Mark Milke, Author at Canadian Energy Centre

72 facts about oil and gas: A summary research brief

Mark Milke — Wed, 15 Dec 2021 04:35:21 +0000

Photos courtesy Getty Images/Enbridge

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The following summary facts and data are drawn from 23 Fact Sheets and 11 Research Briefs released in 2021 by the Canadian Energy Centre. For sources and methodology, as well as additional data and information, the 34 original reports are available at the research portal on the Canadian Energy Centre website at canadianenergycentre.ca

Revenues to Governments

1.

Canada’s energy industry paid over $701 billion in federal, provincial and local taxes, royalties, and fees since 2000. That is:

Nearly twice the latest forecast of the federal budget deficit of $354 billion for 2020/21;
More than the $679 billion paid out in Old Age Security (OAS) benefits between 2005/06 and 2019/20; and
More than the $685 billion in Employment Insurance (EI) benefits paid out between 1987/88 and 2019/20.

Sources: Statistics Canada and CAPP.

2.

Since 2000, Canada’s oil and gas sector alone paid nearly $505 billion to federal, provincial, and local governments.

This is almost the same as the real estate and construction sectors combined (at $510 billion); and
This is more than the $499 billion in Family Allowance and children’s benefits paid out between 1969/70 and 2019/20.

Sources: Statistics Canada and CAPP.

3.

Alberta taxpayers made a $272 billion net contribution to federal government finances between 2007 and 2019.

The direct share from Alberta’s oil and gas extraction sector was, at a minimum, nearly $53 billion, about 9 per cent of gross Alberta contributions and 19 per cent of Alberta’s total net fiscal contribution over the period.

Sources: Derived from Statistics Canada, Table 36-10-0450-01; Alberta Finance, Albertan’s Net Contribution to Con-federation for 2011; and Statistics Canada, Table 17-10-0005-01.

Contribution to National and Regional Economies

4.

The oil and gas sector makes an outsized contribution to the Canadian economy, when healthy or when enduring a slump.

Average weekly earnings are highest in oil and gas extraction at $2,740 weekly in 2019 compared with $1,534 in aerospace, $1.427 in motor vehicle manufacturing, and $1,029 for the average of all industries.

Source: Statistics Canada, Table 14-10-0204-01.

5.

In 2017, the oil and gas sector was responsible for adding $7.7 billion in nominal GDP to the Ontario economy. Oil and gas:

Generated $15.3 billion in outputs, consisting primarily of the value of goods and services produced by sectors in the Ontario economy;
Supported over 71,000 jobs in Ontario, directly and indirectly; and
Paid $2.1 billion in wages and salaries to workers in Ontario.

Source: Derived from Statistics Canada, Supply and Use Tables, custom tabulation.

6.

In 2017, the oil and gas sector was responsible for adding nearly $9.5 billion in nominal GDP to the B.C. economy. Oil and gas:

Generated nearly $18.0 billion in outputs, consisting primarily of the value of goods and services produced by various sectors in the B.C. economy;
Supported nearly 62,000 jobs in B.C., directly and indirectly; and
Paid over $3.1 billion in wages and salaries to workers in B.C.

Source: Derived from Statistics Canada, Supply and Use tables, custom tabulation.

7.

In 2017, the oil and gas sector was responsible for adding nearly $6.9 billion in nominal GDP to Atlantic Canada economy. Oil and gas:

Generated nearly $11.4 billion in outputs, consisting primarily of the value of goods and services produced by various sectors in the Atlantic economy;
Supported over 20,000 jobs in Atlantic Canada, directly and indirectly; and
Paid over $1.36 billion in wages and salaries to workers in Atlantic Canada.

Source: Derived from Statistics Canada, Supply and Use Tables, custom tabulation. Totals may not add exactly due to rounding.

8.

In 2017, the GDP associated with the Canadian oil and gas sector totalled $128 billion, or 6.4 per cent of the total Canadian economy. In 2017, there were 216,285 direct jobs and 395,077 indirect jobs associated with the Canadian oil and gas sector, or 611,362 in total, representing about 3.2 per cent of all jobs across Canada.

Source: Derived from Statistics Canada, Custom Tabulation of the Supply and Use Tables, 2017.

9.

In 2017, Canada’s oil and gas industry GDP was three times the size of the country’s automotive industry and nearly seven times the size of its aerospace industry.

In 2017, oil and gas extraction was worth $46.6 billion of Canada’s nominal GDP;
In 2017, the motor vehicle and parts manufacturing sector accounted for $16.5 billion of Canada’s nominal GDP; and
In 2017, the aerospace product and parts manufacturing sector accounted for $5.9 billion of Canada’s nominal GDP.

Source: Statistics Canada, Table 36-10-0401-01.

Value of Canadian Oil and Gas Exports

10.

The cumulative real value of Canada’s oil and natural gas product exports was over $1.94 trillion between 1988 and 2019.

Source: Statistics Canada. Table 12-10-0121-01.

11.

The $1.94 trillion value of Canadian oil and natural gas product exports between 1988 and 2019 compares favourably to other key Canadian export products. Between 1988 and 2019, the cumulative real value of various exports included:

electricity exports ($207 billion);
aircraft and other transportation equipment ($552 million); and
consumer goods exports (1.47 trillion).

Source: Statistics Canada. Table 12-10-0121-01.

Contribution of Canadian Oil to U.S. Refineries

12.

U.S. refineries are growing increasingly reliant on Canadian heavy oil, including oil from the oil sands. The total percentage of heavy crude oil that the U.S. imports from Canada as a share of all of its imports of Canadian oil has risen from 25.1 per cent in 2000 to 55.8 per cent in 2019, an increase of 122 per cent over the past two decades.

Source: US Energy Information Administration, 2021a.

13.

The per cent of Canadian crude in U.S. refinery feedstock (i.e., the raw materials and intermediate materials processed at refineries to produce finished petroleum products, otherwise known as refinery inputs) has steadily risen from nearly 9 per cent in 2000 to over 21 per cent by the end of 2019.

Sources: U.S. Energy Information Administration, 2020b and 2021b.

Canada and LNG

14.

Worldwide imports of natural gas, in the form of Liquefied Natural Gas (LNG), rose from 144 billion cubic metres (bcm) in 2000 to 470 bcm in 2019, an increase of 326 Bcm and 226 per cent during the period. The sharpest rise in LNG imports by volume occurred in Asia (up 237 Bcm). The Asia-Pacific region, with LNG imports of 346 Bcm in 2019, constituted 74 per cent of the world share of all LNG imports.

Source: Authors’ calculations from IEA (2020b), World Energy Statistics (database).

15.

Relative to Western Canada and the Asia-Pacific market for natural gas (in the form of LNG), the price difference between Canada and Asia provides an opportunity for Canadian natural gas producers to export to Asia-Pacific markets. Since 2009, Asian natural gas prices have been higher than Canadian natural gas by triple percentages, i.e., selling for between 122 and 775 per cent more in Asia than in Canada, depending on the year.

Sources: BP Statistical Review (2020) and International Monetary Fund (2021).

Energy Trade Flows Between Canada and the U.S.

16.

Over the past two decades, the cumulative aggregate value of energy products trade between Canada and the United States was $1.96 trillion, including $138 billion in 2019.

Source: Statistics Canada, Table 12-10-0133-01

17.

Crude oil (including bitumen) has been the largest commodity in the Canada-United States energy products trade flow; a total of $1.12 trillion in crude oil and bitumen has flowed between the two countries from 2000 to 2019, including $101.5 billion in 2019. The second largest commodity in the Canada-United States energy products trade flow over the past two decades is natural gas; a cumulative total trade value of $426.3 billion of that product has passed between the two countries, including $12.1 billion in 2019.

Source: Statistics Canada, Table 12-10-0133-01.

18.

Enbridge Line 5, the pipeline that winds its way between Superior, Wisconsin, and Sarnia, Ontario. carries products that fuel the region’s industries and communities: light oil, synthetic light oil, and natural gas liquids (NGLs), much of which is refined into propane. In 2019, the total value of energy product trade flows between Canada and Michigan was over CA$5.8 billion or US$4.4 billion.

Source: Statistics Canada, International Accounts and Trade Division (2021a and 20201b).

19.

Enbridge’s Line 3 Replacement Project is bringing employment and safer, more reliable energy to communities in Minnesota. In 2019, the total value of the trade flows of energy products between Minnesota and Canada was nearly CA$8.3 billion, or about US$6.4 billion.

Source: Statistics Canada, International Accounts and Trade Division (2021a and 20201b).

Canada-U.S. Pipeline Network

20.

The Canada-United States (U.S.) pipeline network is a critical component of North American energy security. Pipelines carry crude oil, natural gas, and refined petroleum products within and between the two countries. Combined, the Canada-U.S. energy pipeline network is over 453,000 kilometres long, 11 times the earth’s circumference.

Sources: Natural Resources Canada, undated; American Fuel and Petrochemical Manufacturers, undated.

21.

The economic benefits of the Canada-U.S. pipeline network are nearly $60 billion in GDP and more than 63,400 jobs in the industry, with an average annual salary of over $80,000.

Sources: Alberta Labour Information Service, 2020; Canadian Energy Pipeline Association, 2020; Statistics Canada 2021b; US Bureau of Economic Analysis 2020; US Bureau of Labor Statistics, 2020 and 2021.

22.

As of May 2019, the annual mean wage for an employee in the pipeline transportation industry in the United States was $77,340, nearly 45 per cent higher than the annual mean wage for all occupations.

Source: US Bureau of Labor Statistics, 2020.

23.

A strong American oil and gas industry is a critical element of economic prosperity for the North American energy security network between Canada, the United States and Mexico. This includes pipeline infrastructure such as the Line 3 Replacement Project in Minnesota. The pipeline transportation industry plays a significant role in the Minnesota economy, employing 1,169 people, providing nearly $134 million in employee compensation, contributing nearly $444 million to value-added/GDP, and generating nearly $128 million in taxes for federal, state and county governments.

Source: IMPLAN 2021

Economic Impacts of the U.S. Oil and Gas Industry

24.

A strong American oil and gas industry is a critical element of economic prosperity and the North American energy security network linking Canada, the United States, and Mexico. The direct and indirect economic impacts of the U.S. oil and gas industry in 2019 included two million direct jobs, three million indirect jobs, $356 billion in employee compensation, over $238 billion in direct and indirect federal, state, and county taxes, $985 billion in direct and indirect value-added/GDP, and $2.1 trillion in what is known as “outputs,” i.e., the value of goods and services produced by an industry.

Source: IMPLAN, 2021.

New Canadians in Canada’s Resource Sector

25.

The number of landed immigrants employed in the oil and gas sector has increased from 8,800 in 2006 to 15,600 in 2020.

Source: Derived from Statistics Canada, Labour Force Survey, custom tabulation.

26.

Landed immigrants employed in the oil and gas extraction sector are paid more than those working in other goods-producing industries and more than the average for all industries for landed immigrants. In 2020, the average weekly wage ranged from $1,082 for landed immigrants employed in agriculture, forestry, fishing, and hunting to $2,161 in the oil and gas extraction sector. By comparison, the all-industry average weekly wage for landed immigrants was $1,264.

Derived from Statistics Canada, Labour Force Survey, custom tabulation.

27.

The average weekly wage for landed immigrants in the oil and gas sector was higher than for those in selected other sectors and the all-industry average. Immigrants in agriculture, forestry, fishing, and hunting earned 17 per cent less than the all-industry average; those in manufacturing earned virtually the same as that average; those in construction earned 6 per cent more; and immigrants working in the utilities sector earned 42 per cent more. Meanwhile, those working in oil and gas earned 71 per cent more than the all-industry average.

Derived from Statistics Canada, Labour Force Survey, custom tabulation.

28.

Between 2006 and 2020, average weekly wages for landed immigrants employed in the oil and gas extraction sector grew from $1,450 to $2,161, an increase of nearly 49 per cent, or $711 more. This compares with a range of 17 per cent higher for those in the utilities sector and 36 per cent more for those in construction. The all-industry average growth was 37 per cent between 2006 and 2020, or in dollar terms, an increase of $340.

Derived from Statistics Canada, Labour Force Survey, custom tabulation.

Environmental, Social and Governance (ESG)

29.

Canada’s oil and gas sector is estimated to account for just 0.4 per cent of global GHG emissions, while the oil sands sub-sector itself is estimated to account for just 0.2 per cent of global GHG emissions.

Sources: BMO Capital Markets (2020) and Climate Watch (2021).

30.

On environmental spending, when capital and operating expenses on environmental protection in Canada are combined, out of $67.7 billion spent between 2006 and 2018, the oil and gas sector spent $28.1 billion or 41.5 per cent.

Source: Statistics Canada Table 38-10-0042-01 and Table: 38-10-0130-01.

31.

The oil and gas sector was responsible for 51 per cent ($15.2 billion) of all capital spending for environmental protection compared with 49 per cent for all other industries together ($14.7 billion).

32.

The oil and gas sector was responsible for 34 per cent ($12.9 billion) of all operating expenditures for environmental protection compared with 66 per cent for all other industries together ($24.9 billion).

Source: Statistics Canada Table 38-10-0042-01 and Table: 38-10-0130-01

33.

Canada’s greenhouse gas emissions intensity has fallen by 30 per cent since 2000. Between 2000 and 2019, GHG emissions intensity in Canada has fallen from 0.5 megatonnes of carbon dioxide equivalent (Mt of CO2e) per billion dollars of GDP to 0.35 Mt.

Source: Environment and Climate Change Canada (2021b).

34.

Between 2000 and 2018, Canada’s GHG emissions intensity fell from 996 tonnes of CO2e per million dollars of GDP to 445 tonnes, a decline of over 55 per cent.

Source: Climate Watch (2021).

35.

As of 2018, Canada’s GHG emissions intensity of 445 tonnes of CO2e per million dollars of GDP was lower than many other energy-producing and energy-consuming countries, such as China, India, Brazil, Oman, Russia, Saudi Arabia, Mexico, and the United Arab Emirates.

Source: Climate Watch (2021).

36.

Over the past decade, there has been a marked improvement in GHG emissions intensities (i.e. upstream GHG emissions associated with oil sands extraction and primary processing) for Canadian oil sands crudes.

Between 2011 and 2019, the crude production GHG emissions intensity of overall Alberta oil sands commonly exported to the United States fell from 0.53 tonnes of CO2e per cubic metre to 0.42 tonnes, a decline of about 22 per cent.

Source: Government of Alberta.

37.

There has been a 49 per cent reduction in emissions from oil and gas flaring in Canada in 2019 relative to 2014, even though oil production rose by 25 per cent.

Source: World Bank.

38.

Canada ranks the fifth lowest out of 30 countries for natural gas flaring, despite being the fourth-largest oil and gas producer. Canada’s flaring emissions were 1.1 bcm in 2019, while Russia was the highest at 23.2 bcm, followed by Iraq at 17.9 bcm, the United States at 17.3 bcm, and Iran at 13.8 bcm.

Source: World Bank.

39.

Canada also showed the second-largest decrease in flaring between 2014 and 2019 – a 49 per cent decrease, second only to Kazakhstan, which reduced flaring by 60 per cent. This decrease occurred while petroleum liquids production in Canada rose by 25 per cent and dry natural gas production rose by 5 per cent.

Sources: World Bank, US Energy Information Administration.

Tyranny Oil

40.

In 2020, 49 per cent of the world’s oil production (an annual average of 46.6 million barrels per barrel) occurred in countries that Freedom House ranked as Not Free, compared with 33 per cent in Free countries and 10 per cent in Partly Free countries.

Sources: Freedom House (2021). Countries and Territory Ratings and Statuses, 1973-2021. U.S. Energy Information Administration (2021).

41.

In 2018, 48 per cent of the world’s natural gas production (an annual average of 56.6 billion cubic feet) occurred in countries that Freedom House ranked as Not Free, compared with 38 per cent in Free countries and 10 per cent in Partly Free countries.

Sources: Freedom House (2021). Countries and Territory Ratings and Statuses, 1973-2021. U.S. Energy Information Administration, International Statistics.

42.

By 2020, Not Free nations, including Saudi Arabia, Russia, China, the United Arab Emirates, Iran, Iraq, and others, produced 49 per cent of the world’s 94.2 million barrels of oil per day.

Sources: Freedom House (2021). Countries and Territory Ratings and Statuses, 1973-2021. U.S. Energy Information Administration (2021). Petroleum and other liquids production.

43.

Between 1980 and 2019, the proportion of the world’s natural gas production coming from Not Free nations increased from 36 per cent to 48 per cent, while the proportion from Partly Free nations increased from 5 per cent to 10 per cent.

Sources: Freedom House (2021). Countries and Territory Ratings and Statuses, 1973-2021. U.S. Energy Information Administration, International Statistics.

Foreign Oil Imports

44.

Despite its vast oil and gas resources, Canada does import foreign oil. Between 1988 and 2020, Canada spent $488 billion ($604 billion in 2020 dollars) importing crude oil from such countries as Saudi Arabia, Iraq, Russia, Azerbaijan, Nigeria, Algeria, Angola, Venezuela, and Kazakhstan, as well as the United Kingdom, Norway and, more recently, the United States.

Source: Derived from Statistics Canada, Canadian International Merchandise Trade Database.

45.

Between 1988 and 2020, the five largest exporters of foreign crude oil to Canada were the United States ($94.6 billion), followed by Norway ($79.0 billion), the United Kingdom ($62.6 billion), Algeria ($58.4 billion), and Saudi Arabia ($44.4 billion).

Source: Derived from Statistics Canada, Canadian International Merchandise Trade Database.

46.

Quebec imported $228.4 billion in foreign oil between 2000 and 2020, more than any other province.

Source: Derived from Statistics Canada, Canadian International Merchandise Trade Database.

47.

Between 2010 and 2020, Canada’s oil imports were worth a total of $231.1 billion. U.S. oil imports accounted for nearly $84.2 billion, followed by imports from Saudi Arabia at $26.3 billion. That is over $110 billion in foreign oil imported to Canada from those two countries alone in that decade.

International Merchandise Trade Database.

48.

Canada spent nearly $238 billion on crude oil imports between 2010 and 2020. This is:

Higher than the almost $192 billion Canada spent on farm, fishing, and intermediate food products imports;
Higher than the nearly $205 billion Canada spent on aircraft and other transportation equipment and parts imports; and
Just below the $256 billion Canada spent on forestry products and building and packaging materials imports.

Source: Derived from Statistics Canada, Canadian International Merchandise Trade Database

49.

Between 2010 and 2020, Canada spent over $26.3 billion on crude oil imported from Saudi Arabia. This $26.3 billion expenditure is larger than the:

$1.7 billion Canada spent importing coffee from Brazil;
$2.5 billion Canada spent importing coffee from Colombia;
$7.8 billion Canada spent importing fruits, nuts, citrus fruits, and melons from Mexico;
$9.2 billion Canada spent importing edible vegetables and certain roots and tubers from Mexico;
$16.4 billion Canada spent importing footwear from China; and
$19.9 billion Canada spent importing pharmaceutical products from Germany.

Source: Derived from Statistics Canada, Canadian International Merchandise Trade Database

50.

In nearly three decades (1993-2019), the U.S. has imported over 84 billion barrels of foreign crude oil, an average of over 3.1 billion barrels per year.

51.

U.S. foreign crude oil imports between 1993 and 2019 were highest from Canada (19.6 billion barrels or 23.3 per cent of the total), followed by Saudi Arabia (12.6 billion barrels or 15 per-cent), and Mexico (11 billion barrels or 13.1 per cent).

52.

Of all U.S. foreign crude oil imports, 29.3 per cent came from countries designated as Free, with 29.2 per cent from Partly Free countries and 41.5 per cent from Not Free countries.

Sources: US Energy Information Administration and Freedom House.

53.

In almost three decades (1993-2020), the U.S. has imported nearly $4.2 trillion of foreign crude oil, an average of over $148 billion per year.

54.

U.S. foreign crude oil imports between 1993 and 2020 were highest from Canada ($956 billion or 23 per cent of the total), followed by Saudi Arabia ($607 billion or 14.6 per cent), and Mexico ($487 billion or 11.7 per cent).

Sources: US Energy Information Administration and Freedom House

55.

U.S. foreign crude oil imports from Not Free countries were nearly $1.8 trillion or 43 per cent of total U.S. foreign crude oil imports between 1993 and 2020.

Sources: US Census Bureau and Freedom House.

56.

Just under $1.2 trillion of U.S. foreign oil came from Partly Free countries (28.4 per cent) with just over $1.2 trillion (28.6 per cent) from Free countries.

Sources: US Census Bureau and Freedom House.

57.

In the past 15 years (2005-2019), the EU has imported 61.5 billion barrels of foreign crude oil, an average of over 4 billion barrels a year, which is worth over €4.6 trillion on an extra- and intra-EU basis, or nearly CAD$6.9 trillion.

Source: European Commission, 2021.

58.

Over 41.3 billion barrels, or 68 per cent of the oil imported into the EU, has been imported from Not Free countries, with an additional 5.3 billion barrels, or 9 per cent, coming from Partly Free countries. Meanwhile, 11.8 billion barrels, or 19 per cent, was sourced from Free countries.

59.

Of the more than 41.3 billion barrels of oil that the EU imported from Not Free countries between 2005 and 2019:

a. Over 17.2 billion barrels, or about 42 per cent, came from Russia;

b. Nearly 4.6 billion barrels, or 11 per cent, came from Saudi Arabia;

c. Nearly 4 billion barrels, or 9.6 per cent, came from Libya;

d. Over 3.5 billion barrels, or 8.5 per cent, came from Kazakhstan; and

e. Nearly 2.9 billion barrels, or 6.9 per cent, came from Iraq.

60.

Between 2005 and 2019, the EU imported over €4.6 trillion worth of foreign crude oil, an average of €308 billion worth each year. That’s nearly CAD$6.9 trillion in total, or an annual average of CAD$458 billion in crude oil imports.

Source: European Commission, 2021.

61.

Nearly €3.1 trillion worth (about CAD$4.6 trillion), or 67 per cent, was imported from Not Free countries, with an additional €411 billion or 9 per cent coming from Partly Free countries. The EU sourced €901 billion, or nearly 20 per cent, from Free countries.

Source: European Commission, 2021.

62.

Of the nearly €3.1 trillion in oil that the EU imported from Not Free countries between 2005 and 2019, the top five sources were as follows:

a. Nearly €1.3 trillion, or about 42 per cent, came from Russia;

b. Nearly €343 billion, or just over 11 per cent, came from Saudi Arabia;

c. Over €305 billion, or 9.9 per cent, came from Libya;

d. Nearly €267 billion, or 8.7 per cent, came from Kazakhstan; and

e. Nearly €192 billion, or 6.2 per cent, came from Iraq;

Source: European Commission, 2021.

63.

In the past 15 years, the EU has imported €838.3 billion in natural gas from foreign sources, an average of nearly €56 billion per year.

Source: Eurostat, 2021.

64.

Natural gas valued at over €286 billion, or 34.1 per cent, has been imported by the EU from Not Free countries, €519 billion or 62 per cent from Free countries, with an additional €2 billion, or 0.2 per cent, from Partly Free countries.

Sources: Eurostat, 2021, and Freedom House, 2020.

65.

Of the over €286 billion worth of natural gas imported by the EU from Not Free countries between 2005 and 2019:

a. Almost €165.3 billion worth, or about 58 per cent, came from Russia;

b. over €89.1 billion worth, or 31.1 per cent, came from Algeria; and

c. nearly €17.5 billion worth, or 6.1 per cent, came from Libya.

Sources: Eurostat, 2021, and Freedom House, 2020.

Oil and Gas and Renewable Subsidies

66.

Between 2010 and 2013, the IEA estimates that fossil fuel subsidies worldwide increased from US$445.3 billion to US$530.3 billion, before steadily declining to US$317.6 billion in 2019. Iran led the way at US$86.1 billion, followed by China at US$30.5 billion, Saudi Arabia at US$28.7 billion, Russia at US$24.1 billion, India at US$21.8 billion, Indonesia at US$19.2 billion, and Egypt at US$15.8 billion.

Source: International Energy Agency, Fossil Fuel Subsidies Database, 2020.

67.

According to the International Renewable Energy Agency (IRENA), as fossil fuel subsidies fall and the deployment of renewable energy accelerates, the total subsidies for renewables will grow. Looking towards 2050, as the demand for fossil fuel declines, direct subsidies for those fuels are expected to fall from US$447 billion in 2017 to US$165 billion in 2030 and to US$139 billion in 2050.

Source: IRENA, 2020a.

68.

In 2018, the IEA examined the trends and calculated renewable subsidies out to 2040 under its New Policies Scenario (NPS). NPS reflects the impact of existing policy frameworks and announced policy intentions. Under the NPS, global support provided to renewable-based electricity will peak at just under US$305 billion in 2035 and then decline to about US$283 billion by 2040. Of the total cumulative support from 2017 to 2040, more than 75 per cent is earmarked for solar PV and wind power, and more than 15 per cent for bioenergy. Cumulative support for renewables between 2020 and 2040 is estimated at over US$5.4 trillion.

Source: IEA, World Energy Outlook, 2018.

Impact of Carbon Taxes on Vehicle Fuel Costs in Canada

69.

Between 2021 and 2030, gasoline costs associated with the federal carbon tax are expected to rise from 8.8 cents per litre to 39.6 cents per litre, an increase of 350 per cent over those nine years This will have significant impact on the estimated annual fuel costs for the top five vehicles sold in Canada, based on 2019 sales. In 2030, the carbon tax portion will comprise between $723 and $1,158, or about 24 per cent, of the total fill-up costs, assuming that the remaining components of the gasoline cost structure stay the same:

Ford 150: $4,832 in annual fuel costs, with the federal carbon tax comprising $1,158 of that cost, an increase of $901, or 350 per cent, from 2021.
Dodge Ram 1500: $4,832 in annual fuel costs, with the federal carbon tax comprising $1,158 of that cost, an increase of $901, or 350 per cent, from 2021.
Toyota RAV4: $3,263 in annual fuel costs, with the federal carbon tax comprising $782 of that cost, an increase of $608, or 350 per cent, from 2021.
Honda Civic: $3,015 in annual fuel costs, with the federal carbon tax comprising $723 of that cost, an increase of $562, or 350 per cent, from 2021.
Honda CR-V: $3,180 in annual fuel costs, with the federal carbon tax comprising $762 of that cost, an increase of $593, or 350 per cent, from 2021.

Source: Authors’ calculations from Canada Revenue Agency, 2021.

Energy Poverty in the EU

70.

In United Kingdom and Ireland, electricity prices soared by 51 per cent and 48 per cent, respectively while household median income rose by just 14 per cent and 11 per cent. The split between significantly higher power bills and an almost status-quo reality on median household incomes helps explain why some European (or United Kingdom) households have found it increasingly difficult to pay their utility bills.

71.

In Spain, electricity prices soared by 68 per cent between 2008 and 2020 with median household income rising by just eight per cent (by 2019).

Source: Authors’ calculation from Eurostat database.

72.

According to the European Commission: An average household in the EU27 paid €25 /MWh in renewable taxes in 2019. This figure equals 29 per cent of the taxes and levies component and 12 per cent of the total average EU price. The average amount of renewable taxes paid by households in the EU27 rose by 153 per cent since 2010.

Source: Eurostat Database (2021).

CEC Research Briefs

About the authors

This CEC Research Brief was compiled by Lennie Kaplan, former Chief Research Analyst and current Executive Director of Research; Ven Venkatachalam, former Senior Research Analyst and current Chief Research Analyst; and Mark Milke, former Executive Director of Research.

Creative Commons Copyright

Research and data from the Canadian Energy Centre (CEC) is available for public usage under creative commons copyright terms with attribution to the CEC. Attribution and specific restrictions on usage including non-commercial use only and no changes to material should follow guidelines enunciated by Creative Commons here: Attribution-NonCommercial-NoDerivs CC BY-NC-ND.

Photo Credits

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$18 billion and 62,000 jobs: The impact of oil and gas (and Alberta) on BC’s economy

Mark Milke — Tue, 30 Nov 2021 14:45:19 +0000

Aerial view of Oil Refinery Industry in Port Moody, Greater Vancouver, British Columbia, Canada. Getty Images photo

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Overview

Canada’s oil and natural gas sector has had a positive impact on many parts of the Canadian economy, not only in Alberta and Saskatchewan where the industry is a relatively large proportion of the economy, but across the country. The economies of all the provinces, especially Ontario, Quebec, British Columbia, and Atlantic Canada, benefit economically from Canada’s oil and gas sector, particularly when it is healthy, but even in “slump” years such as 2017 when oil and gas prices were relatively depressed.

The impact of the oil and gas sector on other provinces’ GDP, jobs, output, exports, and other key economic sectors is a bit more difficult to determine, but is no less relevant to current discussions about the performance of the oil and gas sector.

In this CEC Fact Sheet, we examine the impact that the oil and gas sector has had on British Columbia’s economy. Two points to note:

First, the analysis presented here includes not only the direct impact of Canada’s oil and gas sector on BC’s economy in nominal GDP, output, jobs, and exports, but the indirect impact that such activities have on other sectors in the province.
Second, given that the largest proportion of oil and gas activity in Canada occurs in Alberta, we also profile the impact of Alberta’s purchases on various sectors of BC’s economy. For this measurement, we look at 2017 in isolation (the latest year for which these data are available).
We also show the significant role Alberta plays in BC’s interprovincial and international trade flows.

Analysis One: The impact of the oil and gas sector on British Columbia’s economy

Using customized data from Statistics Canada¹ (see Table 1), in 2017 the oil and gas sector:

was responsible for adding nearly $9.5 billion in nominal GDP to the BC economy;
generated nearly $18.0 billion in outputs, consisting primarily of the value of goods and services produced by various sectors in the BC economy;
supported over 62,000 direct and indirect jobs in BC’s economy;
paid over $3.1 billion in wages and salaries to workers in BC.

1. For a discussion of Statistics Canada’s use of Input/Output models and equilibrium models, see the addendum in Fact Sheet #17. The latest available year for the customized data from Statistics Canada is 2017.

Source: Derived from Statistics Canada, Supply and Use tables, custom tabulation.

More than $5 billion impact from oil and gas on key BC industries

To examine the impact of the oil and gas sector on BC’s economy in more detail, consider that in 2017 the oil and gas sector purchased $5.6 billion worth of goods and services from other sectors in BC. The $5.6 billion in purchases of goods and services included

$600 million from BC’s finance and insurance sector;
$770 million from professional services; and
over $2.8 billion from BC’s manufacturing sector.

Analysis Two: The value of Alberta’s purchases from BC

Given that the largest proportion of oil and gas activity in Canada occurs in Alberta, we have expanded the analysis to include all purchases by Alberta’s consumers, businesses, and governments of British Columbia’s goods and services — that is, we measure the value of Alberta’s interprovincial trade with BC.

The impact of Alberta’s purchases on BC’s interprovincial trade in 2017: $15.4 billion

Albertans spent a substantial amount on British Columbia’s goods and services in 2017. The purchases include relatively small amounts ($20 million on utilities) to $700 million in finance and insurance services, to $1.1 billion in food and accommodation, $1.5 billion from mines and from oil and gas extraction, and nearly $3.4 billion from BC manufacturers. In total in 2017, interprovincial exports from BC to Alberta were worth $15.4 billion (see Addendum).

As a proportion of BC’s interprovincial exports from various industries, Alberta’s purchases accounted for nearly 36 per cent of its manufacturing sector, and over 61 per cent of its mining, oil, and natural gas sector.

Across all the interprovincial exports from all of BC’s sectors, Alberta-based consumers, businesses, and governments made an average of 37.8 per cent of purchases. That was significantly higher than Alberta’s 11.5 per cent proportion of Canada’s population (see Figure 1).

Sources: Statistics Canada, Table 12-10-0088-01; 2016 Census.

Alberta is BC’s biggest market for interprovincial trade (see Table 2 and Addendum). In 2017, BC’s trade with Alberta was worth $15.4 billion, or 37.8 per cent of all of British Columbia’s interprovincial trade. Ontario came second at $14.1 billion (34.5 per cent) and Quebec third at $4.8 billion (11.9 per cent).

Source: Statistics Canada, Table 12-10-0088-01.

Alberta is British Columbia’s second largest export market after the United States

A look at BC’s international and interprovincial trade export data shows that at $15.4 billion in 2017, BC’s trade with Alberta was second behind only its trade with the United States (nearly $22.3 billion) and ahead of all other markets including Ontario ($14.1 billion), China ($6.9 billion), Japan ($4.5 billion), and South Korea ($2.9 billion) (see Figure 2).

Source: Government of Canada trade data online; and authors’ calculation derived from Statistics Canada, Table 12-10-0088-01.

Alberta’s 2012-2017 impact on British Columbia’s interprovincial exports: $95.8 billion

Residents and local businesses from other provinces benefit when they supply Alberta with labour, goods, services, and technology. Between 2012 and 2017, Alberta imported nearly $96 billion worth of goods and services from British Columbia. This total included $21.6 billion in manufacturing, $6.1 billion in accommodation and food services, and $5.9 billion in agriculture and forestry (see Table 3).

Source: Authors’ calculations from Statistics Canada, Table 12-10-0088-01.

The takeaway

Canada’s oil and gas sector has a significant impact on BC’s export sectors, both direct and indirect, as does the purchase of goods and services by Alberta’s citizens, businesses, and governments in the province where the sector is concentrated. The oil and gas sector provides substantial economic benefits to BC in terms of GDP, jobs, output, and exports. In 2017 alone, the economic benefits included $9.5 billion in nominal GDP, $18.0 billion in outputs in the BC economy, 62,000 jobs, and over $3.1 billion in wages and salaries to workers in the province.

Addendum

Source: Authors’ calculation derived from Supply and Use Tables, Statistics Canada catalogue 15-602-x_2017.

Notes

This CEC Fact Sheet was compiled by Ven Venkatachalam and Mark Milke, formerly of the Canadian Energy Centre (www.canadianenergycentre.ca). All percentages in this report are calculated from the original data, which can run to multiple decimal points. They are not calculated using the rounded figures that may appear in charts and in the text, which are more reader friendly. Thus, calculations made from the rounded figures (and not the more precise source data) will differ from the more statistically precise percentages we arrive at using source data. The authors and the Canadian Energy Centre would like to thank and acknowledge the assistance of Philip Cross in reviewing the data and research for the initial edition of this Fact Sheet. Image credits: Nate Foong from Unsplash.com

References (All links live as of October 11, 2021)

Statistics Canada (2020), Supply and Use Tables, 2017: 15-602-X_2017 <https://bit.ly/2XHbDUe>; Statistics Canada (2021a), Supply and Use Tables, custom tabulation; Statistics Canada (2021b), Table 17-10-0057-01: Projected population, by projection scenario, age and sex, as of July <https://bit.ly/2W8bzfN>; Statistics Canada (2021c), Table 12-10-0088-01: Interprovincial and international trade flows, basic prices, summary level <https://bit.ly/3EN0aTR>; The American Petroleum Institute (July 2017), Impact of the Natural Gas and Oil Industry on the US Economy in 2015 <https://bit.ly/2EKrJTT>; Government of Canada, Trade Data Online (October 2021) <https://bit.ly/2EMswnj>.

Definitions

The oil and gas sector is defined as the sum of oil and gas extraction and oil and gas investment. Oil and gas extraction is defined by NAICS subsector 211. It comprises establishments primarily engaged in operating oil and gas field properties. Such activities may include exploration for crude petroleum and natural gas; drilling, completing, and equipping wells; and all other activities in the preparation of oil and gas up to the point of shipment from the producing property. This subsector includes the production of oil, the mining and extraction of oil from oil shale and oil sands, and the production of gas and hydrocarbon liquids through gasification. Oil and gas investment includes capital expenditures on construction, machinery and equipment, and exploration by the oil and gas extraction industry. GDP, or Gross Domestic Product, also referred to as gross value added at basic prices, is the sum of the market values, or prices, of all final goods and services produced in an economy. Output consists primarily of the value of goods and services produced by an industry. Jobs include employee jobs (full-time, part-time, and seasonal) and self-employed jobs. The direct impact of oil and gas extraction is the effects directly attributed to the industry’s production. The direct impact of oil and gas investment is the deliveries by domestic industries to satisfy capital expenditures by the oil and gas extraction industry. Direct impact is measured in terms of GDP, output, and jobs within the oil and gas sector. The indirect impact covers upstream economic activities associated with supplying intermediate inputs (the current expenditures on goods and services used in the production process) to the directly affected industries. The indirect impact is measured in terms of GDP, output, and jobs through the oil and gas sector supply chain, including other key sectors of an economy—in the case of this paper, British Columbia’s economy. We use the American Petroleum Institute definition of the oil and natural gas sector to quantify the goods and services purchased by the sector and the wages paid by the sector. The sector includes conventional oil and gas extraction and nonconventional oil extraction. Support activities for oil and gas extraction include oil and gas engineering construction, petroleum refineries, petroleum and coal product manufacturing (except petroleum refineries); petroleum product wholesaler-distributors, gasoline stations, crude oil and other pipeline transportation, and pipeline transportation of natural gas. The manufacturing sector includes food and non-alcoholic beverages; alcoholic beverages and tobacco products; textile products, clothing, and products of leather and similar materials; wood products; wood pulp, paper, paper products, and paper stock; printed products and services; refined petroleum products (except petrochemicals); chemical products; plastic and rubber products; non-metal mineral products; primary metal products; fabricated metal products; industrial machinery; computers and electronic products; electrical equipment, appliances, and components; transportation equipment; motor vehicle parts; furniture and related products; and other manufactured products.

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20,000 jobs and $11 billion: The impact of oil and gas (and Alberta) on Atlantic Canada’s economy

Mark Milke — Tue, 16 Nov 2021 04:34:08 +0000

Deep sea oil drilling platform in Halifax harbour. Getty Images photo

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Overview

Canada’s oil and natural gas sector has a positive impact on many aspects of the Canadian economy, not only in Alberta and Saskatchewan where the industry is a relatively large proportion of the economy, but across the country. Canada’s oil and gas sector benefits the economies of all the provinces, including Ontario, Quebec, British Columbia, and those in Atlantic Canada, not only when the sector is healthy, but also in “slump” years, such as 2017, when oil and gas prices were relatively depressed.

The impact of the oil and gas sector on GDP, jobs, output, and exports on provinces outside Western Canada and on key economic sectors in those provinces is not well-known but is highly relevant to current discussions about the role of oil and gas in Canada’s future.¹

In this CEC Fact Sheet, we examine the impact that the oil and gas sector has had on Atlantic Canada’s economy.

First, the analysis presented here includes not only the direct impact of Canada’s oil and gas sector on Atlantic Canada’s economy in terms of nominal GDP, output, jobs, and exports, but also the indirect impact that such activities have on other sectors in Atlantic Canada.
Second, given that the largest proportion of oil and gas activity in Canada occurs in Alberta, we also profile the impact of purchases from Alberta on various sectors in Atlantic Canada’s economy. Here, we look at 2017 in isolation (the latest year for which this data is available), as well as the overall 2012-2017 period for interprovincial trade exports from Atlantic Canada’s manufacturers to Alberta.
We also show the significant role that Alberta plays in Atlantic Canada’s interprovincial and international trade flows.

Analysis One: The impact of the oil and gas sector on Atlantic Canada

Using customized data from Statistics Canada (see Table 1), in 2017 the oil and gas sector:

Was responsible for adding nearly $6.9 billion in nominal GDP to the economies of the provinces in Atlantic Canada;
Generated nearly $11.4 billion in outputs,² consisting primarily of the value of goods and services produced by sectors in Atlantic Canada;
Supported over 20,000 jobs directly and indirectly in Atlantic Canada; and
Paid over $1.36 billion in wages and salaries to workers in the four Atlantic provinces.

1. Atlantic Canada has a long history of involvement in the oil and natural gas sector, though in recent years the main involvement has been via Newfoundland & Labrador. For more on natural gas and oil development and revenues in the Atlantic provinces, see CEC Research Brief Five: Missed Maple Leaf Opportunities: A Synopsis of Natural Gas Industries in Central and Eastern Canada and Key US States.
2. For a discussion of Statistics Canada’s use of both input/output models and equilibrium models, see the addendum in Fact Sheet #17. The latest available year for the customized data from Statistics Canada is 2017

Source: Derived from Statistics Canada, Supply and Use Tables, custom tabulation. Totals may not add exactly due to rounding.

The oil and gas impact alone in 2017: $3.8 billion on key sectors in Atlantic Canada

To examine the impact of oil and gas development on the Atlantic economy in more detail, consider that in 2017, the oil and gas sector purchased over $3.8 billion worth of goods and services from other industries in Atlantic Canada (see Table 2). That $3.8 billion included:

$447 million from the finance and insurance sector;
$618 million from the professional, scientific, and technical services sector; and
Over $2 billion from the manufacturing sector.

Source: Authors’ calculation derived from Supply and Use Tables, Statistics Canada catalogue 15-602-x_2017

Analysis Two: Alberta’s share of Atlantic Canada’s interprovincial trade flows in 2017: $1.7 billion

Given that the largest proportion of oil and gas activity in Canada occurs in Alberta, we have expanded the analysis to include all purchases of Atlantic Canadian goods and services by Alberta’s consumers, businesses, and governments—that is, we measure the value of Alberta’s interprovincial trade with Atlantic Canada.

Albertans spent a substantial amount on Atlantic Canadian goods and services in 2017, from relatively small amounts in accommodation and food services ($61 million) to more substantial trade in manufactured goods ($521 million). In total, in 2017 alone, interprovincial exports from Atlantic Canada to Alberta were worth over $1.7 billion (see Table 3).

Source: Authors’ calculation derived from Supply and Use Tables, Statistics Canada catalogue 15-602-x_2017.

Alberta is one of Atlantic Canada’s largest markets for interprovincial trade and exports

Atlantic Canada’s interprovincial trade with Alberta in 2017 (see Table 4) was behind the region’s trade with the United States (nearly $21.6 billion), Ontario ($7.6 billion), Quebec ($6.7 billion), but ahead of trade with international markets such as China ($1.6 billion), the United Kingdom ($800 million), and the Netherlands and Japan ($600 million each).

Source: Government of Canada, trade data online, and authors’ calculation derived from Statistic Canada Table 12-10-0088-01.

Alberta’s 2012-2017 totals: Nearly $11.6 billion

Between 2012 and 2017, Alberta imported over $11.6 billion worth of goods and services from the Atlantic provinces, ranging from the relatively smaller $86 million in education services to $1.1 billion in food and non-alcoholic beverage purchases (see Addendum) and nearly $3.7 billion in manufacturing in total (see Table 5).

Source: Authors’ calculations derived from Supply and Use Tables, Statistics Canada (various years).

The takeaway

The oil and gas sector in Canada has a significant direct and indirect impact on Atlantic Canada’s export sectors, as does the purchase of goods and services in Atlantic Canada by citizens, businesses, and governments in Alberta, the province where the oil and gas sector is concentrated. The oil and gas sector also provides substantial economic benefits to the Atlantic provinces in GDP, jobs, output, wages and salaries. More specifically, those benefits include $6.9 billion in nominal GDP, $11.4 billion in outputs, 20,000 jobs. and over $1.36 billion in wages and salaries.

Addendum

Source: Author’s calculations derived from Statistics Canada Table 12-10-0088-01.

Notes

This CEC Fact Sheet was compiled by Ven Venkatachalam and Mark Milke at the Canadian Energy Centre (www.canadianenergycentre.ca). All percentages in this report are calculated from the original data, which can run to multiple decimal points. They are not calculated using the rounded figures that may appear in charts and in the text, which are more reader friendly. Thus, calculations made from the rounded figures (and not the more precise source data) will differ from the more statistically precise percentages we arrive at using source data. The authors and the Canadian Energy Centre would like to thank and acknowledge the assistance of Philip Cross in reviewing the data and research for the initial edition of this Fact Sheet. Image credits: Erik Mclean from Unsplash.com

References (All links live as of September 30, 2021)

Definitions

The oil and gas sector is defined as the sum of oil and gas extraction and oil and gas investment. Oil and gas extraction is defined by NAICS subsector 211. It comprises establishments primarily engaged in operating oil and gas field properties. Such activities may include exploration for crude petroleum and natural gas; drilling, completing, and equipping wells; and all other activities in the preparation of oil and gas up to the point of shipment from the producing property. This subsector includes the production of oil, the mining and extraction of oil from oil shale and oil sands, and the production of gas and hydrocarbon liquids through gasification. Oil and gas investment includes capital expenditures on construction, machinery and equipment, and exploration by the oil and gas extraction industry. GDP, or Gross Domestic Product, also referred to as gross value added at basic prices, is the sum of the market values, or prices, of all final goods and services produced in an economy. Output consists primarily of the value of goods and services produced by an industry. Jobs include employee jobs (full-time, part-time, and seasonal) and self-employed jobs. The direct impact of oil and gas extraction is the effects directly attributed to the industry’s production. The direct impact of oil and gas investment is the deliveries by domestic industries to satisfy capital expenditures by the oil and gas extraction industry. Direct impact is measured in terms of GDP, output, and jobs within the oil and gas sector. The indirect impact covers upstream economic activities associated with supplying intermediate inputs (the current expenditures on goods and services used in the production process) to the directly affected industries. The indirect impact is measured in terms of GDP, output, and jobs through the oil and gas sector supply chain, including other key sectors of an economy—in the case of this paper, Atlantic Canada’s economy. We use the American Petroleum Institute definition of the oil and natural gas sector to quantify the goods and services purchased by the sector and the wages paid by the sector. The sector includes conventional oil and gas extraction and non-conventional oil extraction. Support activities for oil and gas extraction include oil and gas engineering construction, petroleum refineries, petroleum and coal product manufacturing (except petroleum refineries); petroleum product wholesaler-distributors, gasoline stations, crude oil and other pipeline transportation, and pipeline transportation of natural gas. The manufacturing sector includes food and non-alcoholic beverages; alcoholic beverages and tobacco products; textile products, clothing, and products of leather and similar materials; wood products; wood pulp, paper, paper products, and paper stock; printed products and services; refined petroleum products (except petrochemicals); chemical products; plastic and rubber products; non-metal mineral products; primary metal products; fabricated metal products; industrial machinery; computers and electronic products; electrical equipment, appliances, and components; transportation equipment; motor vehicle parts; furniture and related products; and other manufactured products.

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Commentary: Energy poverty in Europe is linked to expensive renewables

Mark Milke — Wed, 03 Nov 2021 18:41:49 +0000

Employees of Sontec GmbH assemble photovoltaic modules on the roof of a residential building. in Stuttgart, Germany. Getty Images photo

With the recent rise in the price of natural gas in Europe to five times where it was in early 2021, expect to see many more Europeans and those in United Kingdom plunged into what’s known as “energy poverty.” From Greece to Great Britain and everywhere in between, the European electricity grid has increasingly been delinked from reliable affordable fossil fuels and hooked up to more expensive and intermittent wind and solar projects.

One result is that Europeans pay twice for generated electricity: once for the existing sunk costs of existing fossil fuel (and nuclear in some countries) projects and again for renewable-based electricity projects. Another result is that when wind and solar are not available, multiple nations in Europe and elsewhere are chasing the same available oil, natural gas and coal, pushing those fuel prices dramatically higher.

Canadians and indeed everyone else around the world should pay attention. That’s because what Europeans are enduring and will suffer through again this winter will intensify thanks to what governments worldwide are pushing at the 26th UN Climate Change Conference of the Parties (COP 26) at Glasgow, Scotland: An even faster assumed “phaseout” of fossil fuels.

But it is just that past policy preference which has caused substantial energy poverty in Europe even before the price spike this autumn. (For those unfamiliar with the term, energy poverty is all about citizens too poor to pay their utility bills on time and/or keep their homes adequately warm.)

Stephen Bouzarovski, a University of Manchester professor and chair of an energy poverty working group, estimated that pre-pandemic, 80 million Europeans were already struggling to adequately heat their homes. Meanwhile, at least 12 million European households were in arrears on their utility bills.

The European Union has attempted to provide an objective measurement of the problem but their best data is six years old. The EU Energy Poverty Observatory’s most recent estimate from 2015 showed that 16% of EU consumers faced a “high” share of energy costs. “High” was defined as the proportion of European households whose energy expenditures relative to income was more than twice the national median share (of energy expenditures relative to income).

To get a better sense of the challenge faced by European households and energy poverty, we used 2008 as a start year and then compared the rise in household median incomes (with the full set of data ending in 2019) with the rise in electricity prices (ending in 2020) in 30 European countries.

We found that for lower-income European countries that have seen strong growth in incomes since 2008 (mainly ex-communist states such as Estonia, Bulgaria and Poland as examples), most such states could handle the rise in power prices because median incomes rose faster.

This was not the case in mature countries where median incomes were already relatively high in 2008 but barely grew in the ensuing years, this while power prices zoomed up. For example, electricity prices jumped by 61% in France between 2008 and 2020 with median household income rising by just 19% (using 2019 as our end date given the limited data). The United Kingdom and Ireland saw a 51% and 48% rise in electricity prices in that period while incomes rose by just 14% and 11% respectively.

Worst off was Spain, where median household income was below more prosperous European states in 2008 (at €13,963 that year) and has barely grown since (to just €15,015 in 2019). Median household income thus rose by just 8% in the years available for comparison but electricity prices soared by 68%.

The response of some European governments to this has been to subsidize utility bills. But as with Ontario which does the same to mask the expense of past government policy which drove the province’s electricity prices dramatically higher, all that does is shift the burden of high power costs from the “consumer pocket” to the “taxpayer pocket.” Of course, it’s the same household that bears the cost, or their children and grandchildren if present-day utility bills are subsidized through government borrowing.

The source of high-cost electricity can be found in European Union and United Kingdom policy. Governments there have attempted to “transition” from fossil fuels despite their superior energy density (their “power punch” as Vaclav Smil, retired environment professor at the University of Manitoba characterizes it) vis-à-vis renewables.

The result can be seen in the declining share of fossil fuels in EU electricity production from about 50% in 2000 to 38% as of 2019, with nuclear-generated electricity also discouraged and declining from 32% in 2000 to just over 26% in 2019).

Meanwhile, renewables as a share of EU electricity production more than doubled, from just over 16% in 2000 to over 34% in 2019. That would be fine, except solar and wind are not inexpensive. They are also not as reliable as fossil fuels, something Brits just noticed again when wind power dropped and coal was again used to prop up that country’s electricity grid.

It’s been said that the definition of insanity is “doing the same thing over and over again and expecting different results.” It appears that policymakers are gathering in Glasgow to speed up killing fossil fuels, precisely what already led to massive energy poverty in Europe.

Mark Milke and Ven Venkatachalam are with the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of Energy Poverty in European Households: An Advance Lesson for Canadians.

The unaltered reproduction of this content is free of charge with attribution to Canadian Energy Centre Ltd.

Energy poverty in European households: An advance lesson for Canadians

Mark Milke — Tue, 02 Nov 2021 03:53:40 +0000

Wind turbines stand in front of the Fiddlers Ferry decommissioned coal fired power station on September 27, 2021 in Runcorn, England. Getty Images photo

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Executive Summary

Poverty and energy are not often studied as linked concepts, but economic growth in developed and developing countries is partly dependent on the availability of reliable and affordable forms of energy for households and industries. In this study, we focus on energy poverty.

Energy poverty is defined as the “inability to attain socially and materially necessitated levels of domestic energy services” (Kyprianou, et al., 2019). Energy poverty can occur due to high energy costs or low incomes, or both. A useful example is Spain, where the recent rise in electricity prices is due to a perfect storm of reduced energy production from renewables combined with increased demand. As noted by one Spanish newspaper:

The price of energy has risen this month for all companies due to several factors. Because of the recent heavy storms and snowfall, there is less energy production from cheaper and renewable sources like wind and solar power. There is less supply. If you add that to the increased demand due to the colder temperatures, it causes the prices to increase. (Barcelona-Metropolitan, 2021.)

The problem of energy poverty affects tens of millions in Europe, with nearly 34 million Europeans unable to keep their homes adequately warm in 2018. Energy poverty is thus a significant challenge for the European Union (Bouzarovski and Thomson, 2020).

The change in European power generation: Renewables up and fossil fuels down

Between 2000 and 2019, renewable power generation in Europe has increased significantly with traditional coal-fired power declining, which in part explains higher power prices in recent years.

In 2000, coal-fired electricity was responsible for 30.1 per cent of EU electricity with natural gas at 13.7 per cent, oil at 6.5 per cent, nuclear at 32.4 per cent, renewables at 16.4 per cent and “other” at 0.9 per cent.
As of 2019, coal-fired electricity, was responsible for 15.5 per cent of EU electricity or half what it was 19 years earlier. Natural gas was higher at 20.6 per cent, oil was 1.8 per cent, nuclear at 26.4 per cent, and renewables more than doubled to 34.6 per cent while other sources accounted for 1.1 per cent of Europe’s electrical power (see Executive Summary Figure 1a).

Source: Author’s calculation from Eurostat Database (2021).

Separated and totaled by fossil fuels, in 2000, 50.3 per cent of electricity in the EU was generated by fossil fuels and that declined to 38 per cent as of 2019. Renewables grew to 34.6 per cent of EU electricity production over the same period (see Executive Summary Figure 1b).

Source: Author’s calculation from Eurostat Database (2021).

The results on prices

Electricity end-user prices for households differ significantly in the EU member states. Multiple factors influence electricity prices including domestic regulations, taxes, and the energy source used in electricity generation. The most significant rise in household electricity prices between 2008 and 2020 occurred in France (61% higher), Spain (68% higher) and Latvia (70% higher) (see Executive Summary Table 1)

Source: Author’s calculation from Eurostat Database (2021).

Energy poverty in Europe and the United Kingdom

The European Union measures energy poverty by using the indicator developed by EU Energy Poverty Observatory (EPOV). It provides four different primary indicators for energy poverty, of which two are based on self-reported experiences by household members. The other two are calculated using household income and/or energy expenditure data.

Using household income and/or energy expenditure data,¹ European energy poverty indicators have not been updated since 2015, but in that year, the proportion of European Union households that faced energy poverty was 16 per cent, with the United Kingdom at 19 per cent.
Using self-reporting data on utility bills and the ability to keep one’s house warm as a stand-alone indicator,² as of 2018, 6.8 per cent of people living in private households across the EU (30.3 million people) were unable to pay their utility bills, and 7.3 per cent EU households were unable to keep their house warm; the figures for the United Kingdom were 5.4 per cent for both indicators in 2018.

1. Calculated using household income and/or energy expenditure data refers to expenditure-based indicators -M/2: Absolute (equivalised) energy expenditure below half the national median. 2M: Share of (equivalised) energy expenditure (compared to equivalised disposable income) above twice the national median.
2. Self reported / consensual-based indicators: Ability to keep home adequately warm. This EU survey asked households if they could afford to keep their home adequately warm. The self-reporting on arrears concerned utility bills and if in the most recent twelve months, if the household ha been in arrears, i.e., had been unable to pay the utility bills (heating, electricity, gas, water, etc.) of the main dwelling on time due to financial difficulties.

Our estimates of Europe’s high-cost electricity

Given the European Union’s self-reporting of some energy poverty measurements, we have designed an alternate measurement. Our measurement tracks the increase in European electricity costs by country, compared with the increase in median household income. The measurement is for 2008 to 2020 for electricity costs and for 2008 to 2019 for household median income.

Given that European countries vary widely in median household income, in part because of communism in the 20th century, its collapse, and how many central and eastern European countries were in effect “starting over” in the 1990s, we have divided European countries into those with less than €15,000 in median household income in 2008, and those with more than €15,000 in median household income in 2008.

This is because we would expect, for example, median household income growth in Poland (€4,154 in 2008) and Romania (€1,954 in 2008) to easily outpace any growth in electricity prices in the years examined because those countries (and others) started with very low median household incomes.

Conversely, those with already high median household incomes in 2008 such as the United Kingdom (€18,766) and Ireland (€22,995) would be unlikely to see as dramatic a rise in incomes, given they were already developed economies. That means any rise in electricity prices beyond household median income growth could be more difficult for households to finance.

UK and Ireland see 51% and 48% rise in power bills with marginal increases in median income

The data in fact shows exactly that for many European countries for the 2008 to 2019/2020 period. For example:

• Electricity prices in Poland rose by 20 per cent but household median income increased by 72 per cent, thus making the rise in power prices manageable. The same was true of many other nations with low median household income in 2008: Bulgaria, Romania, the Czech Republic, and Slovakia (see Executive Summary Figure 2a).

Source: Authors’ calculation from Eurostat database.

In contrast, in the United Kingdom and Ireland, electricity prices soared by 51 per cent and 48 per cent, respectively while household median income rose by just four per cent and one per cent, respectively (see Executive Summary Figure 2b). That split between significantly higher power bills and an almost status-quo reality on median household incomes helps explain why some European (or United Kingdom) households have found it increasingly difficult to pay their utility bills.
The most challenging combination though is where a country already had low median household income in 2008 and saw little income growth over the next 11 years, but experienced a dramatic rise in the cost of power. This was the case for Spain, where electricity prices soared by 68 per cent between 2008 and 2020 with median household income rising by just eight per cent (by 2019) (see Executive Summary Figure 2a).

Source: Authors’ calculation from Eurostat database.

Energy transition issues

At the core of the European Union’s high power prices is a swift energy transition framework that has not taken into account the reality that not all energy sources contain the same energy density, and nor are they as reliable.

To understand why, consider the insights from one of the world’s leading experts on energy transitions, University of Manitoba professor of the environment (emeritus) Vaclav Smil, who has noted that “the reality of energy density (that is, how much energy can be extracted from a unit of raw material) in various forms of energy sources (be they oil, natural gas, coal, wind, solar and others) must be accounted for as part of any assumed transition” (Smil, 2017).

In 2018, Science magazine cited Smil’s point that energy transitions are normally transitions away from “relatively weak, unwieldy energy sources for those that pack a more concentrated punch” (Voosen, 2018). Similarly, as Smil wrote in 2020, “Designing hypothetical roadmaps outlining complete elimination of fossil carbon from the global energy supply by 2050 is nothing but an exercise in wishful thinking that ignores fundamental physical realities.” In other words, before abandoning something as a source of energy, we must consider how little (or much) of that source it takes to produce the outcomes we need (Smil, 2020).

Lessons from Europe for Canada

The core question is what lessons might be in store for Canada given that substantial changes are proposed on everything from how Canadians might heat their homes (more electrification) to higher carbon taxes and other policy, regulatory and legislative changes that discourage the consumption of hydrocarbons. There is much discussion about “transitions” to new energy sources, but few studies consider details on what consumers might be forced to spend in efforts to transition. This is best visible in Europe, where households increasingly face challenges in financing basic energy needs due to the increased cost of electricity and other forms of energy.

Introduction: Energy Scarcity, Poverty and Transitions

Energy transitions

This paper explores the cost of attempts to order up energy transitions in Europe and the impact of the same on household energy costs, with the unintended consequence that is now evident: increasing energy poverty across many countries in Europe. This has obvious relevance to Canada where a transition not only from coal but also natural gas and oil and to electrification via renewables is assumed possible. As readers will note, the impact of the energy transition on retail prices of electricity is not uniform. It differs by country and is in part influenced by policy decisions and regulatory frameworks.

At the core of the European Union’s high power prices is a rushed transition framework that has not taken into account the reality that not all energy sources contain the same density, and nor are they as reliable.

In 2018, Science magazine cited Smil’s point that energy transitions are normally transitions away from “relatively weak, unwieldy energy sources for those that pack a more concentrated punch.” Instead, as Smil also remarked, trying to reverse that practical attention to energy density by moving to all-renewable sources of energy could require countries, to use his words from Science, to “devote 100 or even 1000 times more land area to energy production than today… [which] could have enormous negative impacts on agriculture, biodiversity, and environmental quality” (Voosen, 2018).

Similarly, as Smil wrote in 2020, “Designing hypothetical roadmaps outlining complete elimination of fossil carbon from the global energy supply by 2050 is nothing but an exercise in wishful thinking that ignores fundamental physical realities.” In other words, before abandoning something as a source of energy, we must consider how little (or much) of that source it takes to produce the outcomes we need (Smil, 2020).

Energy scarcity and poverty

Briefly, energy poverty is defined as the “inability to attain socially and materially necessitated levels of domestic energy services” (Kyprianou et al., 2019). This can occur due to high energy cost or low incomes, or both.

A variety of statistics exist to give some sense of the problem. The International Energy Agency (IEA) estimates that close to 770 million people worldwide lack access to electricity (IEA, 2020). That is a problem of energy scarcity. However, in developed countries, energy is normally widely available but becoming increasingly expensive. Thus, consumers in wealthier countries have access to electricity — albeit not without interruptions due to brownouts and blackouts — but face higher electricity costs due the to transition away from affordable fossil fuels. As the European Union notes:

[A]dequate warmth, cooling, lighting, and energy to power appliances are essential services that underpin a decent standard of living and health. Access to energy services is essential for social inclusion (European Union, 2020a).

This has consequences. Recent protests in Europe (BBC, 2021), where consumers and governments from Spain to the United Kingdom grapple with rising electricity costs, have placed the twin issues of reliable and affordable energy into focus. One example is the recent rise in electricity prices in Spain as noted by the Spanish newspaper, Barcelona-Metropolitan (2021):

The United Kingdom was the first country to identify and develop a policy to tackle energy poverty. (Thomson et.al.,2017). In North America, studies have found that as a percentage of incomes, poor households spend four times as much on utilities compared to higher-income cohorts. The low-income family spends 8.1 per cent of their income on energy costs on average, compared to 2.3 per cent for non-low-income households (Drehobl, et al., 2020). In Europe, with nearly 34 million citizens unable to keep their homes adequately warm in 2018, energy poverty is a significant challenge (Bouzarovski and Thomson, 2020).

Overview of the European Union Electricity Market

The European Union (EU) is composed of 27 countries, with a population of approximately 450 million and a GDP of US$15.6 trillion in 2019 (World Bank, undated). Gross electricity production³ in Europe increased from 2,657-terawatt hours (TWh) in 2000 to a high of 2,995 TWh in 2008, decreasing during the Great Recession but recovering thereafter to reach 2,904 TWh in 2019 (see Figure 1), the latest year for which data is available.

3. Electricity is produced as a primary or secondary product in power plants. The total amount of electricity produced is referred to as gross electricity production.

Source: Eurostat Database (2021).

The change in European power generation: Renewables up and fossil fuels down

In 2000, coal-fired electricity was responsible for 30.1 per cent of EU electricity, with natural gas at 13.7 per cent, oil at 6.5 per cent, nuclear at 32.4 per cent, renewables at 16.4 per cent and “other” at 0.9 per cent. As of 2019, coal-fired electricity was responsible for 15.5 per cent of EU electricity, or half what it was 19 years earlier. Natural gas was higher at 20.6 per cent, oil was 1.8 per cent, nuclear at 26.4 per cent, and renewables more than doubled to 34.6 per cent while other sources accounted for 1.1 per cent of Europe’s electrical power (see Figure 2a).

Source: Author’s calculation from Eurostat Database (2021).

Separated and totaled by fossil fuels, in 2000, 50.3 per cent of the electricity in the EU was generated by fossil fuels, and that declined to 38 per cent as of 2019. The share of renewables in EU electricity production more than doubled to 34.6 per cent (see Figure 2b).

Source: Author’s calculation from Eurostat Database (2021).

Consumption in the EU Electricity Market by Sector

Consumption in the EU electricity market by sector

Electricity consumption in the European Union between 2000 and 2019 decreased in the energy, transportation and industry sectors, while rising in households, services and in agriculture/forestry (see Figure 3).

Source: Author’s calculation from Eurostat Database (2021).

Breaking down European household electricity consumption by country

The household sector’s electricity consumption increased by 17 per cent between 2000 and 2019 (see Figure 3). Household electricity consumption in absolute terms increased in many countries in the EU with most recording double-digit growth, except Germany (minus three per cent), the United Kingdom (minus seven per cent) and Belgium (minus 22 per cent) (see Figure 4).

Source: Author’s calculation from Eurostat Database (2021).

European household electricity consumption per capita

Electricity consumption per capita was highest in Norway, at 7.5 MWh per capita. The electricity consumption per capita in Europe has varied extensively among countries. It was 1.5 MWh per capita for Germany and for France it was 2.4 MWh per capita (see figure 5).

Source: Eurostat Database (2021).

Household Electricity Prices in EU Member States

Electricity end-user prices for households⁴ differ significantly in the EU member states. Multiple factors influence electricity prices including domestic regulations, taxes, and the energy source used in electricity generation.

Environmental taxes and renewable levies on households matter to electricity prices in European countries. In 2019, environmental taxes paid by families ranged from €1/MWh in Luxembourg to €118/MWh in Denmark. Renewable levies range from €3/MWh in Sweden to €67/ MWh in Germany (European Commission, 2020b).
Germany has the highest household prices due to its renewable surcharge (also called EEG surcharge), which consumers pay on their electricity bills to support renewable energy (Wettengel, 2019).
In 2020⁵, a household user in Germany was paying the highest rate at €301 (which includes taxes levies), followed by Denmark €282 and Belgium €270. Household users in Hungary (€101) and Bulgaria (€98) were paying the least (see Appendix 3). Thus, prices in Germany are three times what they are in Bulgaria.
According to the European Commission (2020c): “An average household in the EU27 paid €25 /MWh in renewable taxes in 2019. This figure equals 29 per cent of the taxes and levies component and 12 per cent of the total average EU price. The average amount of renewable taxes paid by households in the EU27 rose by 153 per cent since 2010.”

Unsurprisingly, given the various levies and taxes as well as the change in the source for electricity (less fossil fuel-fired electricity and more renewables), prices have been steadily increasing in Europe over the 2008-2020 period (the earliest and latest years for which data is available). Since 2010, household electricity prices increased by 2.3 per cent on average annually, while overall consumer prices increased by 1.4 per cent per year in the EU 27 countries. In other words, electricity prices increased by a greater rate than the consumer price index (European Commission 2020c). Of note, the most significant jump in household electricity prices between 2008 and 2020 occurred in France (61 per cent higher), Spain (68 per cent higher) and Latvia (70 per cent higher). The EU average increase was 33 per cent (see Table 1).

4. The EU defines household consumers in the EU-27, as medium-sized consumers with an annual consumption between 2,500 kWh and 5,000 kWh. 
5. Annual prices calculated based on prices in the last six months of 2020

Source: Author’s calculation from Eurostat Database (2021).

Canada-Europe comparisons

European countries have significantly higher household electricity prices than other countries (and this is before the rise in the fall of 2021). For example, household electricity prices in Canada are one-third of what households pay in Germany (see Figure 6).

Source: Eurostat Database (2021).

Energy Poverty in Europe

In recent years, energy poverty has become a challenge for European Union member countries, and each member country reports on energy poverty (Bouzarovski and Thomson, 2020).

Energy poverty can be measured by using various indicators.

Expenditure based approach – household energy costs measured against absolute or relative thresholds, i.e., incomes;
Consensual approach – self-reported assessments of indoor housing conditions, i.e., the ability to keep a home warm; and
Direct measurement- where the level of energy services (heating) achieved in the home is compared with a set standard (Thomson et al., 2017).

The European Union measures energy poverty by using the indicator developed by EU Energy Poverty Observatory (EPOV). It provides four different primary indicators for energy poverty.

Two are based on self-reported experiences of limited access to energy services:

The share of a country’s population in arrears on their utility bills; and
The proportion of a country’s population unable to keep their homes adequately warm.

Two are calculated using household income and/or energy expenditure data:

The proportion of households whose absolute energy expenditures are half the national median share of absolute energy expenditures, knows as the “M/2” indicator”; and
The proportion of households whose absolute energy expenditures are twice the national median share of absolute energy expenditures, knows as the “2M indicator.” We label this a “consumers facing a high share of energy costs.”

Observing the “2M indicator” in 2015, the latest year for available data, the EU estimates that 16 per cent of EU households face a high share of energy costs (see Table 2). In countries such as Germany and the United Kingdom, the proportion of households facing a high share of energy costs was 17 per cent and 19 per cent respectively in 2015, the most recent year for which this EU calculation was constructed.

Source: EU Energy Poverty Observatory (undated).

Another look at EU energy poverty: Behind on utilities/unable to keep the house warm

Using utility bills and the ability to keep one’s house warm as a stand-alone indicator, as of 2018, 6.8 per cent of people living in private households across the EU (30.3 million people) were unable to pay their utility bills, and 7.3 per cent EU households were unable to keep their dwelling warm. The figures for the United Kingdom were 5.4 per cent for both indicators in 2018 (EU Energy Poverty Observatory, undated). Readers should note that the EU estimates are not “watertight” as they are self-reported (see Table 3).

Source: Bouzarovski and Thomson (2020).

Our estimates of Europe’s high-cost electricity

Given the European Union’s self-reporting of energy poverty, we have designed an alternate measurement.

Our measurement tracks the increase in European electricity costs by country and compares it with the increase in median household income. The measurement is for 2008 to 2020 for electricity costs and for 2008 to 2019 for household median income (2019 is the most recent year for which a full set of median household income data is available).⁶

Conversely, those with already high median household incomes in 2008 such as the United Kingdom (€18,766) and Ireland (€22,995) would be unlikely to see as dramatic rise in incomes, given they were already mature economies. That means any rise in electricity prices beyond household median income growth could be more difficult for households to finance.

The data in fact shows exactly that for many European countries for the 2008 to 2019/2020 period. For example:

Electricity prices in Poland rose by 20 per cent but household median income increased by 72 per cent, thus making the rise in power prices manageable. The same was true of many other nations with low median household income in 2008: Bulgaria, Romania, the Czech Republic, and Slovakia (see Figure 7a).

6. There is only a marginal difference between 2019 incomes and 2020 incomes, where available in the latter case. For example, Sweden’s median het household income was €24,490 in 2019 and €24,710 in 2020.

Source: Bouzarovski and Thomson (2020).

In contrast, in the United Kingdom and Ireland (see Figure 7b), electricity prices soared by 51 per cent and 48 per cent, respectively while household median income rose by just four per cent and one per cent, respectively. That split between significantly higher power bills and an almost status-quo reality on median household incomes helps explain why some European (or United Kingdom) households have found it increasingly difficult to pay their utility bills.
The most challenging combination though is where a country already had low median household income in 2008, and then saw little income growth over the next 11 years, but experienced a dramatic rise in the cost of power at the same time. This was the case for Spain, where electricity prices soared by 68 per cent between 2008 and 2020 with median household income rising by just eight per cent (by 2019) (see Figure 7a).

Source: Authors’ calculation from Eurostat database.

Conclusion: Lessons from Europe for Canada

The core question is what lessons Canadian policymakers might glean from Europe, given that substantial changes are proposed in Canada on everything from how Canadians might heat their homes (more electrification) to higher carbon taxes and other policy, regulatory and legislative changes that discourage the consumption of hydrocarbons. This has obvious relevance to Canada, where a transition not only from coal and oil but also from natural gas is considered viable by some, with consequences for the electricity grid. The notion that all electrification in Canada via renewables is possible can have unintended consequences for Canadian households across provinces. As readers will note, the impact of the energy transition on retail prices of electricity in Europe is not uniform; it differs by country and can be influenced by policy decisions and regulatory frameworks. However, European and United Kingdom attempts to move away from affordable and reliable sources of electricity production and its subsequent impact on household electricity prices holds cautionary lessons for Canada.

Appendices

Source: Eurostat Database (2021).

References

BBC (2021). Spain targets energy firms as European bills surge. Spain targets energy firms as European bills surge.<https://bbc.in/3m7Zz73>.

Bednar, D.J and Reames, T.G. (2020). “Recognition of and response to energy poverty in the United States”, Nat Energy 5: 432–439. <https://go.nature.com/3kYF9xG>.

Bouzarovski, Stefan and Saska Petrova (2015). “A global perspective on domestic energy deprivation: Overcoming the energy poverty–fuel poverty binary”. Energy Research and Social Science 10:31-40. <https://bit.ly/3zWL9LX>.

Bouzarovski, Stefan et al. (2020). “Towards an inclusive energy transition in the European Union: Confronting energy poverty amidst a global crisis.” Third pan-EU energy poverty report of the EU Energy Poverty Observatory: Luxembourg: Publications Office of the European Union, 2020. <https://bit.ly/2XUE8Ok>.

BBC (2021). Spain targets energy firms as European bills surge. Spain targets energy firms as European bills surge. <https://bbc.in/3m7Zz73>.

Drehobl, Ariel, et al. (2020).” How High are Household Energy Burdens?”, Washington, DC: American Council for an Energy-Efficient Economy, <https://bit.ly/2WjO5o0>.

European Commission (undated). Eurostat Database. <https://bit.ly/3uhrvZw>.

EU Energy Poverty Observatory (undated). Indicators and Data. <https://bit.ly/3kKsr5L>.

European Union (EU) (October 14, 2020a). Commission Recommendation on energy poverty. 2020/1563. <https://bit.ly/3icx0UI>.

European Commission (2020b). Energy prices and costs in Europe, COM (2020/ 951) Brussels. <https://bit.ly/3CO11C4>.

European Commission (2020c). Energy prices and costs in Europe, COM (2020/ SWD 951). Commission staff working documents. <https://bit.ly/3AM3wEk>.

IEA (2020). SDG7: Data and Projections, IEA, Paris. <https://bit.ly/3ANgHFb>.

IEA (2021). IEA World Energy Statistics (database). <https://bit.ly/34nYWOF>.

Kyprianou, I., et. al. (2019). “Energy poverty policies and measures in 5 EU countries: A comparative study”, Energy and Buildings, 196:46-60.

Office of the Auditor General of Ontario (2015a). Summaries of Value-For-Money Audits. Annual Report. <https://bit.ly/3cxAQlS>.

Office of the Auditor General of Ontario (2015b). Section 3.05: Electricity Power System Planning. Annual Report. <https://bit.ly/2VOoUW9>.

Ontario (2019a). Bill 87, Fixing the Hydro Mess Act, 2019. <https://bit.ly/3ut8uDu>.

Ontario (2019b). Budget 2019. <https://bit.ly/3uvbj7o>.

Ontario (2020). Budget 2020. <https://bit.ly/2WtI5cr>.

Smil, Vaclav (2017). Energy: A Beginner’s Guide, 2nd Edition. One World.

Smil, Vaclav (2020). What We Need to Know about the Pace of Decarbonization. Johnson Shoyama Graduate School of Public Policy, University of Saskatchewan. <https://bit.ly/3c02HO7>.

Sparks, Tori (January 27, 2021), Why Did Spain’s Electricity Prices Suddenly Increase, Barcelona-Metropolitan. <https://bit.ly/2WgiKCv>.

Thomson, Harriet, et.al. (2017). Rethinking the measurement of energy poverty in Europe: A critical analysis of indicators and data. Indoor and Built Environment. 26(7):879-901. <https://bit.ly/3G5k0up>.

Voosen, Paul (2018). Meet Vaclav Smil, the Man Who Has Quietly Shaped How the World Thinks about Energy. Science. <https://bit.ly/3f5eTPl>.

Wettengel, Julian (15 October 2019). “Germany’s renewables levy rises slightly in 2020”, Clean Energy Wire. <https://bit.ly/3uiOXG7>.

World Bank (n.d.) Database. <https://bit.ly/3od7wuj>.

CEC Research Briefs

Canadian Energy Centre (CEC) Research Briefs are contextual explanations of data as they relate to Canadian energy. They are statistical analyses released periodically to provide context on energy issues for investors, policymakers, and the public. The source of profiled data depends on the specific issue. All percentages in this report are calculated from the original data, which can run to multiple decimal points. They are not calculated using the rounded figures that may appear in charts and in the text, which are more reader friendly. Thus, calculations made from the rounded figures (and not the more precise source data) will differ from the more statistically precise percentages we arrive at using the original data sources.

About the authors

This CEC Research Brief was compiled by Ven Venkatachalam, Senior Research Analyst at the Canadian Energy Centre and Mark Milke, Executive Director of Research for the Canadian Energy Centre.

Acknowledgments and Notes

The authors and the Canadian Energy Centre would like to thank and acknowledge the assistance of two anonymous reviewers. Note that for Executive Summary Figure 2, Figure 7b and Appendix 3, EU 27-country averages between 2008 and 2020 were calculated without the United Kingdom.

Creative Commons Copyright

Photo Credits

Sernius, Lalesh Aldarwish, Kaique Rocha, Daria Shevtsova, Jeffrey Czum, Max Vakhtbovych, Golnar Sabzpoush Rashidi, Ryunosuke Kikuno

Commentary: $53 billion to Ottawa – the oil and gas extraction sector’s contribution to federal finances

Mark Milke — Wed, 27 Oct 2021 21:42:32 +0000

Getty Images photo

In the recent equalization referendum in Alberta, nearly 62 percent of voters endorsed removing equalization from the constitution. One constitutional scholar, Ted Morton, also a former Alberta finance minister, has argued that the province has the ability to force the issue, this via previous constitutional references. Others have argued that equalization has a weak constitutional status, which make reforms easier than often presumed.

Part of what drives unhappiness with equalization for some Albertans is the notion that a significant portion of federal tax revenues originate (in net terms) in traditional “have” provinces such as Alberta.

Alberta’s resource extraction is significant, and its revenues (as well as other economic activity and taxes) thus end up on a net basis in provinces such as Quebec via federal transfers. In Quebec though, resource extraction—at least oil and gas, is discouraged and will soon be banned. The fact that some Quebec politicians have called Alberta oil “dirty” also factors into the dissatisfaction.

One of us has previously written a number of reports on equalization and transfer payments over the years, including suggested reforms, but here we will instead look at one overlooked “sliver” of contributions to federal finances: what the oil and natural gas extraction sector in Alberta has paid into federal coffers.

Using Statistics Canada data on revenues from Alberta and federal spending on the same, we found that between 2007 and 2019, Alberta’s total gross fiscal contributions to federal government finance totalled almost $561 billion. Subtract federal transfers to the Alberta government and to Albertans, as well as federal spending in Alberta, and the net transfer to the federal government from Alberta has been $272 billion.

The contribution of Alberta’s oil and gas sector to that $272 billion net figure was $53 billion over the same period, or about 19 percent of the net fiscal contribution “east” to the federal government.

We should note that this $53 billion figure does not include all oil and gas activity in Canada, only the oil and gas extraction sector in Alberta. It also includes only federal corporate tax revenues from Alberta’s oil and gas firms ($35.5 billion) and the federal personal income taxes of Albertans directly employed in the sector ($17.4 billion).

The figure thus excludes direct and indirect revenues from pipelines and other oil and gas economic activity. It also does not include federal taxes on production and taxes on products, such as GST, excise taxes, duties, import taxes, air transportation tax, gasoline and motive fuel taxes, and the like that the oil and gas extraction sector in Alberta paid over the period.

(We chose this narrower comparison in this new study because of the lack of available data from Statistics Canada on other federal taxes on oil and gas production.)

To reach the nearly $53 billion total, the contribution of the Alberta oil and gas extraction sector to federal finances has ranged from an annual high of $3.7 billion to a low $2.5 billion.

The figures also adds context for why many Albertans are often concerned about attacks on the oil and gas industry in Canada: because looking at just oil and gas extraction, 88 percent of all personal income tax paid to Ottawa between 2007 and 2019 came from Alberta; and 89 percent of all corporate income tax paid from oil and gas extraction came from Alberta.

Expressed another way, if Alberta’s oil and gas extraction sector is “phased out,” not only does a major contributing sector to federal government finances diminish significantly, so too does nearly 90 percent of resulting federal and corporate income tax revenues from all oil and gas extraction in Canada.

The $53 billion figure should be placed in the much larger context of our previous research paper where we detailed gross revenue contributions to all governments cross-country from the oil and gas sector, looking at data between 2000 and 2019.

In that study, we found that Canada’s wider oil and gas sector in all provinces paid almost $505 billion between 2000 and 2019 to federal, provincial and municipal governments. That was almost as much as what two other major industries, real estate and construction, paid into government coffers over the same period.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of $53 billion to Ottawa: The Alberta oil and gas sector’s contribution to federal government finances, 2007 to 2019.

The unaltered reproduction of this content is free of charge with attribution to Canadian Energy Centre Ltd.

$53 billion to Ottawa: The Alberta oil and gas sector’s contribution to federal government finances, 2007 to 2019

Mark Milke — Tue, 26 Oct 2021 04:55:39 +0000

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Overview

The oil and gas extraction sector in Alberta has made a significant and direct contribution to Canada’s GDP, output, and jobs over the past decade. The broader energy sector has also made a significant contribution to federal and provincial government revenues in the form of corporate income taxes and royalties (as noted in a previous research brief).¹

In this Fact Sheet, we narrow our focus to the direct impact of the oil and gas extraction sector on Alberta’s gross and net fiscal contribution to federal government finances between 2007 and 2019 (see Figure 1).²

In the years examined, Alberta’s taxpayers (individual and corporate) made a $561 billion gross contribution and a $272 billion net contribution to federal government finances;
The share of that coming from Alberta’s oil and gas extraction sector was, at a minimum, nearly $53 billion, or about 9 per cent of Alberta’s gross contributions and 19 per cent of its total net fiscal contribution over the period;
On an annual basis, the annual contribution of the oil and gas extraction sector has ranged from $2.7 billion to $6 billion, or about 15 per cent to just under 32 per cent of Alberta’s total net contribution to the federal government’s finances during the period.
The average annual contribution from oil and gas has been over $4.1 billion per year over the period.
The $53 billion figure is understated as it does not include indirect federal taxes on production and taxes on products (i.e., GST, excise taxes, duties, import taxes, air transportation tax, gasoline and motive fuel taxes, etc.) paid by the oil and gas extraction sector in Alberta over the period

1. See CEC’s September 2021 Research Brief #17 where we conservatively estimated oil and gas revenues to federal and provincial and municipal governments at $505 billion between 2000 and 2019.
2. In this fact sheet, Alberta’s net annual fiscal contribution refers to the difference between federal revenues raised in Alberta from individuals and businesses and federal expenditures made to Albertans and the provincial government. The Alberta government, as with all provincial governments, does not contribute directly to federal revenues. As with all statistical documents, analysts and commentators will often use “shorthand” language whereby “Alberta’s contributions” means tax and other payments from individuals and corporations from those in Alberta.

Source: Derived from Statistics Canada, Table 36-10-0450-01; Alberta Finance, Albertan’s Net Contribution to Confederation for 2011; and Statistics Canada, Table 17-10-0005-01: Population estimates on July 1st, by age and sex.

Alberta’s net fiscal contribution to federal government finances: A summary

Despite persistently low energy prices, Alberta’s citizens and businesses have continued to make a significant contribution to federal government finances (see Figure 2 and Addendum Table).

Between 2007 and 2019:

Alberta’s citizens and businesses made $272.3 billion in net contributions to federal government finances, or an average of $20.9 billion per year.³
Alberta’s net contribution to federal government finances peaked in 2014 at roughly $27.4 billion. Since then, it has declined somewhat, falling to $16.1 billion in 2017, before rebounding to slightly less than $19.9 billion in 2019.

3. Net contributions are calculated by subtracting federal government expenditures in Alberta/to Albertans/to the provincial government from taxes and other revenues paid to the federal government by Albertans and Alberta businesses. Net contribution calculations are based on the methodology and categories established by Alberta Finance (2012).

Source: Derived from Statistics Canada, Table 36-10-0450-01; Alberta Finance, Albertan’s Net Contribution to Confederation for 2011; and Statistics Canada, Table 17-10-0005-01: Population estimates on July 1st, by age and sex.

The impact of Alberta’s oil and gas extraction sector on Alberta’s net fiscal contribution to federal government finances

The impact of the oil and gas extraction sector on Alberta’s net fiscal contribution to federal finances is determined by the direct and indirect taxes that the sector pays to the federal government annually. They include:

1. Federal personal income taxes, or direct taxes from persons, paid by employees who work directly within Alberta’s oil and gas extraction sector;

2. Federal corporate taxes, or direct taxes from corporations, paid by corporations and business enterprises in Alberta’s oil and gas extraction sector;

3. Federal taxes on production and taxes on products (i.e., GST, excise taxes, duties, import taxes, air transportation tax, gasoline and motive fuel taxes, etc.), or indirect taxes paid by the oil and gas extraction sector in Alberta.

Direct federal personal income taxes from persons

Between 2007 and 2019, total federal personal income taxes or direct taxes from tax filers employed in the oil and gas extraction sector in Canada ranged from about $2.5 billion to $3.7 billion (see Table 1).

Derived from Statistics Canada, Table 11-10-0073-01; and Statistics Canada, T1 Family File (custom tabulation)

To determine the share of federal taxes raised directly in Alberta from the oil and gas extraction sector, we examine the federal income tax retained on wages, salaries, and commissions in Alberta from the oil and gas extraction sector as derived from a custom tabulation drawn from the Statistics Canada T1 Family File.

Between 2007 and 2019, federal personal income taxes paid by tax filers employed in the oil and gas extraction sector in Alberta has ranged from $2.2 billion to $3.4 billion or an annual average of over $2.7 billion per year over the period. This represents about 88 per cent, on average, of federal income taxes retained on wages, salaries, and commissions from tax filers in Canada employed in the oil and gas extraction sector over the period.

The high variability of income tax collected likely reflects, in part, the changing fortunes of the sector and the consequent change in the federal government’s personal income tax base in Alberta. Those changing fortunes include the impact of the Great Recession that began in 2009 and the energy price decline that began in 2014.

Direct federal corporate income taxes from corporations

Federal corporate income taxes from corporations and business enterprises in the oil and gas extraction sector ranged from $525 million to $3.9 billion between 2007 and 2019 (see Table 2).

Based on a custom tabulation from Statistics Canada, between 2007 and 2019 an annual average of between 79 per cent and 96 per cent of federal corporate taxes from corporations and business enterprises in the oil and gas extraction sector were collected from oil and gas extraction businesses and enterprises in Alberta.

Corporations and business enterprises in the oil and gas extraction sector in Alberta paid yearly federal corporate taxes ranging from $413 million to nearly $3.8 billion between 2007 and 2019, or an annual average of $1.3 billion per year over the period.

The high variability of income tax collected likely reflects, in part, the changing fortunes of the oil and gas extraction sector and the consequent change in the federal government’s corporate income tax base in Alberta. Those changing fortunes include the impact of the Great Recession that began in 2009 and the energy price decline that began in 2014.

Derived from Statistics Canada, Table 33-10-0006-01; Statistics Canada, Financial and taxation statistics for enterprises, by industry type; and Statistics Canada, Financial and taxation statistics for enterprises, by industry type, custom tabulation.

Putting it all together

The direct impact of the oil and gas sector on Alberta’s gross and net contribution to federal government finances is significant. Between 2007 and 2019, the contribution from the sector in Alberta was as follows (see Table 3):

In total, the sector contributed a minimum of nearly $53 billion of Alberta’s $561 billion total revenue contribution to federal finances (an average of nearly $4.1 billion per year) or 9 per cent of Alberta’s gross revenue contribution over the period;
The $53 billion was 19 per cent of Alberta’s total net fiscal contribution over the period;
The $53 billion figure is understated as it does not include indirect federal taxes on production and taxes on products (i.e., GST, excise taxes, duties, import taxes, air transportation tax, gasoline and motive fuel taxes, etc.) that the oil and gas extraction sector in Alberta paid over the period.

Source: Derived from Statistics Canada, Table 36-10-0450-01; Table 11-10-0073-01; Table 33-10-0006-01; T1 Family File (custom tabulation); and Financial and taxation statistics for enterprises, by industry type (custom tabulation).

Addendum

Net contribution calculations in the Addendum Table are based on the methodology and categories established by Alberta Finance (2012).

Source: Derived from Statistics Canada, Table 36-10-0450-01.

Addendum and a caveat on net fiscal contributions to federal government finances

This use of Statistics Canada data to calculate net flows between federal government expenditures in provinces and revenues from the same has limitations. Readers should be aware that while the data can be used to show flows in general—Albertans through their federal personal and corporate taxes and other payments contribute in far higher proportions than their share of the national population— there are criticisms of more specific calculations. In a 2007 Statistics Canada article, analyst Steve West noted how federal transfer money sent to Atlantic Canada but which is then used to purchase medical equipment in Ontario makes the question of which province benefits more complicated. Also, as one of us has written in the past, it is unrealistic to expect that federal flows into provinces (spending on individuals, businesses, and others or federal transfers to provincial governments), will exactly replicate “outflows” from the same provinces. One reason for that is the example just noted, but another is how Albertans, for example, when unemployment was lower than the national average, would have contributed more in employment insurance premiums to the federal government than were paid out in return, in the form of EI premiums, to unemployed Albertans. That scenario creates an obvious but entirely understandable imbalance between the two flows.

However, as one of us has also noted in a past study (Milke 2013), on the first example, “such different assignments are routine and expected and thus do not negate the possibility of using such data as a proxy in the absence of more detailed and precise data.” Relevant to both examples, though, is a follow-up point from the same study, “Moreover, such assignment of spending does not detract from how larger and more prosperous economies such as Alberta have economies that are significantly larger as a percentage of the national economy vis-à-vis their population (and thus are proportionately higher contributors to federal tax coffers when compared to say, Quebec).”

For our purposes, despite the limitations in the data—readers should think of the available data as a proxy and as indicative of trends—what is clear is that tax and other payments from the Alberta oil and gas sector (and from other Alberta businesses and individuals) are substantial. Measured on both a net basis and on a net per capita basis (and with comparisons to net contributions from other provinces’ individuals and corporations profiled in studies noted in the above paragraph and later in this one), the flows demonstrate the significance and importance of both the oil and gas sector and Alberta to the national economy and federal revenues. This is an observation that has also been made by others. They include Ben Eisen et al. in a 2019 study, and Robert Mansell et al. in a 2020 study.

Notes

This CEC Fact Sheet was compiled by Lennie Kaplan and Mark Milke at the Canadian Energy Centre (www.canadianenergycentre.ca). The authors and the Canadian Energy Centre would like to thank and acknowledge the assistance of an anonymous reviewer in reviewing the original data and research for this Fact Sheet. Image credit: Igor Kyryliuk from Unsplash.com

References (All links live as of Oct 11, 2021)

Alberta (undated), Oil [and natural gas] prices [downloaded CVS file] <https://bit.ly/2FK1Cg7>; Alberta Finance (2012), Albertan’s Net Contribution to Confederation for 2011 <https://bit.ly/3mypYej>; Eisen, Ben, Steve Lafleur, and Milagros Palacios (2019), How Albertans Continue to Keep Federal Finance Afloat <https://bit.ly/34dXIo9>; Eisen, Ben, Steve Lafleur, and Milagros Palacios (2020), A Friend in Need: How Albertans Continue to Keep Federal Finances Afloat, 2020 <https://bit.ly/3lkGpeX>; Mansell, Robert, Mukesh Khanal, and Trevor Tombe (2020), The Regional Distribution of Federal Fiscal Balances: Who Gets, Who Pays, and Why It Matters <https://bit.ly/3l3YpHj>; Milke, Mark (2013), Super-Sized Fiscal Federalism <https://bit.ly/2HOeYc4>; Statistics Canada, Table 11-10-0073-01: Wages, salaries and commissions of tax filers aged 15 years and over by main industry sector and sex <https://bit.ly/2ZZpQtP>; Statistics Canada, Table 33-10-0006-01: Financial and taxation statistics for enterprises, by industry type <https://bit.ly/2HkMztY>; Statistics Canada, Table 36-10-0450-01: Revenue, expenditure and budgetary balance – General governments, provincial and territorial economic accounts <https://bit.ly/33InsZy>; Statistics Canada (2020), Supply and Use Tables [data from 2017] <https://bit.ly/32NnIau>; Statistics Canada, Financial and taxation statistics for enterprises, by industry type, custom tabulation; Statistics Canada, T1 Family File of the Centre for Income and Socio-Economic Well-Being, Annual Income Estimates for Census Families and Individuals (T1 Family File), custom tabulation; West, Steve (2007), Federal Government Revenue and Spending by Province: A Scorecard of Winners and Losers in Confederation? Canadian Economic Observer (February): 3.1, Statistics Canada <https://bit.ly/33hv9qD>; Statistics Canada (2021), Table 17-10-0005-01: Population estimates on July 1st, by age and sex. <https://bit.ly/3iQO0Aj>.

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Commentary: Canada is missing out on a $1.2 trillion European Union natural gas market

Mark Milke — Wed, 20 Oct 2021 14:45:53 +0000

Workers at the construction site of a section of the Nord Stream 2 natural gas pipeline near Kingisepp, Leningrad Region. Getty Images photo

In 2009, the central European country of Ukraine endured a twin lesson in geopolitics and energy security: Russia cut off its natural gas supply in mid-winter.

Russia’s public reason was that it was engaged in a pricing dispute with Ukraine. In reality, it was an attempt by the Kremlin to influence Ukraine’s government and to send a message to its public: you need us to keep your homes warm and businesses, schools and hospitals running. After that, Ukraine made efforts to import natural gas through third-party suppliers rather than directly from Russia.

Fast forward 12 years and Europe is racing to make itself even more dependent on natural gas from Russia, a country which can best be described as an autocracy. Europe is doing so while it continually discourages its own natural gas exploration and extraction.

For example, between 2005 and 2019 (the most recent year for which we have this data), Russia has been one of the largest sources of imported natural gas for the European Union, exporting over €165 billion worth to the EU in that period.

The EU’s dependence on Russia’s natural gas increased when the first of two Nord Stream pipelines, partially owned by Russia’s majority state-owned natural gas company Gazprom, became fully operational in 2012. Nord Stream delivers 55 billion cubic metres (bcm) of gas annually from Russia directly to Germany via a pipeline that runs under the Baltic Sea.

These deliveries are expected to grow further, by up to another 55 bcm annually, when the second pipeline, Nord Stream 2, becomes operational in 2022. Nord Stream 2 will also run under the Baltic Sea. As Gazprom itself notes, Nord Stream 2 is seen as “particularly important now when Europe sees a decline in domestic gas production and an increasing demand for imported gas.”

That increasing dependence is why some German lawmakers, including the head of the parliamentary committee on foreign affairs, opposed Nord Stream 2 and wanted it cancelled. That hasn’t happened, and Europe looks set to become more dependent on Russian natural gas and that from other Not Free countries. (The term “Not Free” is from the Washington DC-based think tank, Freedom House, which has measured and ranked countries and territories by their degree of freedom since 1973. Their broad rankings are: Free, Partly Free, and Not Free.)

Here are the hard numbers: Between 2005 and 2019, the European Union imported over €838 billion in natural gas from foreign sources, an average of nearly €56 billion per year. (In Canadian dollars, that’s about $1.2 trillion and $83 billion, respectively.)

Of that, about €286 billion or 34 percent came from Not Free countries, and €519 billion or 62 percent from Free countries. The remainder came from Partly Free countries and/or was not categorized according to a freedom measurement.

Of the over €286 billion worth of natural gas imported by the EU from Not Free countries between 2005 and 2019, almost 58 percent came from Russia, just over 31 percent came from Algeria with just over six percent from Libya. In other words, about 95 percent of the EU’s natural gas imports came from countries considered to be autocratic or Not Free to use Freedom House’ description.

Now focus on just 2019. That year, the EU imported €40.1 billion in natural gas from outside sources with over 41 percent from Not Free countries, just under 53 percent from Free countries, and the rest from Partly Free countries or not measured.

Thus, that 41 percent from Not Free countries was seven percent higher than the 34 percent average in the preceding 15 years—and before Nord Stream 2 starts exporting even more natural gas from Russia.

Which European countries are most dependent on imported Not Free natural gas?

Of the over €286 billion worth of natural gas imported by the EU from Not Free countries between 2005 and 2019, just over €237 billion, or nearly 83 percent, was imported by Italy, Spain, Hungary, Slovakia, and the Czech Republic. These EU natural gas import numbers from Eurostat do not include Germany and France due to confidentiality reasons and thus EU imports from Not Free countries are in fact conservative estimates of such natural gas flows.

Could Canada help lessen some of this dependence? Potentially. According to Natural Resources Canada, at the end of 2018 Canada had 73 trillion cubic feet (tcf) of proven natural gas reserves. To extract that and move it offshore (be it to Europe or to Asia), a more predictable regulatory regime for investors on natural gas infrastructure, including pipelines and liquefied natural gas (LNG) terminals, could help secure new markets for Canada’s natural gas.

Such natural gas, mostly uncompetitive before given the distance between Quebec, the east coast provinces (gas deposits exist in such provinces) and Europe, may be more competitive now given the rise and likely permanent higher prices Europeans look set to endure. A side bonus for Europe would be diversified gas import markets and reduced dependence on Russia.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of EU Natural Gas Imports: €286 billion Imported from Tyrannies and Autocracies Since 2005.

EU Natural Gas Imports: €286 Billion Imported From Tyrannies and Autocracies Since 2005

Mark Milke — Tue, 19 Oct 2021 06:03:34 +0000

A Nord Stream 2 sign hangs above a painted map at the construction site for a natural gas receiving station in the Lubmin industrial area in Mecklenburg-Western Pomerania, Germany. Getty Images photo

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Download the PDF here

Download the charts here

Introduction

In this CEC Fact Sheet, we examine trends in the total value (expressed in euros) of natural gas imports from within and outside of the European Union (EU) from Not Free, Partly Free, and Free countries¹ between 2005 and 2019.² Despite discussions about diversifying its natural gas supply, countries in the EU continue to import significant quantities of natural gas from autocracies and tyrannies, most notably from Russia.

Germany is considered one of the world’s largest importers of natural gas, with imports mainly coming from the Netherlands, Norway, and Russia (with Russian natural gas imports arriving via Nord Stream). However, the value of natural gas imported into the EU between 2005 and 2019 is derived from Eurostat and is understated as the organization (Eurostat) does not include Germany and France for reasons
of confidentiality.

Nonetheless, according to Rystad Energy, a Norway-based energy research and business intelligence company, data from the last complete year, 2019, shows that Germany – acting also as a gas transport hub – imported 55.5 billion cubic metres (bcm) of gas from Russia, 27 bcm from Norway, and 23.4 bcm from the Netherlands. In total, the three countries accounted for 92 per cent of German gas imports (Rystad Energy, 2020).

It should also be noted that as a Not Free country, Russia has a history of interrupting natural gas flows for political gain. Its behaviour provides Canada with an opportunity to become a reliable supplier of natural gas to the EU.

1. The term “Not Free” is from the Washington DC-based think tank, Freedom House, which has measured and ranked countries and territories by their degree of freedom since 1973. Their broad rankings are: Free, Partly Free, and Not Free. Not Free countries are those where civil and other rights are often far below those of Free countries (Freedom House, 2020). The nine Not Free countries in this Fact Sheet are Algeria, China, Egypt, Iraq, Libya, Russia, Turkmenistan, Turkey, and Uzbekistan. The four Partly Free countries are Morocco, Pakistan, Ukraine, and Serbia.
2. Extra-EU refers to countries outside of the EU. Intra-EU refers to countries within the EU.

EU natural gas imports by value from 2005 to 2019: Over €286 billion from Not Free countries

In the past 15 years, the EU has imported €838.3 billion in natural gas from foreign sources, an average of nearly €56 billion per year (see Table 1).

Source: Eurostat, 2021.

Natural gas valued at over €286 billion, or 34.1 per cent, has been imported from Not Free countries, €519 billion or 62 per cent from Free countries, with an additional €2 billion, or 0.2 per cent, from Partly Free countries (see Figure 1a).

Sources: Eurostat, 2021, and Freedom House, 2020.

Of the over €286 billion worth of natural gas imported by the EU from Not Free countries between 2005 and 2019,

almost €165.3 billion worth, or almost 58 per cent, came from Russia;
over €89.1 billion worth, or 31.1 per cent, came from Algeria;
and nearly €17.5 billion worth, or 6.1 per cent, came from Libya (see Figure 1b).

Sources: Eurostat, 2021, and Freedom House, 2020.

Of the over €286 billion worth of natural gas imported by the EU from Not Free countries between 2005 and 2019,

Just over €237.1 billion, or nearly 83 per cent, wasimported by Italy, Spain, Hungary, Slovakia, and the Czech Republic.
Italy led the group at €131.9 billion worth (46.1 per cent)of imported natural gas, followed by Spain at €41.1 billionworth (14.4 per cent), Hungary at nearly €26.8 billion worth (9.4 per cent), Slovakia at €19.9 billion worth (7 per cent), and the Czech Republic at €17.5 billion worth (6.1 per cent) (see Figure 1c).

Sources: Eurostat, 2021, and Freedom House, 2020.

EU natural gas imports in 2019, by value and reporting country

In 2019, the EU imported €40.1 billion in natural gas from outside sources (see Table 1).

Of the €40.1 billion, nearly €16.5 billion, or over 41 per cent, was imported from Not Free countries, €21.2 billion or just under 53 per cent from Free countries, with just another 0.6 per cent from Partly Free countries (see Figure 2a).

Sources: Eurostat, 2021, and Freedom House, 2020.

Of the €16.4 billion worth of natural gas that the EU imported from Not Free countries in 2019, nearly €16.3 billion worth, or 99 per cent, was imported from just three countries — Russia, Algeria, and Libya (see Figure 2b).

over €10.7 billion worth, or 65 per cent, came from Russia;
nearly €4.5 billion worth, or just over 27 per cent came from Algeria;
and nearly €1.1 billion worth, or 6.5 per cent, came from Libya (see Figure 2b).

Sources: Eurostat, 2021, and Freedom House, 2020.

Of the €16.4 billion worth of natural gas that the EU imported from Not Free countries in 2019, Italy, Spain, Hungary, Greece, and Slovakia alone imported over €14.8 billion from tyrannies and autocracies.

Italy imported the most at nearly €9.3 billion or 56 per cent,
followed in a distant second by Spain at €2.1 billion or 13 per cent,
then Hungary at €1.9 billion or 11 per cent,
followed by Greece at €879 million or 5 per cent, and
finishing with Slovakia at nearly €718 million or 4 per cent (see Figure 2c).

Sources: Eurostat, 2021, and Freedom House, 2020.

EU and Turkey heavily reliant on Russia for natural gas: 77 per cent of natural gas exports from Russia’s majority state-owned Gazprom go to the EU

As noted earlier, for the past 15 years Russia has been the largest source of natural gas for the EU, exporting over €165 billion worth to the EU in that period. The EU’s dependence on Russia’s natural gas increased when the first of two Nord Stream pipelines, partially owned by Russia’s majority state-owned natural gas company Gazprom, became fully operational in 2012. The pipeline delivers 55 billion cubic metres (bcm) of gas annually from Russia directly to Germany via a pipeline that runs under the Baltic Sea. These deliveries are expected to grow further, by up to another 55 bcm annually, when the second pipeline, Nord Stream 2, becomes operational in 2022. Nord Stream 2 will also run under the Baltic Sea and is seen as “particularly important now when Europe sees a decline in domestic gas production and an increasing demand for imported gas” (Gazprom, undated).

This ever-growing dependence on Russia makes the EU potentially vulnerable to natural gas supply disruptions that could result from geo-political events, such as Russian meddling in the former Soviet Bloc countries. In the past, Russia has punished European countries that were selling Russian gas to Ukraine by cutting off natural gas being delivered through both Nord Stream and an existing pipeline to the Ukraine.

According to Marcus Kolga of the MacDonald-Laurier Institute,

Nord Stream 2 will allow Russia to consolidate much of its gas exports directly to Germany as a transit country, thereby making European energy supplies heavily dependent on Russia-German relations. Indeed, (Vladimir) Putin would be able to quickly cut a significant portion of its natural gas to Europe on just this one route. Equally important is that Russia will be able to significantly reduce its gas exports through Ukraine. This will remove an important link between Ukraine and the rest of Europe, while also leaving Ukraine and Poland at a disadvantage – both financially with declining transit revenues, but also in any future gas negotiations with Russia energy giant Gazprom (Kolga, 2019).

Gazprom is already by far the largest supplier of gas to Europe. In 2019, Gazprom supplied nearly 199 bcm of gas to European countries. Western European countries and Turkey accounted for approximately 77 per cent of the company’s exports, while Central European states took 23 per cent (Gazprom, 2021). More specifically,

Germany used the most gas at 57 bcm
followed by Italy at just over 22 bcm
Austria took nearly 16.3 bcm,
Turkey used 15.5 bcm,
France bought nearly 14.1 bcm,
the United Kingdom procured 10.3 bcm,
Hungary took nearly 11.3 bcm, and
Poland received just over 9.7 bcm (Gazprom, 2021).

Russia is a problematic supplier of natural gas for the EU. Bonnie Saynay, head of Research and Data Strategy for Institutional Shareholder Services (ISS) ESG observed that “Concepts of socially-acceptable policies in Russia, where domestic violence was partially decriminalized in 2017 and ‘homosexual propaganda’ to minors is outlawed, also differ widely from European and U.S. investors’ expectations” (Fedorinova, 2020).

According to Nemanja Popovic, political and economic analyst at the Atlantic Sentinel, “for the long run, the European Union should aim to diversify its supply routes…By diversifying its imports, it can curtail Russia’s influence in its energy markets and limit the severity of potential infrastructural failures” (Popovic, 2020).

Emerging opportunities for Canadian natural gas and LNG to break into the EU supply chain

For at least 15 years the EU has been heavily dependent on the natural gas shipped to it from autocracies and tyrannies, most notably Russia. With the planned completion of Gazprom’s Nord Stream 2, natural gas imports to the EU from Russia will only grow, making the EU even more vulnerable to Russian influence. Canada could help reduce that dependence.

According to Natural Resources Canada, at the end of 2018 Canada had 73 trillion cubic feet (tcf) of proven natural gas reserves (Natural Resources Canada, undated). Through strategic investments in infrastructure, including pipelines and LNG terminals, and a more predictable regulatory regime for investors, Canada could secure new markets for its gas in Europe, thereby helping the EU diversify its gas import markets and reducing its dependence on Russia.

Marcus Kolga of the Macdonald-Laurier Institute sums up Canada’s opportunities this way:

As Alberta desperately seeks new markets for its energy resources and concerns about Western alienation and the threat to federal cohesion grow, Europe’s dangerous, self-inflicted reliance on Russian gas could offer a historic opportunity for Canada… federal and provincial governments would be wise to facilitate the export of Canadian energy to new markets in Europe. Doing so will allow us to advance our economy, address concerns about national unity and reinforce the security of our European NATO allies. (Kolga, 2019

Notes

This CEC Fact Sheet was compiled by Lennie Kaplan and Mark Milke at the Canadian Energy Centre (www.canadianenergycentre.ca). All percentages in this report are calculated from the original data, which can run to multiple decimal points. They are not calculated using the rounded figures that may appear in charts and in the text, which are more reader friendly. Thus, calculations made from the rounded figures (and not the more precise source data) will differ from the more statistically precise percentages we arrive at using source data. The authors and the Canadian Energy Centre would like to thank and acknowledge the assistance of Dennis Sundgaard in reviewing the data and research for this Fact Sheet. Image credits: Patrick Federi from Unsplash.com

References (All links live as of October 5, 2021)

Euroactive (2017), Gazprom says exports to Germany hit record high in 2016 <https://bit.ly/3z3BbIL>; Eurostat (2021), International trade in goods, EU trade since 1988 by HS2,4,6 and CN8 (DS-645593) <http://bit.ly/3eRErQi>; Eurostat (2020), EU imports of energy products – recent developments <http://bit.ly/3eQySBK>; Fedorinova, Yuliya (2020), Russian sustainability scores rise, but climate goal still lags, BNN Bloomberg <http://bit.ly/30TGsmU>; Freedom House (2020), Countries and Territories: Global Freedom Scores <https://bit.ly/2yS1IPf>; Gazprom (2021), Gazprom Exports <http://bit.ly/3cIG7ZF>; Gazprom (Undated), Nord Stream 2 <https://bit.ly/3mc60pn>; Kolga, Marcus (2019), Canada could help Europe diversify its energy supplies from Russia, Macdonald-Laurier Institute <http://bit.ly/2Qgf68t>; Natural Resources Canada (Undated), Natural Gas Facts <http://bit.ly/3jz7jMK>; Popovic, Nemanja (2020), The energy relationship between Russia and the European Union <http://bit.ly/3vDSfUi>; Rystad Energy (2020), Germany’s gas demand to top 110 Bcm by 2034 and Nord Stream 2 is the cheapest new supply option <https://bit.ly/3j0EcE5>; Sustainalytics (2021), Company ESG Risk Ratings: Gazprom PJSC <http://bit.ly/3bU3Oin>.

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Commentary: Europe’s oil from tyrannies and autocracies: 3.1 trillion Euros worth since 2005

Mark Milke — Wed, 06 Oct 2021 20:50:40 +0000

Italy was the biggest client in Europe for autocracy oil in 2019. Getty Images photo

One of the more bizarre developments in Europe in recent years has been the twin policy path whereby fossil fuels are discouraged in favour of wind and solar, but deals are yet struck with autocracies such as Russia to import more fossil fuel via pipelines.

The net effect of the first policy, obvious in the last few weeks, has been to force European consumers and businesses to pay much more to heat and power their homes and to run their businesses. That results from the intermittent nature of wind and solar: When the wind doesn’t blow and the sun doesn’t shine, backup for the electricity grid is needed. That comes from natural gas or coal, though the latter along with nuclear power is increasingly being phased out. That means Europeans pay twice for power.

Now combine the coal and nuclear phaseouts with Europe’s political and policy disdain for local exploration for oil and natural gas, such as in 2017 when France proudly banned future exploration for oil and fracking for gas in France and overseas territories. Then add parallel attempts to label Canadian oil as dirty and thus discourage future Canadian exports to Europe. The result is that the European demand for energy hits limited supply and that results in soaring energy prices.

A real-time example is occurring with natural gas used to back up and power Europe’s electricity grid. On electricity prices, for example, Dutch TTF gas (a European benchmark price) has been reaching as high as €90 a megawatt hour in the last few weeks. That’s up from up from the €17 range in January, or five times higher now.

This has consequences. Even before the recent rise in electricity prices, an estimated 80 million households across Europe struggled to pay their power bills, with 12 million in arrears. A quintupling of power prices will drive those numbers even higher this winter.

Now add in the other development: a Europe that will become more dependent on oil and natural gas from regimes that are hostile to European values, including Europe’s postwar practice of open societies, liberal democratic norms, and tolerance.

Perhaps the best example of that latter development is the near-completed Nordstream 2 pipeline which will bring Russian natural gas to Germany and other parts of Europe. Initially, some European and American politicians opposed the Russian gas pipeline, fearing, rightly, it would make the continent more dependent on Russian whims including the use of energy as a geopolitical weapon.

The concern is legitimate. Back in 2009, Russia cut off the natural gas supply to Ukraine in mid-winter, ostensibly over a pricing dispute. In reality, it was an attempt to control Ukraine. Since then, Ukraine arranged to buy natural gas from third-party sources rather than directly from Russia to lessen the Kremlin’s influence.

Beyond the current crisis in natural gas prices in Europe, and this before winter has even started, consider how dependent Europe already is on autocracies and tyrannies for another fossil fuel: oil.

Between 2005 and 2019, European countries imported over 61.5 billion barrels of crude oil, worth just over 4.6 trillion Euros, or about Canadian $6.9 trillion.

Of the €4.6 trillion in foreign oil imports to Europe, about two-thirds of it at €3.1 trillion came from countries with poor records for human freedom. In other words, they were tyrannies, autocracies or dictatorships. They were “Not Free” countries in the language used by Freedom House, a Washington D.C.-based think tank which has been measuring freedom scores for countries worldwide since 1973 and whose data we matched up against European Commission data on oil imports.

In contrast, just 20 percent of European oil imports came from Free countries, with nine percent from Partly Free countries, and four percent were not measured.

As to where Europe’s Non-Free oil arrived from between 2005 and 2019, the top three nations exporting into Europe were Russia (€1.3 trillion), Saudi Arabia (€343 billion) and Libya (€305 billion).

In terms of where such Non-Free crude oil ended up, let’s now turn to 2019 for the most recent data. The biggest client in Europe for autocracy oil in 2019 was Italy which took in 404 million barrels, worth €26.1 billion; Germany was next at 374 million barrels, with a value of €$23.8 billion; and Spain with 277 million barrels, with a value of €17.5 billion.

One can favour free trade in oil and natural gas without ignoring the reality that Europe is tying itself more closely to countries such as Russia via Nordstream 2 and meanwhile is already highly dependent on autocracies for the lion’s share of its oil imports.

Meanwhile, Europe’s policies on renewables will mean more of the same including ever-higher prices for European consumers.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by taxes paid by industry on carbon emissions. They are authors of EU Foreign Oil Imports from Tyrannies and Autocracies: Nearly €3.1 Trillion (CAD$4.6 Trillion) Since 2005.