The Bank of Canada announces its rate decision on Wednesday, Canadian earnings season kicks into high gear, and the battle for the White House has managed to bypass one of the country’s most important economic issues. More on that below, but first:
In the news
High stakes: Former Kingsdale CEO Ian Robertson is launching a new leadership advisory firm.
Low returns: What’s going on with Georgian Partners? Even in a bleak VC landscape, the fund manager is underperforming.
Young money: A growing portion of Canadians homebuyers are going solo.
Happening this week
Economists and investors are increasingly betting that the Bank of Canada will opt for a half-point reduction as price pressures ease.
Globe economics reporter Mark Rendell says the Bank of Canada is widely expected to make a “super-sized” rate cut.
- At least three recent news reports and one analyst note referred to a 50-basis-point cut as “jumbo,” an indication I missed a memo re: economic adjectives. Mark assured me he didn’t receive it either, or was just trying to spare my feelings: “50bps seems ‘oversized,’ he said. ‘Jumbo’ might be a bit much. The 100bps raise in 2022, now that was jumbo!”
- On Friday, CIBC economist Avery Shenfeld raised the stakes, arguing there’s a logic to a “mega-move” 75-basis-point cut.)
Regardless, this is an objectively mega-jumbo week for Canadian earnings: Reports are due from Canadian National Railway and First Quantum Minerals on Tuesday, Canadian Pacific Kansas City on Wednesday, Rogers Communications and Teck Resources on Thursday, and Corus Entertainment on Friday.
Software giant SAP and AI-centric electric-vehicle maker Tesla also report this week, today and Wednesday, respectively.
A drone image taken this month of the Hyundai electric vehicle and battery plant in Ellabell, Ga.ELIJAH NOUVELAGE/The Globe and Mail
In focus
Why ‘clean energy’ might need a rebranding
The state of Georgia is revolutionizing its energy industry, leaning heavily into tax credits, grants and financing provided by the current U.S. administration.
Backed by billions in government spending, private industry has poured billions of its own money into the region. Georgia, which dates its first natural-gas wells to the 19th century, is now remaking its energy industry to ensure that it aligns with the vision of a Democratic administration.
What happens, then, if a Republican administration is in place next year? If elected on Nov. 5, Donald Trump has vowed to rescind unspent funds under the Inflation Reduction Act (IRA) – which includes those climate measures – and to “terminate the Green New Deal,” which he calls “the Green New Scam.”
Democratic candidate Kamala Harris and Trump are far apart on many issues. But on this issue, their competing visions make a case for Georgia having the most at stake in the U.S. presidential election. You can see why the region’s industrial and political leaders would be so vocal about their concerns.
Except they aren’t. “Getting people to talk about it was a bit like pulling teeth.”
That’s how The Globe’s Adam Radwanski described to me his recent attempts to capture the drama in the leadup to the election. In Georgia, he saw a way to explore the region and its energy transition – but also as a decisive staging ground for countries around the world accelerating their own clean-energy plans. If the IRA falls, countries like Canada will have much less reason to follow in the U.S. footsteps.
So Adam travelled south earlier this month to speak with political and industry leaders about their understandable concerns. “I’ve got to say, I went down there thinking this is going to be a real hotbed for debate.
“This is where we’re going to see the most visceral discussion of whether or not these investments can survive possible political changes.”
The roaring sound of silence
Why the muted reception? First, we have to admit: Talking to Canadian journalists isn’t high on U.S. politicians’ priority lists: It’s mostly risk with little reward. But clean energy isn’t high on their list, either: Trump’s views are well known, but “producing cleaner, more affordable energy” is on page 33 of the Democratic platform. The lack of a climate focus from Kamala Harris has frustrated environmental advocates, but that might be a political calculation. Energy policy ranked 16th among issues most important to voters in a recent poll. And climate change? You’ll need to keep scrolling.
But the main issue, Adam found, was a fear of attracting attention. “Industry is usually really eager to talk when I’ve travelled internationally for The Globe on this beat, in the U.S. or in Europe, even if the politicians aren’t. Usually they want to bring you in and tell you all the stuff they’re doing, and talk about their opportunities and their challenges.”
But the bigger players in Georgia like Hyundai, which is making electric vehicles and batteries, and Q cells, a giant in the solar-energy market, engaged only “very guardedly.” Smaller companies, too, which are usually clamouring to talk: “Again, quite cautious.” Even the Georgia Chamber of Commerce shied away. Poor Adam.
But he came to a realization: That silence was the story. In fact, it’s the story of the world’s clean-energy transition in general. “They don’t want to put themselves in the middle of this election. They don’t want to insert themselves into the culture wars.”
The culture wars
A lot of the reticence to talk about climate policy is word association. Climate change: Liberals. Clean energy: Snowflakes. And that’s if voters are thinking about it at all. But that doesn’t mean that there’s no way to talk about it – we just might need to rethink how.
Over the course of his five years on the climate beat, Adam has seen climate come achingly close to breaking out as a standalone issue – only to be taken over by major news events: the pandemic, an affordability crisis, natural disasters, Russia’s invasion of Ukraine. The irony, of course, is that you could string climate change through all of these developments, but it only registers as an aside.
So leaders can think of smarter ways to frame these global shocks through a climate lens. Or they can forget about public policies to advance clean energy altogether.
When industry sources did engage with Adam in Georgia, he saw some evidence of that sort of messaging. There was talk about employment and other benefits in the communities where companies are putting down roots. It was just very, very tentative.
That suggests more pragmatic arguments might be hitting home more squarely. So if you are a leader in this space, Adam has a suggestion: “Don’t talk about it as saving the planet and you don’t get too high in the sky about it. You talk about well-paying jobs, you talk about what you’re doing for local economies and you talk about not wanting to be overly reliant on imported goods, which is one of the few areas where there’s something approaching political consensus in the U.S.
If the White House swings Republican, the relatively nascent industry might finally feel the pressure to rethink its silence. Perhaps it’ll come to see that aggressively standing up for itself as a cornerstone of American prosperity is better than forcing anything hinting of a “green agenda” onto a weary electorate.
“If you’re building EV plants, that’s not some newfangled way of addressing climate change. It’s like, these are the cars people drive now. This is what we’re building. That is the hope, I think, that they just become normalized as part of the economy.”
What’s being said, and what isn’t
Adam said he saw signs of “creeping acceptance” in Georgia, where the clean-energy industry is creating jobs.
“The question is: How do you support them as you support any other kind of economic growth? With AI and other growing sectors, we don’t talk about whether or not these industries are worth supporting. The idea is the clean-energy transition takes root enough that you just say, of course, a government of any stripe has to back them. This is what our industry is.”
If Canadian clean-energy sectors are watching the race south of the border – and who isn’t? – they might want to take note of what’s being said, as well as what isn’t. What results from this campaign will weigh on Canada as it heads into its own election, facing very similar dynamics, flirting with creeping acceptance.
Conservative Leader Pierre Poilievre doesn’t speak as dismissively as Donald Trump about the low-carbon industry. But he’s not starting from Prime Minister Justin Trudeau’s premise that these sectors are essential. It’ll be up to industry to make its case, perhaps more robustly, and perhaps with a lexicon more focused on jobs, the economy and the protection of American industry.
You can read Adam Radwanski’s story on how an energy boom could go bust after the U.S. presidential election here.
Charted
This is what it looks like when investors go nuclear. A number of stocks tied to North America’s nuclear-power arsenal rallied last week after Amazon joined Microsoft, Google and Oracle with plans to harness clean energy to power its data centres, David Berman writes.
Constellation Energy Corp. rose 6.6 per cent, expanding its year-to-date gain to more than 140 per cent. Constellation, the largest owner of U.S. nuclear-power plants, last month announced a power purchase agreement with Microsoft Corp. that will lead to restarting the Three Mile Island nuclear plant in Pennsylvania.
Morning markets
Global markets were lower amid investor caution ahead of the U.S. election and uncertainty about the Middle East, while China’s anticipated benchmark rate cut did little to boost sentiment. Wall Street futures and TSX futures were in negative territory.
Overseas, the pan-European STOXX 600 was 0.46 per cent lower in morning trading. Britain’s FTSE 100 slipped 0.16 per cent, Germany’s DAX declined 0.78 per cent and France’s CAC 40 gave back 0.8 per cent.
In Asia, Japan’s Nikkei closed 0.07 per cent lower, while Hong Kong’s Hang Seng fell 1.57 per cent.
The Canadian dollar traded at 72.37 U.S. cents.