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What the election of Donald Trump means for Justin Trudeau

The election of Donald Trump throws a wild card into some of the Trudeau government's best-laid plans. In at least one case, a Trump presidency and a Republican majority in Congress are good news for Canada. There are some other areas where it means amber lights, or loudly flashing red ones. And on some files, a Trump administration spells a giant question mark for Ottawa.

Let's start with the clear good news.

Keystone XL: Remember the north-south pipeline project, which the Obama administration delayed, delayed and delayed some more – and then, for reasons of pure Democratic Party politics, declined? It's back.

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American environmentalists years ago absurdly turned Keystone into a litmus test of environmental purity: Democratic politicians had to come out against it or lose an important part of their constituency. Opposing this pipeline, and only this pipeline, became a cheap and easy way to claim environmental legitimacy. So Democratic politicians, including Hillary Clinton, opposed it.

But in the weird echo-chamber of American politics, if the Democrats were irrationally against Keystone, then Republicans decided to be irrationally supportive. Mr. Trump made building Keystone one of 18 points in his "Contract With The American Voter."

Not only has Mr. Trump promised to "lift the Obama-Clinton roadblocks" to Keystone, he's promised to do this on his very first day in office.

For the Trudeau government and the Canadian oil industry, the building of Keystone XL would unblock an economic and political logjam. It would mean more Canadian oil flowing to market by the most cost-effective and least politically controversial means possible. That would be a large and unexpected gift for Mr. Trudeau.

All other major pipeline projects under consideration in this country, from the Energy East project to the Atlantic, to Northern Gateway and Trans Mountain to the Pacific, cross provincial boundaries and native-land claims, and new tanker traffic in Canadian waters. All involved delicate negotiations between Ottawa and the provinces, and the potential for enormous blowback from voters in the Liberal coalition.

The route of Keystone XL, in contrast, is almost entirely in the U.S. It means no extra tankers in Canadian waters. The environmental and political risks are all south of the border.

Mr. Trump's pro-Keystone stance could allow Mr. Trudeau to essentially offshore one of his biggest challenges. Of course, it remains to be seen how Mr. Trump will carry through on his promise, and under what conditions – he at one point mused about demanding a share in the project and its profits.

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But the president-elect is, unlike his opponent, staunchly pro-Keystone XL. For Canada, it's significant.

The environment: If Mr. Trump's Keystone stance is a gift to Ottawa, his environmental promises could deliver a painful kick in the shins.

The president-elect, like much of his party's congressional delegation, is hostile to the idea of lowering greenhouse gas emissions through carbon taxes, cap-and-trade or the phase-out of coal-fired electricity generation. The Trudeau government has just begun pushing Canada's provinces to ramp up carbon pricing; in a few months, Mr. Trump's new government will likely be vigorously pushing America in the opposite direction.

The chessboard is complicated, since much of the regulation of this sector comes from the states. But if a Trump administration rolls back moves to put a price on carbon in the U.S., that could make some carbon taxes relatively more difficult to undertake and sustain in Canada. Carbon-intensive industries may have an incentive to simply pick up and move to a jurisdiction with lower environmental controls.

Canadian governments are going to have to keep a close eye on this – to ensure that any tax measures they take here don't drive companies to relocate there.

And more broadly, the strategy of adopting stronger environmental regulations on the Canadian energy industry, for the sake of earning "social licence" with U.S. regulators and politicians, may have just been rendered obsolete.

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It made sense when the White House was Democratic. But Mr. Trump's platform promises to "lift the restrictions on the production of $50-trillion dollars' worth of job-producing American energy reserves, including shale, oil, natural gas and clean coal."

In other words, the Trump administration isn't planning on ramping up environmental rules. If anything, the U.S. is about to begin moving in the opposite direction. American pressure on Canada's oil sands to cut carbon emissions may be about to abate – at least until the next Congressional elections, in 2018.

Tomorrow: What Trump means for Canadian trade and foreign policy.

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