#7 CEO Steve MacDonald Reflects On Lessons Learned and Progress Made As He Says Goodbye To Emissions Reduction Alberta

Cheryl Croucher (CC) interviews Steve MacDonald (SM)

CC: STEVE, YOU’RE ACTUALLY JUST CHANGING YOUR POSITION. YOU’RE NOW THE OUTGOING CEO OF EMISSIONS REDUCTION ALBERTA. WHAT PROMPTED THE MOVE?

SM: Great to talk to you again, Cheryl. Yes. I’ve been in this role for six and a half years, and I’ve been a leader in the number of organizations over the years. And you just know that you have to move on before your best before date.

You take an organization to a particular stage, you deliver some of the accomplishments, or most of the accomplishments that you wanted, you’ve got a strong team in place, but you recognize that it’s time for new wisdom, new insights, new perspectives, and new energy, quite frankly, to come into the organization. So, it was very much my choice.

The board has been incredibly supportive, but I’m at that age and stage where it’s time to look for new opportunities to contribute in different ways. And I look back at the organization and I think it’s very well positioned. They’ve announced the new CEO, Justin Reimer, and he’s an incredible asset coming into the organization with great experience.

And I have no doubt that he’ll take ERA to even greater heights in terms of the outcomes and the difference we’re making in the sustainability and innovation space.

CC: WELL, JUST TO GIVE A LITTLE BIT OF AN OVERVIEW, WHAT IS EMISSIONS REDUCTION ALBERTA AND HOW IS IT THAT YOU ARE FUNDED?

SM: ERA was a purpose-built back in 2009. And I say purpose-built because that was the same timeline that the Government of Alberta introduced its carbon levy on large final emitters. That was part of Alberta’s climate plan and it was the first climate plan in North America that actually introduced a price on carbon.

But the plan also recognized that industry couldn’t get to where they needed in terms of emissions reductions without applying new technologies.

So they created Emissions Reduction Alberta to take some of that carbon levy and go out and identify and accelerate those technologies that would allow Alberta industries and Alberta, in general, to achieve its ambitions in terms of emissions reduction.

So, we are basically an organization that identifies where there are gaps in technology, where is there a need for innovation that allows companies to reduce their emissions, and we then go out and solicit the best ideas out there. We fund them with grant funding.

Then we look at two main streams. One is how can we improve the cost and carbon competitiveness of existing industries that, in other words, do the same thing but do it better.

But we’re also very much involved in the creation and scale-up of new businesses, new innovations, greener technologies, think of in the areas of storage, carbon fibers, carbon utilization, new battery technology. So, we play in both roles and we’ve been very successful.

To date, we’ve invested about $800 million and 220 projects worth $6.5 billion, so we have that economic impact for sure. But we’re also on track with our projects, to deliver 42 mega tonnes cumulatively by 2030, so a significant impact on greenhouse gas reduction.

I quote the $6.5 billion number because our money follows. We require matching of private money so we want to have that indication that the market sees value in this project and private money is stepping up to it. In fact, we leverage about seven to one. For every dollar we put in, seven dollars of private money is there.

And I think our strength is based on that fact we provide that direct line of sight between the carbon price and actual investment in the solutions industry needs to achieve and be successful in a low carbon future.

And I like to say we’re turning the ambition – lots of people talk about this ambition around climate change – we’re actually turning that into action by delivering real technologies and real solutions that are deployed and allow Alberta to be successful as we pursue our net zero ambition.

CC: WHEN YOU LOOK BACK SIX AND A HALF YEARS AGO, WHAT WAS THE CLIMATE AT THAT POINT AND HOW HAS IT CHANGED AND WHERE ARE YOU NOW?

SM: A great question, and as I’m walking out the door, that sort of retrospective look at my career and where things have gone have been very front of mind.

It was 2015, the winter of 2015, when I joined ERA. Prior to that, I was working with Premier Notley on the design of Alberta’s climate plan. Alberta’s Climate Leadership Plan it was called at the time. Before that, I was actually working with Premier Prentice on his climate plan.

And what I would say is, it was clear Alberta knew that there was a need for action in this space, not withstanding our reputation we don’t get it. In fact, we are one of the earlier adopters and wanting to demonstrate that we had a plan, we had a clear destination and we were prepared to move on that.

2015 was pivotal in the whole conversation because that was the Paris COP. That’s where the world was going to come together and actually finally agree on what’s the destination and that commitment to hold climate to one and a half degrees.

And so, that was what was missing at that time. There wasn’t sort of this agreement on what’s the final destination. I would say at that time it was still a lot of uncertainty; that people didn’t have the level of commitment and that certainty on how we were going to do this. There was just a general agreement we were all going do something.

The world was in completely different stages. Some were very advanced. Many countries were sort of sitting on the sidelines, but reluctantly moving forward. And so, it was a time of we need to be clear on what the destination is. Get some consensus on that.

Alberta’s climate leadership plan was groundbreaking in terms of the policy levers. We were doing action on methane. We’re going off coal, we were doing a carbon tax. We’re doing energy efficiency. All the pieces that the world was talking about, we were actually putting in place to allow us to be successful in that net zero world.

But there was a lot of uncertainty and still a lot of lack of clarity on exactly what would this look like. The good news is, you have to begin with agreement on what the destination is, and then you can start the journey.

CC: SO WHAT IS THE DESTINATION?

SM: I think there’s agreement that man-made emissions are causing changes in the climate, and that’s resulting in weather incidences that are not sustainable; that there’s all sorts of economic, social, and environmental impacts that have to be addressed. So, I think there’s solid agreement on that.

And I think what’s emerged over the last six and a half years is stronger consensus on what’s the path forward. That we need to reduce the combustion of fossil fuels. That we need to find ways to capture CO2.

That we need to reduce our use of products and minerals through a more circular economy lens.

What’s happened is that ambition has started to rise in terms of the pace and scale that this has to happen. Goals have been set. And I think now that there is a bit of a shared pathway, everybody from the International Energy Agency to United Nations and every country is starting to lay out, okay, what’s the actual path forward.

And that is what’s different than the last five years, that clarity on not just the where, but the how.

CC: THE RECENT REPORT FROM THE INTERNATIONAL COMMITTEE (IPCC) CAME OUT. IT WAS VERY DIRE IN TERMS OF ITS CONCLUSIONS AND THE HEAD OF THE UN SAID, IT’S NOW OR NEVER, LIKE KICKING BUTT FOR EVERYBODY. WHAT DO YOU SAY TO THAT?

SM: Yes, that sense of urgency exists because there’s a 2050 sort of deadline that if we don’t take the action necessary, that the impact will be irreversible and the consequences will be totally unacceptable for mankind. So that ticking clock is what’s creating this anxiety and it’s taken a while for the flywheel of action to start to spin.

But I would say, what’s encouraging is, in the last three years, in particular, there’s lots of activity. From a relatively slow pace, you know, 2015 to 2018, I think since then, it’s really starting to accelerate. And it’s starting to accelerate because it’s not just governments talking about it, our end goals.

It’s investors are demanding action in this space. Customers are demanding action in that space. Companies are making commitment. And so that sort of accelerating ambition loop is motivating governments to take more action, step up those incremental goals and create the infrastructure in terms of, what are the standards, what are the reporting? How do we demonstrate success? Where are there shared interests? How can we build collaboration? And lastly, money.

To make these things happen, you need investment. And when I was first involved back in 2014, people talked about millions of dollars and gradually went to billions of dollars, and now the world’s talking about trillions of dollars, and that sort of commitment in real terms will make things happen.

So, yes, I share the sense of urgency that the UN mentioned and the concern, but I also share that there’s some hope that we’ll do this because the pieces are starting to fall into place.

CC: SO, JUST SPEAKING ABOUT SOME OF THOSE THINGS IN TERMS OF INVESTMENTS, I’VE NOTICED ESPECIALLY OVER THE LAST COUPLE OF YEARS, THAT THROUGH EMISSIONS REDUCTION ALBERTA, THERE SEEMS TO BE AN ACCELERATION IN THE NUMBER OF PROGRAMS THAT YOU’RE PUTTING OUT FOR RESEARCH AND DEVELOPMENT OF NEW TECHNOLOGIES. WHAT ARE SOME OF THOSE THAT YOU’VE PUT IN PLACE?

SM: We’ve been very busy. It certainly hasn’t been a boring time here in the CEO role. Because again, I think industry, government understand that technology is essential if they are going to meet these ambitions.

So, we’re guided by a technology road map within ERA that says, where are the opportunities? Where are those emissions and where are their gaps? And so, we rolled out different calls for proposals over the years. And you’re right, the last few years have been incredibly busy.

With COVID, we put out a call around shovel-ready projects. What are those technologies that just need some public dollars to accelerate them and scale them up and allow them to be deployed.

The flip side of the environmental benefits are the economic benefits. You know, COVID had shut a lot of work down so, in fact, we were using an environmental imperative to actually generate jobs and create investment.

That call resulted in us awarding funding to 16 projects, $176 million in funding and those projects were worth over $2 billion. And really exciting stuff in that space – everything from Canadian Pacific Railways converting diesel electric to hydrogen electric locomotives, which is a solution the world needs on the transportation side.

Capital Power is doing a really exciting project where they are capturing the CO2 from their flue gas and converting it into a valuable product called carbon nano tubes. Nano tubes are basically the building blocks for aircraft – strong, low weight materials for aircraft, automobiles.

There were projects in the cement industry, forestry industry, solar storage projects. Well, that was really exciting.

We also expanded our role a bit and rather than just look at sort of de-risking pre-commercial technology, we also recognize there was a need to actually get out there and offer incentives to small and medium-sized business to upgrade their energy usage and identify cost-saving technologies that allow them to do that. And that was called our Energy Savings for Business program.

If you think about it, it’d be like the YWCA installing high efficiency boilers to reduce their electricity bills. Given the price of electricity, it was a very wise investment. Or a greenhouse adding different lights. So this idea that at the end user level, how do you deploy those technologies that deliver real results in the short term?

We just announced a call around the circular economy. The circular economy is how do you get out of this take, make and then waste material. That you actually reuse them in a way that allows you to recycle them. And so, you reduce the initial use and need for materials and you extend the life of those and they don’t wind up in the waste stream.

If we don’t use less products and services and fuels and plastics, we’re not going to meet our net zero ambitions.

And then, the last thing is, we also did a call around the carbon capture space. Huge opportunities for Canada, Alberta, in particular. It’s a solution the world needs.

It’s essentially, rather than you combust hydrocarbons, the CO2 gets emitted, you add some technology, it scrubs out those flue gases and captures the carbon and either sequesters it in the ground.

But anyway, we’ve done some really good work in terms of helping those projects advance, and there’s going to be billions and billions of investment following up our $30 million in actually reducing the carbon footprint of large industries, like the oil sands, cement, fertilizer up-scale.

So excited about these examples.

CC: I FIND IT QUITE INTERESTING THAT YOU’VE DEVELOPED THIS IDEA THAT YOU GIVE VALUE TO WASTE AND TAKE THAT WASTE CARBON AND TURN IT INTO SOMETHING REALLY USEFUL AND VALUABLE. AS YOU SAY, INSTEAD OF JUST PUTTING IT INTO THE GROUND, YOU CAN INJECT IT INTO CEMENT TO MAKE IT STRONGER, TO MAKE IT A BETTER PRODUCT. HOW DO YOU GET THAT IDEA OUT TO THE PUBLIC?

SM: Yes, that is part of the challenge for Alberta, that we haven’t been good at telling our story in a lot of ways. And I think the Energy Savings for Business is a good example of making it real for people- that I have a role in reducing my greenhouse gas footprint.

And then, you can sort of build on that, well, industry has that same challenge. And it’s not all about adding costs. It’s actually about creating new opportunities, new industries. And your example of carbon utilization and that whole circular economy is a perfect example of that. That is, how can we look at bitumen and not combust it? How can we use bitumen for asphalt and carbon fiber? How can we redesign plastics so they are compostable or can be used in other products? That’s a different mindset and you have to make a real for people.

And then, you have to have examples where it’s working. If you talk about it theoretically – well, we’re going to do this – you kind of lose people. But if you can actually point to, look, we are converting three diesel electric locomotives in Calgary right now. They’re going to run on hydrogen. So we’re creating that demand side and showing that we can actually make those zero emitting transportation systems. Then people understand, and then that’s where the governments get onside and the private sector capital flows into place.

So, telling that positive narrative rather than sort of the negative doom and gloom is really critical. And that’s what I think I’m most proud of with ERA. We’re that proof point. There is not a technology that we haven’t had a role in helping to advance and there’s lots of promise there.

CC: WELL, I THINK BACK TO 2017 WHEN EMISSIONS REDUCTION ALBERTA SPONSORED THE BIG CONFERENCE “SPARK” AND I HAD AN OPPORTUNITY THEN TO SPEAK WITH ONE OF THE PRESENTERS, THOMAS HOMER-DIXON. HE WAS TALKING ABOUT THE NEED TO MOVE INTO ELECTRIC CARS AND THAT SORT OF THING. NOW, HERE WE ARE. THE GOVERNMENT OF CANADA IS PROMOTING ELECTRIC CARS. WE HAVE CAR PLANTS CHANGING OVER. WE HAVE ELON MUSK AND TESLA. WE’RE ALSO LOOKING AT HYDROGEN AND BIG HYDROGEN PROJECTS COMING UP IN ALBERTA AND ACROSS NORTH AMERICA. WHAT DOES THAT SAY TO YOU ABOUT WHERE WE’RE HEADED AND WHAT THESE FUELS OF THE FUTURE ARE GOING TO BE?

SM: Well, that’s a great observation in terms of an example of how that ambition loop is spinning faster.

Five years ago, if you would have heard that there’s ambition, you know, for 30% of new vehicles and 50%, and then ultimately, 100% of new vehicles will be EVs, you would have said that’s not going to happen. But it is happening.

And electrification is a critical piece of the energy system of the future. There’s no doubt about that.

What concerns me is people think that’s going to meet the world’s energy demands alone. I’m not as confident with that. I think there’s about 2 billion people that live in energy poverty right now. By 2050, the population’s scheduled to grow by another 2 billion. So really, what we need to be talking about is energy additions.

How do you meet the energy needs of the world with reliable, affordable energy? And so, it’s going to be all the above. You mentioned hydrogen. Perfect example. The biofuels space is going to be critical. And then, how do you create those new supply chains on both the demand side and on the supply side?

What’s going to be the role of artificial intelligence in terms of using more energy, more wisely.

So, he (Thomas Homer-Dixon) talked about electrification back in 2017 and EVs. I like to talk about, it’s all of the above. We’re going to need all these energy sources to be successful.

And I think there’s going to be a legitimate and necessary role for hydrocarbons.

How do we ensure that we’re producing them in the most environmentally friendly way? Oil sands companies, for example, have committed to net zero by 2050. How do we tweak the internal combustion engine? How do we actually use those resources in a way that’s aligned? Because it is net zero. So, what are the offsets we can purchase? Things like that.

So, on that point, I think he was right back in 2017 when he predicted it. I think he’d be even pleasantly surprised about how it has accelerated.

I just get nervous when people think electrification is the solution to the world’s energy needs for the foreseeable future, because I think that’s unrealistic. We’ve seen some of the stresses that can be caused when we’re not being mindful of the supply and demand side aligning as we do this transition and we’re seeing with the geopolitical situations coming out of Ukraine.

CC: WHAT DO YOU SEE AS BEING YOUR TAKEAWAY FROM THE LAST SIX AND A HALF YEARS?

SM: ERA was a brilliant concept the government had back in 2009. It was absolutely necessary.

You need public funds to unlock and de-risk the technology that the market requires. You need it to be arms length. You need it to be independent to make wise choices, not influenced by partisan political decisions.

I’ve learned that if you get people in a room and talk through the challenges, you come up with real solutions. If you actually pause and listen, rather than talk, there’s lots of opportunities for collaboration.

That trust is important in this, any transition, any change process. And in this one, I think that’s critical.

And how do you maintain that trust? How do you create a coalition to move things forward?

When I travel the world, you know, I tell people I’m from Alberta and maybe they know Alberta, but it’s Canada that has the recognition. And so, we need to create a storyline that Alberta is aligned with Canada’s ambition and Canada is aligned with Alberta’s ambition around this file.

So, I’ve learned the importance of those partnerships in building trust.

And then, the last thing is action. There’s so much ambition and rhetoric out there. You need to turn that into action and reality. And I learned that it’s possible. All of our calls for proposals are wildly oversubscribed. There’s lots of good ideas out there.

It’s just you need to get on with it. And if you can do it in a credible, transparent, thoughtful way, you can be very successful. And I think we have been.

CC: THAT SOUNDS LIKE REALLY GOOD ADVICE FOR YOUR SUCCESSOR, JUSTIN REIMER.

SM: Yes. Justin is very experienced in the collaboration space. He’s done a lot of work, working across industry, across governments. So, he comes with that understanding of the importance of partnerships and a strong network to build on.

And then for me, and I think Justin feels this already, you need to deliver results. You need to demonstrate to the skeptics, and even the optimists, that this will work and we can actually deliver the results Alberta, Canada, and the world needs. And I think that’s been our track record. I’m absolutely confident that he’s going to take it to the next level.

CC: THANK YOU VERY MUCH, STEVE, AND I WISH YOU WELL IN THE FUTURE.

SM: Yes, I hope our paths continue to cross. It’s been always a pleasure talking with you and I’ll make sure I keep listening to your podcasts to stay well-informed.

CC: THANK YOU VERY MUCH.

SM: Have a great day.

Steve MacDonald is the outgoing CEO of Emissions Reduction Alberta.

Learn more about the various emissions mitigation projects and how to apply for funding by checking out ERA’s website at www.eralberta.ca