-leading mining exchange, but Canada’s green energy mining industry is still nascent and struggling.

There is only one lithium mine in Canada, in Manitoba — and it’s owned by a Chinese company that ships the output to China. Why? A recent Globe and Mail article spelled out why, and there’s enough blame: the domestic mining industry, reluctant Bay Street financiers, and governments, including Ottawa. When this one lithium mine (still in development at the time) came up for sale three years ago, only Chinese money knocked on the door. It was a mistake by Ottawa to allow the purchase – the deal could have been blocked and probably would be today – but where were the Canadian, American or European investors?

Now everyone is alert. The Trudeau government pledged $3.8 billion over eight years to Canada’s first critical minerals strategy in its April budget. Ontario released its own plan in March.

When it comes to industrial strategies, one should always be cautious. But on green energy, both the US and China have it and believe they must. And in the 1970s, it was Canadian government tax breaks and investment that helped spur development of the tar sands.

But if Canada is to become a leader in the green economy, industry must do the work. And the industry that underlies most sources of green energy is old school traditional mining. It’s all about finding, mining and processing certain key minerals.

Digging for riches has long been a Canadian specialty. It has a bright future.

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