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The Canadian Press

Ryan Remiorz

In the end, it may not matter whether Canada signs up to tougher curbs on carbon emissions. The world is moving on, at accelerating speed, toward a world that is less energy-hungry, less polluting, more efficient and more renewable.

The evidence lies in the extraordinary story of 2014, to be found in BP's annual statistical review of world energy. Every year the British oil company does a tally of how many gigawatts we produced, how many barrels we pumped and how many tonnes we burned. The statistics provide the data for the extraordinary tale of American shale and how it pulled the rug from under the oil price. Much more interesting, however, is what BP says is happening around the edges of the big picture. Carbon emissions increased last year by just 0.5 per cent, the slowest rate for 15 years. The reason is weak growth in energy demand, particularly in China where energy intensity is falling rapidly.

The Chinese are burning less oil, gas and coal for every extra dollar they earn. Coal consumption in China, the world's biggest user, stalled last year, says BP, showing almost nil growth, compared to an average 6 per cent per annum expansion rate over the past decade. This is no accident or blip but the direct consequence of China's planned transition from heavy goods manufacturer and exporter to an economy that provides more services to the expanding Chinese middle class.

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Many Canadians berated Prime Minister Stephen Harper when he signed up to a G7 nations commitment to phase out fossil fuels in this century. Libertarians are furious at what they see as a betrayal of oil, a vital Canadian industry, while greens dismiss the undertaking as weak and inadequate to the urgent task of mitigating climate change. But both extreme sides of the argument may be missing the point. If Mr. Harper chose to examine the recent data, he might draw the conclusion that there is little reason to either defend or punish Canada's heavy oil producers. If current trends continue, the oil-sands industry will shut down of its own accord well before the century is out, rendered uneconomic due to lack of sustainable demand for an expensive product.

Meanwhile, according to BP, solar energy gains advantage. The oil company describes the state of renewables in 2014 as both a glass half-empty and half-full. Half-empty because renewable energy still only accounts for 3 per cent of primary energy and wind power is expanding more slowly due to cuts in government subsidies. However, solar is increasing at the spanking pace of 38 per cent and, overall, renewables accounted for 40 per cent of the global increase in power generation last year.

Renewables are expanding at rapid rates, insensitive to weak energy demand growth. Hobbled by falling prices and weak demand, coal mines shut and oil rigs are idle but, helped by government subsidies and mandates, wind turbines are erected and homeowners install solar panels. To put it another way, says BP, last year fossil fuels acted as the swing producer, curbing output growth in response to the energy demand slowdown.

Coal is suffering the brunt of the world's drive toward cleaner energy and lower energy intensity. Small wonder that a clutch of major oil producers in Europe are twisting the knife, calling for harsher carbon pricing. Their strategy is to hope that in the short and medium term, natural gas will bury coal as the primary fuel for power generation.

However, a dash for gas could be a short-lived respite for the oil industry. The drive toward renewables, mainly solar power, will be inexorable in China and India, propelled as much by public concern about air quality and the cost of imported fuel as by the political push for lower carbon. In Europe, oil consumption is falling rapidly and the popular clamour for cleaner air is drowning out the voice of the car lobby. I expect that within less than two decades we will see the internal-combustion engine banned from the centres of Europe's biggest cities.

Some analysts may dismiss 2014 as a weird year, a hiccup. I would see it rather as a watershed in which the tables started to turn against the fossil-fuel industry, a change driven more by market forces and public self-interest than by politics. The world will still need oil, and lots of it, for decades to come but producers, including Canada, will have to be opportunistic. It will be about being a canny swing producer, in other words making sure your product is available on time and at the right price. Just having it in the shop window will not be enough.

Carl Mortished is a Canadian financial journalist and freelance consultant based in Britain.

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