Prime Minister Mark Carney’s overtures to the European Union about associate membership status may be the next prompt for Canada to move toward decarbonizing its energy system and high-emitting industries—whether or not that outcome is on the PM’s immediate agenda.

With a two-day summit set to convene in Montreal Oct. 29-30 to dig into the details of what associate status could mean, there are lots of details to work out and complex negotiations ahead, writes Andrew Caddell, a former senior policy advisor at Global Affairs Canada, in a post last week for The Hill Times. But with Europe committed to mostly staying the course on its climate targets, and touting the economic and geopolitical gains in doing so, some expectation is beginning to build that alignment with those policies will be part of the price of admission to a closer relationship.

The conversation around associate membership gained momentum in mid-September, when Carney was in Brussels to attend European Commission President Ursula von der Leyen’s annual State of the Union address. Her speech included an invitation to Canada to become the EU’s first “associate member”—a category that doesn’t actually exist at present—to bring allies closer together in “an openly hostile world,” Reuters reported at the time.

“European Union lawmakers gave a standing ovation after she made the proposal and then walked over to embrace Canada’s Prime Minister Mark Carney,” the news agency wrote.

“In the cold fragility of today’s world,” von der Leyen told the European Parliament, “we must urgently reimagine our partnerships. So, I would like to work with ⁠you on opening the door for Canada.”

That statement, and the explicit offer of associate membership, “went further than expected,” the Globe and Mail reported. While Carney said Canada was not seeking EU membership, he “has been assiduously courting EU leaders in an effort to counterbalance ongoing trade tensions with U.S. President Donald Trump, pushing the notion of a ‘unique alliance’” with the EU.

“We are not fair-weather allies. We do not pursue zero-sum deals,” Carney told European parliamentarians. “We hold common values, for which we have always fought, and in whose defence we must always remain vigilant.”

In an “alliance for the future”, Canada and the 27 EU countries “can anchor our ground to hold our values while forming a protective canopy under which our citizens can thrive,” Carney added. “This is about sovereignty. Our ability to live as we wish. It is about the freedoms we must fight for every day. Sovereignty requires resilience—the ability to withstand shocks.”

Right on cue, Trump responded that an offer of associate membership would be a “hostile act” and threatened “heavy tariffs” against the EU if he thought a deal had been made with “bad intentions”.

That was a signal of the “extraordinary geopolitical shock” to the United States in Carney’s growing proximity to the EU, the U.S. Cable News Network wrote. “The second Trump administration made U.S. hegemony over the Western Hemisphere an article of faith. But the country’s closest geographical and cultural ally is seeking a highly symbolic break with its ‘America First’ neighbour, a sign it now feels more politically and morally aligned with Europe.”

Just talking about closer alignment won’t make it happen, not with some European diplomats moving immediately to throw cold water on the idea. “We love the Canadians, but everyone is very realistic about what’s possible and what’s not,” one EU diplomat told The Financial Times. “Saying ‘everything but membership’ sounds good, but came across as not really thought through,” they added. “But I don’t fault [Carney] for trying.”

Yet the tantalizing possibility is that, if associate EU membership eventually takes shape, it could include climate and energy transition policies that are in many cases stronger in the EU than they are in Canada.

While there’s no simple way to describe the complexities of a 27-country political bloc, the European Union has mostly charted a consistent course toward emission reductions and a decarbonized energy system—certainly more so than the United States, particularly under Trump.

The EU was one of the guiding influences that brought the 2015 Paris agreement into being, and the continent subsequently saw a flurry of policy development to put principles into practice.

Then in 2022, when Russian dictator Vladimir Putin invaded Ukraine and tried to use the EU’s dependence on Russian gas as a bargaining chip in the war, the continent’s decision-makers concluded that fossil fuel dependence could be an even more immediate geopolitical risk than climate change. Countries moved quickly to diversify their gas supplies, but also took decisive steps to boost energy efficiency and shift to non-fossil energy.

Fast forward to today, and the continent has fully implemented a carbon border adjustment mechanism (CBAM) aimed at protecting domestic industries from competing imports from countries with less ambitious and costly carbon rules. “The EU has a strong carbon market and carbon tariff that penalizes imports not covered by a similarly strong carbon price at home,” the Canadian Climate Institute wrote last week on LinkedIn. “That will mean Canadian companies pay the EU tariff instead of keeping revenues in Canada—another reason to strengthen Canada’s carbon markets.”

The continent is also far ahead of Canada in applying a sustainable finance taxonomy to investments, and recently reaffirmed a ban on new oil and gas drilling in the Arctic, despite objections from Norway.

“Moving forward, our approach on the moratorium will remain unchanged,” a European Commission spokesperson told Euronews. “Our policies have objectives to address climate change and environmental degradation and support sustainable economic development.”

In the wake of that decision, it was clear that the European finance sector had played a role. “The EU Commission paid attention to the group of major European investors who came out and called for a firm stance against new oil and gas development in the Arctic,” Katrine Ehnhuus, senior advisor at the Nordic Center for Sustainable Finance, said in a release. “Financial institutions play a vital role in shaping the trajectory of the green transition, and they are welcomed when making their voices heard with decision-makers.”

After fossil industry and U.S. government pressure to weaken its methane regulations, the EU did agree to delay methane reporting on oil and gas imports by one year, to 2028. The stated motivation was to “safeguard energy security” and “give market actors time to implement the new rules,” Bloomberg reported last week, citing EU Energy Commissioner Dan Jørgensen, a former Danish climate minister. Investors warned the EU that any delay “would create uncertainty and undermine methane action,” Responsible Investor reports, a full year after the Institutional Investors Group on Climate Change brought together 44 institutional investors with €4.85 trillion under management to express their support for the rule.

“Regulatory certainty is fundamental to long-term business planning, and methane reductions are essential for limiting near-term global warming,” Eric Christian Pederson, head of responsible investments at Nordea Asset Management, declared in the IIGCC release. “The EU methane rules as they stand aren’t just good climate policy—they’re needed to reduce risk for companies, portfolios, the securities market, and society at large. Watering down regulation that companies have already based investment decisions on is counterproductive and risks undermining globally agreed methane reduction efforts.” 

But even if the policy signals are mixed, on-the-ground implementation of the EU’s energy transition could bring a new set of expectations and market pressures to an incoming associate member.

In June, during the International Energy Agency’s global energy efficiency conference in Montreal, the president of a Danish energy efficiency equipment supplier said Europe has reduced its energy use by almost 30% over the last two decades, and could cut 70% of its remaining natural gas demand by 2040. Danfoss Climate Solutions President Kristian Strand cited new research by Oxford University energy and climate policy professor Jan Rosenow that documented the progress to date, and the further gains to be achieved through a mix of energy efficiency, electrification, and clean energy adoption—enough to save the continent up to €2 trillion (C$3.22 trillion) on fossil fuel imports.

Separately, two European sources have told The Mix that the push to meet a more stringent carbon standard is already showing up in business decisions. One executive from a Canadian division of a European industrial conglomerate said rigorous carbon targets essentially prevent their company from locating new manufacturing in jurisdictions that can’t offer clean power. Another said it would make sense for the EU to apply a higher carbon standard in any trading relationship with a new associate member, to protect the competitiveness of domestic industries that are already moving more seriously to cut emissions.

The talk of associate membership has also opened conversations about what Canada could offer the European Union. Canada’s EU ambassador-designate, former environment and climate minister Jonathan Wilkinson, cited military procurement, AI, supercomputing, and critical minerals as top-line priorities in a recent interview with Toronto Star business columnist Adam Radwanski.

“Minerals are highest on the Europeans’ list and ‘extremely high’ on Canada’s,” Radwanski wrote. “Uranium and hydrogen are on there, too, and maybe natural gas if some challenging economics and timelines could be made to work.”

In a post for The Hill Times, Johanne Whitmore, chair in energy sector management at HEC Montréal, warned that those timelines might not work in Canada’s favour.

“While Europe’s own transition is built on a clear hierarchy based on efficiency and electrification aiming [for] fossil demand reduction as the structural outcome, it is pushing for Canada’s LNG expansion which sits outside of this logic,” Whitmore wrote, citing recent discussions between Carney and French President Emmanuel Macron. France might be only too happy to get more short-term access to Canadian gas imports, Whitmore added, but that kind of demand “shifts the burden of long‑term risk onto Canadians. Europe’s short‑term energy security concerns do not erase the long‑term climate risks both leaders acknowledge. And they do not justify locking Canada into decades of new fossil infrastructure.”

In an interview Sunday with CTV Question Period, German Foreign Minister Johann Wadephul said his country is also looking for LNG from Canada, BNN Bloomberg reported—but only over the short term.

“We do have to diversify, not only because this Russian war against Ukraine, but also with regard to the situation in the Middle East, if we look to the Strait of Hormuz and also recently to the situation around Bab-el-Mandeb, we know that our supply chains are under threat,” Wadephul said.

“But also, I would say we do have to speed up with changing our whole energy infrastructure into the new renewable system,” he added. “So, this is, I would say, the future, and the whole geopolitical circumstances are another very strong argument to do all of that faster.”

During a trip to Canada last week, European Investment Bank President Nadia Calviño said “the time is ripe” for her institution to pay closer attention to financing Canadian projects, telling CBC she’s looking for a framework agreement that would enable investments in critical minerals “and beyond”.

“I think the key idea is one that Prime Minister Carney is sharing, which is strategic alliance and strategic co-operation,” Calviño said. “We speak the same language, we share the same values.”

That line of thinking had Clean Energy Canada urging Canadian decision-makers to “move beyond [memoranda of understanding] with European partners toward actual investments, offtake agreements, and joint financing” for critical minerals, “while building out more refined and processed value chains at home.”

Around the same time, the Canadian Climate Institute said the prospect of a new partnership with the EU would reinforce the importance of “urgent action” on a cleaner economy and climate change.

“The EU has an aggressive plan to electrify its economy and is a leader on clean energy,” the institute wrote on LinkedIn. “That means doubling the current electricity share of final energy use by 2040 (46%). Reaching that goal could cut EU fossil fuel imports by €260 billion per year. That presents a big opportunity for Canadian firms offering low-carbon services, innovations, and technologies. Electrifying more of Canada’s economy and doubling the size of our power grids in parallel will bolster those advantages.”

Those priorities have taken shape at a time when Europe’s remaining dependence on fossil fuels is producing higher fuel prices and inflation, the Institute for Energy Economics and Financial Analysis added.

“The EU is paying much more for fossil fuel imports while volumes have held steady or have fallen,” IEEFA wrote, citing Eurostat data. The high costs have prompted at least one company to pause production at three UK chemical plants, putting 300 jobs at risk, and a cold winter while the Strait of Hormuz remains blocked could lead to record energy prices.

For Carney, meanwhile, a closer connection to the EU is part of the wider plan to diversify Canada’s trading relationships and reduce the country’s dependence on the United States. With the White House facing down the possibility of steep electoral losses in upcoming midterm elections, Trump was out yesterday with a rash prediction that Canada will agree to what he called “a fair deal” on trade in the next three to four weeks.

“They’re going to come in, and they’re going to say, ‘Sir, we are sorry.’” he said from the White House Monday.

Gabriel Brunet, director of communications for Canada-U.S. trade minister Dominic LeBlanc, said Canada will remain focused “on what we can control,” including economic growth inside the country and diversifying trade around the world, the Globe and Mail writes.

“Well, here we go again,” the Globe’s Monday evening newsletter added in response to Trump’s latest brainstemstorming session, with the countdown clock to midterms standing at 35 days.