by Naomi Klein
* * *
Sitting at the long conference table overlooking his factory floor, Paolo Maccario, an elegant Italian businessman who moved to Toronto to open a solar factory, has the proud, resigned air of a captain determined to go down with his ship. He makes an effort to put on a brave face: True, “the Ontario market is pretty much gone,” but the company will find new customers for its solar panels, he tells me, maybe in Europe, or the United States. Their products are good, best in class, and “the cost is competitive enough.”4
As chief operating officer of Silfab Ontario, Maccario has to say these things; anything else would be a breach of fiduciary duty. But he is also frank that the last few months have been almost absurdly bad. Old customers are convinced the factory is going to close down and won’t be able to honor the twenty-five-year warranty on the solar panels they purchased. New customers aren’t placing orders over the same concerns, opting to go with Chinese companies that are selling less efficient but cheaper modules.I Suppliers who had been planning to set up their own factories nearby to cut down on transport costs are now keeping their distance.
Even his own board back home in Italy (Silfab is owned by Silfab SpA, whose founder was a pioneer in Italian photovoltaic manufacturing) seemed to be jumping ship. The parent company had committed to invest around $7 million on a custom piece of machinery that, according to Maccario, would have created solar modules that “have an efficiency that has not been reached by any manufacturer in China and in the Western world.” But at the last minute, and after all the research and design for the machinery was complete, “It was decided that we cannot spend the money to bring the technology here,” Maccario explains. We put on hair nets and lab coats and he shows me an empty rectangle in the middle of the factory floor, the space set aside for equipment that is not coming.
What are the chances he would choose to open this factory here today, given all that has happened, I ask. At this, all attempts at PR drop away and he replies, “I would say below zero if such a number exists.”
With his finely tailored wool suit and trim salt and pepper goatee, Maccario looks as if he should be sipping espresso in a piazza in Turin, working for Fiat perhaps—not stuck in this concrete box with an unopened yogurt on his desk, across the street from Imperial Chilled Juice and down the road from the ass end of an AMC multiplex.
And yet in 2010, the decision to locate the company’s first North American solar manufacturing plant in Ontario seemed to make a great deal of sense. Back then the mood in Ontario’s renewable sector was positively giddy. One year earlier, at the peak of the Wall Street financial crisis, the province had unveiled its climate action plan, the Green Energy and Green Economy Act, centered on a bold pledge to wean Canada’s most populous province completely off coal by 2014.5
The plan was lauded by energy experts around the world, particularly in the U.S., where such ambition was lagging. On a visit to Toronto, Al Gore offered his highest blessing, proclaiming it “widely recognized now as the single best green energy [program] on the North American continent.” And Michael T. Eckhart, then president of the American Council on Renewable Energy, described it as “the most comprehensive renewable energy policy entered anywhere around the world.”6
The legislation created what is known as a feed-in tariff program, which allowed renewable energy providers to sell power back to the grid, offering long-term contracts with guaranteed premium prices. It also contained a variety of provisions to ensure that the developers weren’t all big players but that local municipalities, co-ops, and Indigenous communities could all get into the renewable energy market and benefit from those premium rates. The catch was that in order for most of the energy providers to qualify, they had to ensure that a minimum percentage of their workforces and materials were local to Ontario. And the province set the bar high: solar energy developers had to source at least 40–60 percent of their content from within the province.7
The provision was an attempt to revive Ontario’s moribund manufacturing sector, which had long been centered on the Big Three U.S. automakers (Chrysler, Ford, and General Motors) and was, at that time, reeling from the near bankruptcy of General Motors and Chrysler. Compounding these challenges was the fact that Alberta’s tar sands oil boom had sent the Canadian dollar soaring, making Ontario a much costlier place to build anything.8
In the years that followed the announcement, Ontario’s efforts to get off coal were plagued by political blunders. Large natural gas and wind developers ran roughshod over local communities, while the government wasted hundreds of millions (at least) trying to clean up the unnecessary messes. Yet even with all these screwups, the core of the program was an undeniable success. By 2012, Ontario was the largest solar producer in Canada and by 2013, it had only one working coal-fired power plant left. The local content requirements—as the “buy local” and “hire local” provisions are called—were also proving to be a significant boost to the ailing manufacturing sector: by 2014, more than 31,000 jobs had been created and a wave of solar and wind manufacturers had set up shop.9
Silfab is a great example of how it worked. The Italian owners had already decided to open a solar panel plant in North America. The company had considered Mexico but was leaning toward the United States. The obvious choices, Maccario told me, were California, Hawaii, and Texas, all of which offered lots of sunshine and corporate incentives, as well as large and growing markets for their product. Ontario—overcast and cold a lot of the year—wasn’t “on the radar screen,” he admitted. That changed when the province introduced the green energy plan with its local-content provisions, which Maccario described as a “very gutsy and very well intended program.” The provisions meant that in communities that switched to renewable energy, companies like his could count on a stable market for their products, one that was protected from having to compete head-to-head with cheaper solar panels from China. So Silfab chose Toronto for its first North American solar plant.
Ontario’s politicians loved Silfab. It helped that the building the company purchased to produce its panels was an abandoned auto parts factory, then sitting idle like so many others. And many of the workers the company hired also came from the auto sector—men and women from Chrysler and the autoparts giant Magna, who had years of experience working with the kind of robotic arms that are used to assemble Silfab’s high-tech panels. When the plant opened, Wayne Wright, a laid-off autoworker who landed a job as a production operator on the Silfab line, spoke movingly about his seventeen-year-old son, who told him that “finally” his dad’s new job would be “creating a better future for all the younger kids.”10
And then things started to go very wrong. Just as the U.S. has acted against local renewable supports in China and India, so Japan and then the European Union let it be known that they considered Ontario’s local-content requirement to be a violation of World Trade Organization rules. Specifically, they claimed that the requirement that a fixed percentage of renewable energy equipment be made in Ontario would “discriminate against equipment for renewable energy generation facilities produced outside Ontario.”11
The WTO ruled against Canada, determining that Ontario’s buy-local provisions were indeed illegal. And the province wasted little time in nixing the local-content rules that had been so central to its program.12 It was this, Maccario said, that led his foreign investors to pull their support for factory expansion. “Seeing all those, for lack of a better term, mixed messages . . . was the straw that broke the camel’s back.”
It was also why many plants like his could well close, and others have decided not to open in the first place.
Trade Trumps Climate
From a climate perspective, the WTO ruling was an outrage: if there is to be any hope of meeting the agreed-upon 2 degree Celsius target, wealthy economies like Canada must make getting off fossil fuels their top priority. It is a moral duty, one that the federal government undertook when it signed the Kyoto Protocol in 1997. Ontario was putting real policies i
n place to honor that commitment (unlike the Canadian government as a whole, which has allowed emissions to balloon, leading it to withdraw from the Kyoto Protocol rather than face international censure). Most importantly, the program was working. How absurd, then, for the WTO to interfere with that success—to let trade trump the planet itself.
And yet from a strictly legal standpoint, Japan and the EU were perfectly correct. One of the key provisions in almost all free trade agreements involves something called “national treatment,” which requires governments to make no distinction between goods produced by local companies and goods produced by foreign firms outside their borders. Indeed, favoring local industry constitutes illegal “discrimination.” This was a flashpoint in the free trade wars back in the 1990s, precisely because these restrictions effectively prevent governments from doing what Ontario was trying to do: create jobs by requiring the sourcing of local goods as a condition of government support. This was just one of the many fateful battles that progressives lost in those years.
Defenders of these trade deals argue that protections like Ontario’s buy-local provisions distort the free market and should be eliminated. Some green energy entrepreneurs (usually those that purchase their products from China) have made similar arguments, insisting that it doesn’t matter where solar panel and wind turbines are produced: the goal should be to get the cheapest products to the consumer so that the green transition can happen as quickly as possible.
The biggest problem with these arguments is the notion that there is any free market in energy to be protected from distortion. Not only do fossil fuel companies receive $775 billion to $1 trillion in annual global subsidies, but they pay nothing for the privilege of treating our shared atmosphere as a free waste dump—a fact that has been described by the Stern Review on the Economics of Climate Change as “the greatest market failure the world has ever seen.” That freebie is the real distortion, that theft of the sky the real subsidy.13
In order to cope with these distortions (which the WTO has made no attempt to correct), governments need to take a range of aggressive steps—from price guarantees to straight subsidies—so that green energy has a fair shot at competing. We know from experience that this works: Denmark has among the most successful renewable energy programs in the world, with 40 percent of its electricity coming from renewables, mostly wind. But it’s significant that the program was rolled out in the 1980s, before the free trade era began, when there was no one to argue with the Danish government’s generous subsidies to the community-controlled energy projects putting up wind turbines (in 1980, new installations were subsidized by up to 30 percent).14
As Scott Sinclair of the Canadian Centre for Policy Alternatives has pointed out, “many of the policies Denmark used to launch its renewable energy industry would have been inconsistent with . . . international trade and investment agreements,” since favoring “locally owned cooperatives would conflict with non-discrimination rules requiring that foreign companies be treated no less favourably than domestic suppliers.”15
And Aaron Cosbey, a development economist and trade and climate expert who is generally supportive of the WTO, rightly notes that the promise of local job creation has been key to the political success of renewable energy programs. “In many cases the green jobs argument is the deciding factor that convinces governments to dole out support. And such requirements, if attached to subsidies or investment privileges, violate WTO obligations.”16
Which is why governments adopting these tried-and-tested policies—of which there have been far too few—are the ones getting dragged into trade court, whether China, India, Ontario, or the European Union.
Worse, it’s not only critical supports for renewable energy that are at risk of these attacks. Any attempt by a government to regulate the sale or extraction of particularly dirty kinds of fossil fuels is also vulnerable to similar trade challenges. The European Union, for instance, is considering new fuel quality standards that would effectively restrict the sales of oil derived from such high-carbon sources as the Alberta tar sands. It’s excellent climate policy, of the kind we need much more, but the effort has been slowed down by Canada’s not so subtle threats of trade retaliation. Meanwhile, the European Union is using bilateral trade talks to try to circumvent longstanding U.S. restrictions on oil and gas exports, including a decades-old export ban on crude oil. In July 2014, a leaked negotiating document revealed that Europe is pushing for a “legally binding commitment” that would guarantee its ability to import fracked gas and oil from North Dakota’s Bakken formation and elsewhere.17
Almost a decade ago, a WTO official claimed that the organization enables challenges against “almost any measure to reduce greenhouse gas emissions”—there was little public reaction at the time, but clearly there should have been. And the WTO is far from the only trade weapon that can be used in such battles—so too can countless bilateral and regional free trade and investment agreements.18
As we will see later on, these trade deals may even give multinationals the power to overturn landmark grassroots victories against highly controversial extractive activities like natural gas fracking: in 2012, an oil company began taking steps to use NAFTA to challenge Quebec’s hard-won fracking moratorium, claiming it robbed the company of its right to drill for gas in the province.19 (The case is ongoing.) As more activist victories are won, more such legal challenges should be expected.
In some of these cases, governments may successfully defend their emission-reducing activities in trade court. But in too many others, they can be relied upon to cave in early, not wanting to appear anti–free trade (which is likely what is behind Ontario’s quiet acceptance of the WTO’s ruling against its green energy plan). These challenges aren’t killing renewable energy; in the U.S. and China, for instance, the solar market continues to grow impressively. But it is not happening fast enough. And the legal uncertainty that now surrounds some of the most significant green energy programs in the world is bogging us down at the very moment when science is telling us we need to leap ahead. To allow arcane trade law, which has been negotiated with scant public scrutiny, to have this kind of power over an issue so critical to humanity’s future is a special kind of madness. As Nobel Prize–winning economist Joseph Stiglitz puts it, “Should you let a group of foolish lawyers, who put together something before they understood these issues, interfere with saving the planet?”20
Clearly not. Steven Shrybman, an international trade and public interest lawyer who has worked with a broad range of civil society groups to defend against these trade challenges, says that the problem is structural. “If the trade rules don’t permit all kinds of important measures to deal with climate change—and they don’t—then the trade rules obviously have to be rewritten. Because there is no way in the world that we can have a sustainable economy and maintain international trade rules as they are. There’s no way at all.”21
This is exactly the sort of commonsense conclusion that has the Heartlanders so very scared of climate change. Because when people wake up to the fact that our governments have locked us into dozens of agreements that make important parts of a robust climate change response illegal, they will have an awfully powerful argument to oppose any such new deals until the small matter of our planet’s habitability is satisfactorily resolved.
The same goes for all kinds of free market orthodoxies that threaten our capacity to respond boldly to this crisis, from the suffocating logic of austerity that prevents governments from making the necessary investments in low-carbon infrastructure (not to mention firefighting and flood response), to the auctioning off of electric utilities to private corporations that, in many cases, refuse to switch over to less profitable renewables.
Indeed the three policy pillars of the neoliberal age—privatization of the public sphere, deregulation of the corporate sector, and the lowering of income and corporate taxes, paid for with cuts to public spending—are each incompatible with many of the actions we must take to bring o
ur emissions to safe levels. And together these pillars form an ideological wall that has blocked a serious response to climate change for decades. Before delving more deeply into the ways the climate crisis calls for dismantling that wall, it’s helpful to look a little more closely at the epic case of bad timing that landed us where we are today.
A Wall Comes Down, Emissions Go Up
If the climate movement had a birthday, a moment when the issue pierced the public consciousness and could no longer be ignored, it would have to be June 23, 1988. Global warming had been on the political and scientific radar long before that, however. The basic insights central to our current understanding date back to the beginning of the second half of the nineteenth century, and the first scientific breakthroughs demonstrating that burning carbon could be warming the planet were made in the late 1950s. In 1965, the concept was so widely accepted among specialists that U.S. president Lyndon B. Johnson was given a report from his Science Advisory Committee warning that, “Through his worldwide industrial civilization, Man is unwittingly conducting a vast geophysical experiment. . . . The climatic changes that may be produced by the increased CO2 content could be deleterious from the point of view of human beings.”22
But it wasn’t until James Hansen, then director of NASA’s Goddard Institute for Space Studies, testified before a packed congressional hearing on June 23, 1988, that global warming became the stuff of chat shows and political speeches. With temperatures in Washington, D.C., a sweltering 98 degrees Fahrenheit (still a record for that day), and the building’s air conditioning on the fritz, Hansen told a room filled with sweaty lawmakers that he had “99 percent confidence” in “a real warming trend” linked to human activity. In a comment to The New York Times he added that it was “time to stop waffling” about the science. Later that same month, hundreds of scientists and policymakers held the historic World Conference on the Changing Atmosphere in Toronto where the first emission reductions were discussed. The United Nations’ Intergovernmental Panel on Climate Change (IPCC), the premier scientific body advising governments on the climate threat, held its first session that November. By the following year, 79 percent of Americans had heard of the greenhouse effect—a leap from just 38 percent in 1981.23
