Simon Donner is a professor of geography and resources, environment and sustainability at the University of British Columbia. Kathryn Harrison is a professor of political science at the University of British Columbia.
Since Russia’s illegal invasion of Ukraine, Canadians have heard from many quarters that “the world needs more Canadian oil and gas.” The industry and its allies argue that our oil can replace Russia’s “dictator oil,” and that Canadian liquefied natural gas (LNG) can do the same, while also doing the world a climate favour by replacing coal.
Two international reports published recently reject those opportunistic arguments.
The annual United Nations Emissions Gap Report finds that existing national climate commitments fall far short of what’s needed to meet the Paris Agreement goal of keeping warming well below 2 C, ideally below 1.5 C. Instead, we’re on track for 2.4 to 2.6 C by the end of the century.
If that sounds close enough, consider the massive human and economic costs Canadians paid last year at just 1.1 C of warming – more than 600 deaths in B.C.’s “heat dome,” and massive floods thereafter that destroyed infrastructure and livelihoods.
But 1.5 C will be much worse, and 2.5 C could well be catastrophic. Bear in mind that the planet will continue to warm until we reach net-zero emissions globally. The faster we do that, the less the planet warms, and the more we can limit human suffering.
The second report, the International Energy Agency’s annual World Energy Outlook, affirms that a net-zero world will be one with dramatically less oil and gas consumption.
IEA examines global energy disruption, including Russia’s invasion of Ukraine and the reduction of gas exports to Europe. IEA anticipates a global reshuffling of production from existing oil and gas fields over the next few years to meet urgent energy needs.
Beyond that, though, IEA concludes that the war in Ukraine, the U.S. Inflation Reduction Act, and the falling costs of renewables will hasten the transition away from oil and gas. It is telling that when the Chancellor of Germany, the country most dependent on Russian gas, visited Canada this year, he sought green hydrogen exports, not LNG.
IEA models three scenarios. The Stated Policies scenario assumes no change in climate policies in any country for three decades. Although this is not credible given the current pace of policy change – indeed, it excludes a host of policies already under development in Canada – it is included as a reference case. The Canadian oil and gas industry often promotes this implausible scenario as a representation of future demand, without acknowledging that it presumes a complete failure of national and global climate policy.
In contrast, the Announced Pledges scenario models what we might expect if all countries fulfil their current commitments. Although not guaranteed, it’s still far less than what’s needed. Recognizing that, IEA includes a Net Zero scenario consistent with limiting warming to 1.5 C.
The differences in energy demand across scenarios are significant, both for the planet, and for Canadian oil and gas producers.
The reference case sees oil demand stabilize in the mid-2030s at about 10 per cent above current levels. In contrast, oil demand declines 38 per cent by 2050 under the Announced Pledges scenario, and by 75 per cent in the Net Zero scenario.
In the reference case, Canadian production also sees a 10-per-cent increase to 2030 and modest decline thereafter, though with no investment in new oil sands projects. However, under the more realistic Announced Pledges scenario, Canada fares worse than the global average, with oil production dropping 43 per cent by 2050.
As global climate action increases, Canada’s capital- and carbon-intensive bitumen becomes less competitive. (It’s some consolation that Russian production declines even more under all scenarios.)
Turning to gas, IEA concludes that “the era of rapid global growth in natural gas demand is drawing to a close.” Even the reference case anticipates flat global demand after 2030.
As with oil, Canadian gas production declines more steeply than the global average under Announced Pledges: 20 per cent by 2030 and 50 per cent by 2050. We’re less competitive because big new investments in greenfield pipelines and LNG terminals are harder to justify in an era of declining demand.
It is fanciful to assume that even as we reduce our own territorial emissions, Canada will continue to prosper from exporting oil and gas to be burned elsewhere. Other countries can and are taking similar steps to reduce their territorial emissions. IEA’s report anticipates that in the global transition away from fossil fuels, Canadian oil and gas is a loser, not a winner.