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The sun pours down on the throng of notables seated in the atrium of the MaRS building in downtown Toronto. All eyes are glued to the podium, where the stocky man at centre stage is about to speak. “It’s great to be here,” he says. “Last time I was in Canada was for a bodybuilding championship. I never thought when I said “I’ll be back” that it would be as the governor of the great state of California!”
Arnold Schwarzenegger can’t resist riffing off his most famous line. Shorter than his larger-than-life persona would suggest, the one-time Mr. Olympia and action-hero-turned-political-phenom is so tanned, he’s almost copper. When Schwarzenegger’s face goes into neutral (as it often did during earlier speeches), his mouth forms a tight, determined line. But right now he’s all smiles. An hour earlier, he signed a pact with Ontario Premier Dalton McGuinty to fight greenhouse-gas emissions—to much applause. McGuinty adopted the governor’s low-carbon fuel standard, which will require fuel sold in California to meet tough carbon content restrictions. A day later, British Columbia Premier Gordon Campbell followed suit. It’s a move that could have huge implications for Alberta’s oil exports to all three markets.
But in fact McGuinty did not go as far as California has in fighting emissions. Not even close. Ontario did not sign on to the part of Schwarzenegger’s legislation that called for automakers to reduce tailpipe emissions by 30% by 2016. Asked about that after his MaRS talk, Schwarzenegger dodged smoothly. “This partnership will be extraordinary,” proclaimed the Governator. “It strengthens our countries’ joint commitment to roll back greenhouse-gas emissions.”
Perhaps. But beneath all the bombast and showmanship of the trade mission lies an inconvenient truth.
Schwarzenegger officially visited Canada to celebrate its roaring trade with California—a phenomenally valuable relationship for both sides. According to Bay Area economists Sean Randolph and Niels Erich, who this March published a study called Shared Values, Shared Vision, California’s Economic Ties With Canada, California sold us US$14 billion in goods and services, making Canada its No. 2 market, after Mexico. Our exports to California, though, leave that number in the dust: the relationship represents a US$8.5-billion surplus in Canada’s favour. Crucially, exports of cars, trucks and auto parts to California make up more than the entire surplus—with energy a smaller but rapidly growing piece of the pie.
Numbers like that explain why California’s governor made visiting Canada a top priority for his second term in office. His visit to Toronto in late May garnered the expected crowd of paparazzi shots and headlines. Less talked about, and less recognized, is that Schwarzenegger’s environmental policies will have deep impacts on Canada. Behind the feel-good speeches and handshaking, the Governator’s message to industry is this: Go green—or hasta la vista, baby.
Schwarzenegger is not a traditional Republican. Or so it would seem, considering the lead his government has taken on trying to reduce greenhouse-gas emissions in the most populous state in the union. Last September, Schwarzenegger signed his first policy aimed at reducing greenhouse emissions, California’s AB 32 Global Warming Solutions Act. A sweeping piece of legislation, it classifies carbon dioxide and other greenhouse gases as pollutants, and aims to reduce and cap carbon emissions at 1990 levels by 2020. The policy builds on 2002 legislation calling for a 30% reduction in tailpipe emissions by 2016—a major challenge to any auto industry that exports to the Californian market.
The auto industry struck back. The Alliance of Automobile Manufacturers, which represents GM, Ford, Toyota and others, lobbied the federal Environmental Protection Agency hard, claiming California must demonstrate a link between greenhouse gases and the legislation, and that with this law California had overstepped its jurisdiction under the Clean Air Act. (This is true: in the States, air pollution is regulated by the federal government.)
In a clear win for the Schwarzenegger camp, the U.S. Supreme Court ruled in April that on environmental issues, the EPA should waive restrictions on the state’s jurisidictional rights. (This is because California’s environmental laws predate federal laws.) The issue has been in limbo ever since, with Schwarzenegger recently threatening to sue the EPA unless it grants the waiver.
Undeterred by the storm of litigation, the man who once played the title role in The Terminator moved swiftly from cars to the stuff they burn. In January, he signed the world’s first-ever low-carbon fuel-standard policy. It puts the oil and gas industry on a low-carb diet, requiring that all fuel consumed in California reduce its carbon content across its life cycle by 10% between now and 2020. As David Crane, the policy brains behind the legislation, explained, the standard evaluates carbon content “from well to wheel,” taking into account the carbon used to make the fuel, as well as that in the final commodity.
Fuels that meet the standard can be traded in the state. Fuels that don’t—such as those extracted in a highly carbon-intensive process from the Alberta oilsands—will have to find markets elsewhere. (In a 2005 study, the Pembina Institute, a Calgary-based environmental research organization, said that crude extracted from the oilsands emits 85.5 kilos of carbon dioxide per barrel of oil, as compared to 28.6 kilos emitted in conventional crude extraction.)
Linda Adams is the secretary of the California Environmental Protection Agency. After Crane, she is Schwarzenegger’s most important environmental adviser, and she accompanied him to Toronto. Asked if oil from the Alberta oilsands would be acceptable in California’s market after 2010, when the low-carbon fuel standard goes into effect, she looked a tad uncomfortable. “No, it wouldn’t,” she said slowly. “It wouldn’t meet the standard.”
Schwarzenegger’s government is targeting cars and crude for a simple reason: cars produce 40% of California’s greenhouse emissions. The state has tinkered with alternatives for decades, yet it remains 96% dependent on fossil fuels for its transportation needs. “What we’ve done,” Crane explains, “is create stable, consistent demand for alternative fuels.”
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