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Andrew Evans: The world is finally embracing nuclear energy, and Canada should power the way

Commentary

Coming out of this month’s COP28 conference in Dubai, 22 countries (including the United States, Canada, Japan, and others) signed a pledge to triple the global amount of nuclear power by 2050. It represents a positive (albeit unenforceable) step forward for nuclear power’s global reputation rehabilitation and potential future success. 

Nuclear power represents a carbon-free, reliable source of electricity that has the potential to supply global electricity grids with the large amounts of electricity that they will need to effectively decarbonize. Without nuclear, there is an open question as to what will be the baseload sources for the grid and ultimately if our climate goals are attainable. As David Frum bluntly put it in a recent podcast with The Hub: “if you got a plan to get to net-zero in 12 years, and it doesn’t include nuclear, it’s drugs.”

While renewables like wind and solar can overcome their intermittency issues when paired with grid-scale batteries, and this could prove one avenue for baseload power, this pairing remains largely untried (and currently very costly) in practice. The other possible sources are natural gas or coal power plants, which are reliant on burning fossil fuels and would increase our carbon emissions. 

Yet, with the IEA forecasting anywhere between 80-150 percent increases in global demand for electricity by 2050, there’s going to be massive new demand for stable, reliable power. Herein lies the potential for nuclear as a substitution for coal and gas.

Recent history shows that nuclear energy can is a clean, efficient, and reliable source. According to the IEA, between 1971 and 2020, global electricity emissions were 20 percent lower due to nuclear energy than they would otherwise have been. Ensuring we build nuclear plants instead of coal and gas plants will therefore result in continued emissions reductions from the power sector, helping to hit global climate targets, which will be otherwise unfeasible.

In addition to established nuclear countries like France and South Korea signing on to the pledge, non-nuclear countries like Poland, Ghana, Mongolia, and Morocco have also signed on. This is an encouraging sign of clear interest from a wide range of grids and geographic areas. Not only would a global tripling allow for a greater amount of carbon-free power, but it would also present numerous commercial opportunities for Canada. 

Much of the reason that nuclear power does not have more widespread backing is the financial uncertainty surrounding successful execution. Western-built nuclear projects face consistent issues with cost and time overruns; the latest project completed in the U.S. was $16 billion over budget and seven years late, while in Britain, the country’s major project is already £3 billion over budget and a year behind schedule, with expected operation not until 2027.

Canada has a major opportunity to seize the commanding heights of what could be a major export industry of the future and secure investment in a key value-adding industry for generations. Canada has done this before by developing and exporting the CANDU-model reactor to Pakistan (1971), Argentina (1984), South Korea (1983), Romania (1977), and China (1998), demonstrating the reach and influence that we were able to exert. The next frontier in nuclear is Small Modular Reactors (SMRs), aimed at reducing the complexity of the projects, making them more cost-manageable and quicker to build. 

Ontario Power Generation has been leading the way, signing deals with Poland and the Czech Republic for the construction and development of future SMRs. OPG has also taken a major step by aiming to have a new SMR at Darlington by 2029, in cooperation with GE Hitachi and the Tennessee Valley Authority. This new build will be a test case demonstration of the strength of Canada’s nuclear industry while also bringing in foreign expertise to maximize the chances of a successful completion.

Another recent major milestone that demonstrates the growing strength of Canada’s nuclear sector is the partnership between Cameco and Brookfield to purchase Westinghouse. Not only will this diversify and further expand Cameco’s business, but it also grants access to the company and people who completed the most recent large-scale nuclear build in the US. Cameco also signed a 12-year deal in 2023 with Ukraine to export all of Ukraine’s uranium needs for processing in Canada to produce fuel for Ukraine’s nuclear power plants. Previously, Ukraine’s nuclear fuel primarily came from Russia.

Helping to further revitalize Canadian exports has been the recent approval from Minister Wilkinson to provide $3B in export financing to Romania. This was agreed to in exchange for Canadian participation in expanding Romania’s only nuclear plant (which was originally a Canadian design). This, along with the decision to include nuclear energy in the federal Green Bond Framework, have been positive steps from the government. Along with highly positive public statements from Pierre Poilievre, a political consensus on support for nuclear has seemingly emerged at the federal level in Canada.

For Canadian exports to be successful in a timely manner over the long term, we must work to address long approval processes in foreign import markets often related to a lack of institutional expertise in nuclear matters. Here, the Canadian Nuclear Safety Commission has a role to play in working with international regulatory agencies and speeding the approval process while maintaining safety standards.

To this end, the CNSC has demonstrated its ability and has existing bilateral agreements with 46 other countries to harmonize standards and information exchanges. These agreements must be given more political priority to advance exports, and there have been examples of this being the case, with a new agreement to make a shared technical review process specific to SMRs being signed with Poland in February 2023. A more proactive approach to regulatory and safety measures with other countries can help to quell any concerns and develop new markets for Canadian nuclear exports.

Finally, not only will leadership on SMRs open doors for increased domestic economic development, but it will also offer our friends and allies abroad increased options to use non-Russian or Chinese nuclear technology. Utilizing our domestic capacity to provide nuclear fuel along with specialized nuclear services can allow them to pivot from their current reliance on Russia and China. By providing the ability for them to disconnect from these sources, we can help advance the Western political coalition by denying gains to China and Russia. A contribution from Canada to help preserve global norms around nuclear usage would be valuable to reclaiming our role as an important and contributing power in the years ahead.

The keystone in this vision is the Darlington project. If it can be even relatively successful in terms of being on time and on budget, global prospects for SMRs will increase dramatically and opportunities will flow to Canadian businesses. Helping countries like Poland, Ghana, Mongolia, and Morocco build their grids using modern, safe, reliable technology will yield significant climate benefits and strengthen Canada’s global advantage when it comes to nuclear energy.

Steve Lafleur: Does everything feel broken? Canada’s messy federalism is a big part of the problem

Commentary

You might think subsidiarity is too dry a topic to care about. You’re wrong. It affects everything. 

The concept is simple: responsibility for policy issues should rest with the lowest level of government practical. In other words, if municipal governments are well-placed to address an issue, they should. If they’re not, the provinces should do it. Failing that, the federal government. It’s an approach that I generally support, but it’s often challenging in practice. 

This might seem like a stale, academic concern. Far from it. Canada is an unusually decentralized country. Canada’s federal government has controlled roughly 30 to 40 percent of government expenditures (net of transfers) for the last three decades. By contrast, the U.S. federal government controls around two-thirds of government spending. With more than 60 percent of spending by sub-national governments, we have an unusually large stake in ensuring that they’re well placed to undertake those responsibilities. 

A lot of things aren’t working in Canada right now. While I don’t subscribe to the idea that Canada is broken, there are signs of stress everywhere. We’re dealing with a nationwide housing crisis, decaying infrastructure, and a health-care system that feels like it’s on the brink of collapse. It’s understandable that people are frustrated, or even angry.

Part of the problem is our messy style of federalism often allows governments to pass the buck. Another is that subnational governments are often burdened with issues they don’t have the capacity to manage effectively—or, more perniciously, that they have no incentive to fix. Either way, we often let things corrode until they reach a breaking point.

But before we get too deep into my critique, some history. From the onset of the First World War until the 1990s, the federal government nearly always dominated total spending, peaking at 90 percent during WWII. Between the end of WWII and the creation of the modern welfare state, spending shifted towards provincial governments. For twenty years starting in 1970, federal expenditures hovered between roughly 40 and 45 percent of spending. Then came the 1990s and ensuing budgetary crises. One way that governments dealt with newfound fiscal pressures was downloading. In addition to privatizing large swaths of the economy, the feds downloaded many spending responsibilities to the provinces, for instance by cutting federal transfers. Provincial governments followed a similar path, in many cases pushing responsibilities for functions like social housing down to the municipal level.In many respects, this decentralization was beneficial. For one thing, it was part of an unprecedented fiscal correction by the Chretien government—probably the most successful fiscal undertaking in the history of Canada. But it also rationalized Canadian governance by more closely aligning spending with the principle of subsidiarity.

But there are three barriers that often get in the way of effective subsidiarity. 

First, responsibility rests with the wrong level of government. Take land-use planning, for example. It has been a truism for a very long time that zoning ought to be the purview of municipal governments. But their incentives are all wrong. They only answer to voters currently residing within specific boundaries, and primarily to homeowners. This means that prospective and future residents are not considered. In theory, this problem could be self-correcting. NIMBY cities could simply lose population to more dynamic cities. In practice, there is a strong economic pull towards a small number of economic centres.

Even in the post-COVID world, location matters. A home in North Bay isn’t a substitute for a home within commuting range of Toronto. Given the strong pull towards a few large cities, there are provincial and national implications from zoning restrictions. City halls in the GTA in particular have acted as a brake on Canada’s economy for a very long time while the federal government, which has traditionally had the smallest role in housing of any order of government, takes the biggest share of the blame

Second, the boundaries of a jurisdiction can be too large or small. Context matters a lot. Take Toronto, for instance. When the Government of Ontario smashed together six municipalities to create the new Toronto megacity, it was meant to create efficiencies. Not only did those efficiencies not materialize, but it means that responsibility is now too diffuse. 

The idea of subsidiarity is to ensure that the people best positioned to make decisions are empowered to do so. Ironically, the megacity has meant that people in the old city of Toronto have very little control over their communities. Getting anything done in there requires consent from five other municipalities that have wildly different priorities.Anyone who has been to a family dinner knows it’s not easy to get everyone on the same page. Some people don’t like mashed potatoes, some have food allergies, and others are just allergic to joy. If the whole family tree got an equal vote on what to eat, it would be a catastrophe. In other words, it would be like a Toronto City Council meeting.

Third, responsibility might be an illusion. Take health care, for example. Health care is a provincial responsibility—in theory. In practice, provincial governments need to follow the letter of the Canada Health Act (CHA). That isn’t a legal requirement, but a practical one. Failure to do so would lead the federal government to withhold Canada Health Transfer funding. While there is much to like about the CHA—such as the requirement for portability (so people changing provinces don’t lose coverage) —there are other parts that might well be counterproductive, like the “public administration” requirement or the prohibition on user fees. Whether or not one supports the CHA in its entirety (and as currently interpreted), it’s clear that provincial governments don’t have full control over health-care policy in Canada. 

Fortunately, we’re seeing some rebalancing. The highest profile example is in housing policy. 

It started with former Conservative Party leader Erin O’Toole. His platform included a provocative idea: the federal government should withhold infrastructure funding to municipalities that don’t build enough housing. This made sense not only because housing was becoming a national crisis, but because if the federal government is going to fund infrastructure projects that are justified based on population growth, the population proximate to those projects should grow. Otherwise, they don’t make sense. The term common sense gets tossed around a lot, but this was a pretty common sense idea. 

The next big move came from the Ford government. Under enormous pressure to get housing built, the province started to directly intervene in local land-use policy. While the moves look modest in light of recent developments, they eliminated the taboo against upper levels of government getting involved in land-use policy. 

Then came the big one: the Carrot Stick. The federal government started to really feel the pressure from rising housing prices this year, particularly as interest rates increased. The Trudeau government decided that they wanted to “work with” municipalities, in contrast to the Conservatives who wanted to impose conditions. In other words, carrots, not sticks. Then along came Sean Fraser. He was having none of this. 

Fraser realized, as I’d hoped when the program was announced, that the carrot could be used like a stick. There’s no reason why the minister needs to sit back and hope that municipalities volunteer to do more on housing. Instead, he’s used the bully pulpit to badger municipalities into strengthening their applications. For the most part, it’s worked. Cities across the country are moving to allow four units per lot, which seemed unthinkable eighteen months ago. The idea of provincial, let alone federal governments being involved in housing policy was contentious up until very recently. But it’s a necessary corrective, albeit late. 

Another high-priority example comes from Toronto. The city has been grappling with what to do with the Gardiner Expressway for years. It’s in the middle of a massive refurbishment project putting enormous pressure on the city budget. Toronto has tried to deal with this by imposing tolls, but the province said no. Given that it serves the whole region and isn’t especially popular with locals who were being forced to fund the rebuild themselves, uploading it to the provincial government to fund through provincial taxes only made sense. Another necessary rebalance.

Subsidiarity is a good principle in the abstract, but a hard one to implement in practice. As a decentralized federation, Canada is grappling with the challenges of dispersed responsibilities. Happily, we seem to be correcting some of our missteps. Decentralization done wrong can be worse than centralization. Principles are a good starting point, but we need to sweat the details.