A Matter of Fact: Shutting down Canada’s oil and gas industry is not a solution for climate change

Canadian expertise could easily make us leaders, not victims of transitioning global energy systems

By Deborah Jaremko
SAGD oil sands project in northern Alberta. Photo courtesy Cenovus Energy

A column this week by anti-oil and gas activist Tzeporah Berman is misleading about Canada’s role in climate change and reckless about the country’s future.

Berman’s main arguments – that oil and gas is a sunset industry, and that shutting down Canada’s sector would change the course of climate change – are incorrect.

Her call to close down Canadian oil and gas serves no purpose other than to provide an ideological win for those against fossil fuels, damaging one of Canada’s most important assets, and not recognizing that climate change is a global challenge.

Fact: Shutting down all of Canada wouldn’t ‘move the dial’ on climate change

Canadians are concerned about climate change and eager to play a role in lowering global GHG emissions. But it is critical to be realistic about the impact we can have, always balancing that against protecting our economy and quality of life.

Let’s face it: Canada is responsible for only 1.5 per cent of global GHG emissions. Shutting down the oil and gas industry, let alone the entire country, wouldn’t have much of a worldwide impact.

As deputy prime minister Chrystia Freeland told the Financial Times last year, “Even if all Canadians ceased emitting carbon, we wouldn’t move the dial…Yes, we do have to take action on climate change. At the same time, we also need a strong economy, and we understand the reality that fossil fuels are part of the Canadian economy and the world economy.”

And they will continue to be long into the future, driven by population and economic growth in emerging regions like Asia, India and sub-Saharan Africa.

“Demand will eventually peak, plateau and decline, just as the world population will, but there is a problem if we interpret this as some sort of marker for the death of the Canadian oil industry,” writes business leader Mac Van Wielingen in a recent paper by the University of Calgary’s School of Public Policy.

“This leads to thinking on energy policy in the wrong direction, and it is a shallow generalization that distracts from a broader, more complex reality.”

Canadian expertise could easily make us leaders, not victims of transitioning global energy systems, he argues.

Van Wielingen says the lifespan of the oil sector needs to be stretched out not just to pay for the greening of energy but also to support Canada’s heavy social costs, growing debt, and more generally to support post-COVID recovery.

Fact: Oil and gas is not a sunset industry

The world’s sharp recovery of demand as it emerges from the pandemic is clear evidence of the critical importance oil and gas plays in productive daily life.

Oil prices today are higher than they have been since 2018, amid trends like record depletion of U.S. oil stockpiles.

There are emerging energy sources and excitement over what’s possible, but there’s no question that the future involves a lot of oil and gas. No credible forecast sees the elimination of fossil fuels from global energy markets in the coming decades – even the International Energy Agency’s unlikely net zero scenario.

The IEA published three possible outlooks over the last year. Its base case, or most likely, forecasts that oil demand will increase to 104 million barrels per day in 2040, up from 98 million barrels per day in 2019. Meanwhile, natural gas demand will increase to 505 billion cubic feet per day, up from 340 billion cubic feet per day in 2019.

In the IEA’s outlook that assumes increased global action to reduce GHG emissions, oil demand in 2040 is 66.2 million barrels per day, and natural gas demand is 344 billion cubic feet per day.

Even in the agency’s net zero scenario, in 2050 the world continues to demand 24 million barrels per day of oil and 169 billion cubic feet per day of natural gas.

No matter the future pathway, Canadians should benefit from satisfying global oil and gas demand rather than jurisdictions far behind in their commitment to environmental, social and governance (ESG) performance like reducing GHG emissions, Indigenous rights and responsible governance.

“We continue to see Canada and its oil companies as being ahead of the ESG curve and a well-rounded candidate to fulfill the world’s ongoing need for ‘friendly oil,’” says a June 2021 report by analysts with BMO Capital Markets.

Fact: Canadian natural gas can reduce global GHGs

Canada can do more to help reduce global GHGs – while improving social and environmental protection – by exporting its resources than it can by shutting the sectors down.

Using natural gas from Canada for power generation instead of coal in China is expected to result in emissions reductions of 34 to 62 per cent, according to a June 2020 study published in the Journal for Cleaner Production.

There’s a lot of coal-fired power being built around the world. As of January 2021 there were 201 coal plants under construction globally, including 92 in China, 30 in India and 24 in Indonesia, according to Global Energy Monitor. That’s in addition to 345 coal-fired power plants in the pre-construction phase, including 135 in China.

“Canadian natural gas has an abundant cheap supply that could easily displace coal and higher intensity fossil fuels and provide uplift for Canada, giving greener and cheaper energy both in North America and globally, assuming they can get the infrastructure completed and show the wherewithal to do it,” says Ian Archer, associate director in the natural gas team at IHS Markit.

Fact: Oil sands accelerating efforts to reduce GHGs

There is a widely spread misconception that Canada’s oil sands sector is an environmental laggard from a GHG perspective. In reality, several oil sands projects now have emissions footprints that are lower than the global average thanks to new technology and improved efficiency, BMO reports.

“An adaptable, innovation driven mindset exists in Canada’s energy sector, and it is deepening and evolving,” Van Wielingen writes.

“Responsiveness, innovation and adaptation has happened and is happening.”

Average oil sands emissions per barrel have fallen by 27 per cent since 2013, BMO reports. Over the same period, competing global oil majors decreased their GHG emissions intensity by just 13 per cent.

A further 20 to 30 per cent reduction in oil sands emissions intensity is expected over the next decade as producers apply new technology and process improvements. And potential game changers could be on the horizon like small modular nuclear reactors and direct air capture.

“We also sense that the industry’s ambition and urgency to take action is higher than ever, underscored by the recent oil sands Pathways to Net Zero initiative,” BMO analysts said.

“All told, we are increasingly optimistic that progress toward the sector’s ESG goals will accelerate ahead and maintain its leading pace of advancement.”

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