Edward Greenspon is president and CEO of the Public Policy Forum. Wayne Wouters is strategic and policy adviser at McCarthy Tetrault LLP and former Clerk of the Privy Council. They co-chair the Energy Future Forum’s strategy group.
The federal government is putting the finishing touches on its next chapter in the intensifying battle against climate change. In a recent op-ed, Natural Resources Minister Jonathan Wilkinson and Environment Minister Steven Guilbeault rightly said what should be obvious – that getting to net-zero emissions will only happen “if we use every tool at our disposal.”
This month the government will begin setting out a roadmap to achieve our updated Paris emissions reduction target of 40 per cent to 45 per cent and an investment tax credit to promote carbon capture and storage for high-emitting industries, including oil and gas. It is going to be hard to achieve those emissions cuts without using carbon capture technology.
Achieving our Paris accord objectives and ultimately reducing emissions to net zero is obviously a non-negotiable. The question lies in the how. Policies aside, a scarcity of strategic clarity undermines the ability to secure the social, economic and political consensus necessary to hold public support steady over a matter of decades.
Canadian opinion leaders advance two competing visions for achieving Canada’s Paris targets and net-zero objective – an accelerated phaseout approach, versus an aggressive decarbonization one.
The crux of the difference revolves around the role of Canadian oil and gas production as consumption is induced downward. The accelerated phaseout vision, confident that renewables and efficiencies will satisfy the energy demands for transportation, home heating and industrial activity, would see oil and gas production curtailed in the near term. This is the course Germany and other European nations have pursued in recent years, phasing out traditional energy sources faster than alternatives could bear the load. The resulting price spikes and energy shortages, even before the invasion of Ukraine, imprudently put public support for climate action at risk. No politicians wants to mess with people’s access to affordable energy before replacement systems are absolutely locked in.
Those advocating for an aggressive decarbonization model also emphasize the critical role of renewables and clean fuel alternatives, such as hydrogen, in achieving targets. Where they part company with those calling for an accelerated phaseout is in their accommodation for oil and gas. Given that just 5 per cent of cars on the road today are EVs and that electricity capacity is woefully insufficient to meet peak heating demand on the coldest days of the year, aggressive decarbonizers accept that fossil fuels are going to be around for a while yet, and therefore producers must curtail their emissions. The message to the oil and gas industries is that it’s sink-or-swim time.
Should they swim, Canada can hang onto its largest source of export revenues for as long as global demand persists, buttressing the value of the dollar and providing the means to finance the import of wind turbines, solar panels and battery storage, none of which Canada currently produces in quantity. The test will be whether Canada can continue to compete for this global demand – even at reduced volumes – by offering the best barrels in terms of cost and carbon emissions. The alternative, as the International Energy Agency has pointed out, is deepening reliance on OPEC and Russia, neither of whom are particularly wedded to ESG principles, let alone democratic values.
An aggressive decarbonization strategy can’t happen, though, without an all-in public-private partnership on the scale of a St. Lawrence Seaway or the tens of billions invested in our current energy system. Royal Bank of Canada says the 21st-century energy transition will require $2-trillion of investment between now and 2050.
Natural gas production is a somewhat simpler proposition. The IEA recently observed that Canadian liquified natural gas will be at least 60-per-cent less carbon-intensive than the global average, thanks in large part to its proximity to hydroelectric power sources and Canada’s progress in tackling methane emissions. Europe is likely to need secure sources of gas into the 2040s and coal-consuming nations in Asia require cleaner alternatives. The world wins environmentally from Canadian gas and Canada wins economically, particularly the growing number of Indigenous communities in British Columbia and Newfoundland and Labrador assuming ownership positions in LNG projects.
Carbon capture is a key component of any aggressive decarbonization strategy. Here lies a major tension point between the competing visions: those focused on an accelerated phaseout oppose prolonging the life of fossil fuels under any circumstances, whereas the aggressive decarbonizers are prepared to take emissions wins wherever they are found.
That group also favours carbon capture as an essential building block for converting Canada’s abundant natural gas resources (fourth in the world) into next-generation hydrogen. The accelerated phaseout proponents only want hydrogen that comes from electricity not produced by fossil fuels, rather than allowing different regions to play to their energy strengths.
Canada must clarify what our game plan will be: to hasten the phasing out of fossil fuels, or to invest in aggressive decarbonization of their production and consumption. The riskiest route lies in a phaseout that mistimes the market, causes price spikes and possibly sparks a public backlash. Nobody needs additional barriers on the long road to net zero.
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