PINDER: Finding what doesn't work in Germany, trying it again in Canada

The fourth largest economy in the world, Germany, has dominated the European Union for decades, based primarily on its economic performance. A manufacturing powerhouse, it exported more than half of its widely acclaimed products. Much of that has changed. But, having written regularly about Germany’s travails, why one more time?The first reason is to correct an assertion in a December column. With the loss of natural gas from Russia and the shutdown of its nuclear generating capacity, Germany was forced to reintroduce higher levels of coal to meet electricity demand. My incorrect observation was that this meant an increase in emissions to “record levels.”Resorting to further coal consumption did increase carbon dioxide emissions, but Germany has been quite successful in reducing them in recent years and the “record levels” assertion was not accurate. I much appreciate the feedback.The second reason is to remind Canadians that Germany's problems are in large part a consequence of significant strategic misjudgments. The most significant was its trust in Russia as a supplier of natural gas. Winding down nuclear electricity is another. Then, how about moving from its leadership of luxury automobiles in favour of electric vehicles, a top-down transition yet to enjoy consumer acceptance. (And maybe never.)Finally, Germany’s installation of wind power capacity has been highly successful, second only to Denmark in the EU. But according to a recent National Bank report, the 20% year-over-year drop in GHG emissions “is largely attributed to a slowdown in key German industries (chemicals and fertilizers.)” Reducing emissions by reducing economic activity is not a win. And in 2023, Germany’s economy shrunk by 0.3%.Meanwhile, economic challenges continue. Andrew Kenningham, chief Europe economist at Capital Economics writing for Reuters says, “Residential and business investments are likely to contract, construction is heading for a steep downturn and the government is tightening fiscal policy sharply.” He added growth is unlikely in 2024.From the same report Carsten Brzeski, the global head of macro at ING, opined that “the risk that 2024 will be another year of recession is high.” And, from a January 16 Wall Street Journal column, “Germany is in a rut, and there is no quick way out. With no sign that any of the cyclical and structural factors are about to improve, Germany’s prospects aren’t looking good.”With car production more than 25% below its mid-2010s level, the CEO of a 175-year-old foundry said, “the threat of the deindustrialization is real.”Companies paying three or four times as much for electricity than before Russia invaded Ukraine led to his comment “we still don’t see a full strategy from the government to address the issue.”On the other hand, in a report from The Guardian, Germany’s emissions hit a 70-year low, “most of the emission cuts in 2023 are not sustainable from an industrial or climate policy perspective. If emissions are subsequently relocated abroad, then nothing has been achieved for the climate.”Germany's example then shows that if there is a climate crisis, the only solution is reducing economic activity. Could that be why, with current economic circumstances and prospects like those of Germany, the Government of Canada persists in attacking one of Canada’s few remaining significant industries, the energy complex?A strategic error by Ottawa, then but sadly, not the only one.Carbon taxes are increasing costs throughout the economy and are likely to be the most significant issue in the next federal election.The housing crisis has been significantly exacerbated by unfettered immigration. Canada is a highly sought-after country, one of our competitive strengths. A thoughtful federal government would work with the provinces to define our people needs and focus on those who will help improve the future of our country.It would also match the numbers with our housing capacity, as much common sense as strategy.The climate zealots in Ottawa require a local solution to a perceived global problem. Rather than further attacking the energy sector, primarily based in western Canada, with the objective of shutting it down in due course, it’s anti-west animus overlooks a better approach.With at least 100 years of resources, and a competitive travel advantage from the Pacific coast, Canadian natural gas producers could replace high emission coal for electrical generation in Asia by way of low emission natural gas. This would be a win for emission reductions, Canada’s economy and national unity.Contrary to the demonstrated inexperience of our prime minister, there is a very strong “business case” for developing the greenest gas in the world. (Expansion is subject to additional low-cost electricity.) This case will soon be demonstrated by LNG CANADA. By next year at the latest, Canadian natural gas will move by pipeline to Kitimat, where it will be cooled and compressed into liquified natural gas and shipped to China, Malaysia, Japan and Korea for the benefit of all parties and the planet for those who think there is a crisis.The absence of strategic thinking, based on competitive advantages, is sadly absent in both Canada and Germany, with similar consequences. Be it a non-profit, business, or government, a thoughtful strategy is the foundation for success. Instead, the Trudeau government is diminishing our competitive advantages. It is the folly of single issue zealots.I can’t resist further pointing out that, over time, a strategic approach would also help the budget “balance itself.”

PINDER: Finding what doesn't work in Germany, trying it again in Canada

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