Politics versus the future: Canada’s Orwellian energy standoff

There is no denying the utility of fossil fuels, which meet 85% of the world’s energy needs. And consumption is rising along with emissions. Even in Canada, the second largest hydropower producer in the world, 76% of end use energy is provided by fossil fuels.

We are told by the federal government that increasing oil and gas production and meeting emissions reduction targets are mutually compatible goals. Alberta has crafted a ‘climate leadership plan’ that allows oil sands emissions to grow by 40% and places no restrictions on oil and gas production outside of the oil sands. A phase out of remaining coal plants, most of which were already due to be decommissioned under the former Harper government’s legislation, and a modest carbon tax, were also included.

Even with Alberta’s oil sands cap in place, National Energy Board (NEB) projections for oil and gas production growth show that upstream emissions will increase greatly, to the point that a 49% reduction in emissions from the rest of Canada’s economy would be required to meet our Paris targets.

Notwithstanding the difficulty in making such radical reductions outside of the petroleum sector in a short timeframe, the federal and Alberta governments assert that if the Trans Mountain pipeline expansion (TMX) is not built, even Alberta’s extremely modest ‘climate leadership plan’ may be cancelled.

Rachel Notley and Justin Trudeau have invested a lot of political capital in TMX but are ignoring the bigger picture. Even if oil and gas production is allowed to grow per the NEB’s projections, there are two other export pipelines likely to be built that are not mentioned in the heated TMX debate.

Line 3 and Keystone XL, without TMX, would provide sufficient pipeline export capacity for foreseeable production growth under the oil sands emissions cap, and access world prices on the Gulf Coast.

The oft-repeated ‘Canada has only one market’ rhetoric ignores the fact that oil is a globally priced commodity, that the US Gulf Coast has the world’s largest concentration of coking refineries able to optimally refine Canadian heavy oil, and that there is likely a price discount, not a premium, from exporting to Asia, given transportation costs.

But building any of these pipelines ignores the fact that upstream oil and gas emissions under Alberta’s plan, given NEB projections, will account for more than three quarters (76%) of Canada’s emissions by 2040 and 100% by 2050 – if emissions reduction targets are to be met.

Some environmental groups assert that it will be relatively easy to swap out fossil fuels for renewable energy – wind, solar, biomass, biofuels and geothermal energy. That is unlikely given the scale of such a transition. Renewable energy can certainly be scaled up a lot, along with geothermal energy for heating and cooling, but we will likely need fossil fuels for decades to come as we make the transition.

That’s because solar and wind are intermittent, on an hourly and seasonal basis, and the energy they produce – electricity – makes up only 17% of current delivered energy in Canada. They need to be backed up by dispatchable sources like natural gas, or with storage, to provide reliable power. Solar and wind now provide less than 5% of Canada’s electricity generation, and much less of total delivered energy.

All of which means we can’t make the transition overnight, and the longer we delay, the more difficult it will become. It also means we can’t simply plan to swap one source of plentiful energy for another, without reducing consumption. Mass transit, building codes, building retrofits and other efficiencies will be very important.

Industry extracts the lowest-cost, highest-quality, least emissions-intensive fossil fuel resources first. Knowing that fossil fuels will likely be needed for a long time to come, and that producing them is very emissions-intensive, Canada’s current de facto strategy of selling them off at rock bottom prices with declining revenues to government makes little sense.

Governments telling us we must increase emissions from oil and gas production in order to meet emissions reduction targets would make George Orwell proud. Canada needs a viable energy strategy that will meet long-term energy security needs and emissions reduction commitments. Investments in political capital, to the exclusion of common sense and a view beyond the next election, seem to have relegated us to Orwell’s world.
 

David Hughes is an earth scientist and author of Canada’s Energy Outlook: current realities and implications for a carbon-constrained future published by the Canadian Centre for Policy Alternatives and available at energyoutlook.ca

Pipeline feud underscores need for evidence-based energy strategy

Canada’s long-term energy security needs and climate commitments cannot be met without major changes: study

VANCOUVER — A new study by veteran earth scientist David Hughes anchors the heated debate about pipelines and energy infrastructure within the realm of science and evidence. The study, which offers a comprehensive review of Canada’s energy systems, reveals that Canada’s existing plans fall short of meeting energy security and emissions reduction targets.

In contrast to heated rhetoric about Kinder Morgan’s proposed Trans Mountain Expansion (TMX) Project, Canada’s Energy Outlook: Current realities and implications for a carbon-constrained future—published today through the Corporate Mapping Project, the Canadian Centre for Policy Alternatives and the Parkland Institute—provides a detailed evidence-based assessment of Canada’s energy system and the options realistically available for an energy-secure, carbon-constrained future.

The study’s findings also run counter to key arguments made in favour of the TMX and expanding oil and gas production, including:

  • On emissions-reduction: Expanding oil and gas production as projected by the National Energy Board (NEB) means that the rest of Canada’s economy will have to reduce emissions by 49 per cent by 2030, and 85 per cent by 2040, to meet emissions reduction targets. This is almost certainly impossible in the timeframe available.
  • On available pipeline capacity: The TMX rhetoric ignores two other approved export pipelines. Line 3 and Keystone XL would provide more than double the export capacity of the TMX, and meet foreseeable export needs under the Alberta Government oil sands emissions cap.
  • On maximizing profit: The argument that TMX is necessary to capture an “Asia price premium” is false. Canadian heavy oil is discounted because of its inferior quality and due to the cost of transportation. That quality discount will be the same on the US Gulf Coast as in Asia, and the transport cost is higher to Asia—meaning that exports via TMX will command a lower price than exports to the US via pipeline.
  • On economic activity: Despite growing production, the proportion of Canadian GDP due to oil and gas production shrank 20% from 1997 to 2015. Returns to the public are also down: corporate taxes paid for extraction and refining are down more than 50 per cent since 2006, and royalty revenue has declined 63 per cent since 2000.
  • On job creation: Despite production growth, jobs in the extraction and distribution portions of the industry have been relatively flat since 2006 and declined in 2015 with the downturn in oil price. Further, job creation estimates by pipeline proponents are almost entirely short-term construction jobs. Permanent jobs from TMX, for example, amount to 50 in BC and 40 in Alberta, according to the proponent’s documentation.
  • On long-term prosperity: Canadians are likely to require fossil fuels for many years to come, given the daunting scaling issues in replacing them with alternative renewable sources. Canada has no strategy for oil and gas beyond expanding exports as rapidly as possible. This will deplete the highest quality portion of Canada’s remaining fossil fuel endowment—the portion that is the least costly and emissions-intensive to recover—thereby compromising long-term energy security with minimal economic returns, given the current low price environment.

These points are highlighted in the study, which explores the evolution of Canada’s energy system in comparison to other countries; the relationship of the economy to energy consumption and emissions; revenue generation and jobs from fossil fuel production; and existing government proposals to meet 2030 and 2050 climate commitments. After considering these many factors, the study concludes with recommendations for meeting long-term energy security and climate needs.

“This is a critical moment to develop a viable energy strategy, based on science and evidence, to address our future energy needs and emissions-reduction targets” says report author Hughes.

“We have relied on fossil fuels for more than a century and we’ve had a good run. There is no silver bullet—we will require both non-renewable and renewable energy resources in the future and need to be realistic about what we can expect from various energy options, as well as means to reduce consumption. We need to take steps now or we put our future energy security and emissions-reductions targets at grave risk.”

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The report—including chapter summaries and downloadable PDFs—can be found at energyoutlook.ca.

For more information or to set up interviews, please contact: Lindsey Bertrand (CCPA–BC Office) at lindsey@policyalternatives.ca or 604-801-5121 ext 238

You may also contact:

  • In Ottawa: Alyssa O’Dell (CCPA–National Office / Eastern time zone) at alyssa@policyalternatives.ca or 613-563-1341 ext 307 
  • In Edmonton: Scott Harris (Parkland Institute) at sgharris@ualberta.ca or 780-492-3952

In the news

May 2, 2018The Tyee — Government revenue from fossil fuels in sharp decline

May 2, 2018News Talk 770 — David Hughes discusses the study with host Danielle Smith (starts at 01:29)

May 1, 2018The Star Vancouver — ‘Virtually impossible’ to ramp up oil and gas in Canada and hit climate targets, report warns

May 1, 2018 — DeSmog Canada — “10 handy facts about Canadian energy that you actually probably want to know”

May 1, 2018 — AM 1310 News — David Hughes discusses the study on the The Rick Gibbons Show

April 17, 2018 — CBC Radio One: Early Edition — “David Hughes says Alberta could wreak havoc with BC’s gas prices if it were to turn off the taps”