Global Courant
For the first time, Canada’s national energy regulator has looked at how oil and gas production will change in a zero world, where countries meet their climate targets – and it shows a future without much demand for Canadian fossil fuels.
In his widely read annual report on the energy future of the countrythe Canada Energy Regulator (CER) has modeled scenarios where the world and Canada successfully move towards net-zero carbon emissions by 2050, which is seen as key to limiting global warming to 1.5C above the pre-industrial level — the goal of the Paris Agreement International Conference.
The regulator found that in such scenarios, oil and gas production in Canada would begin to decline as early as 2026 due to falling oil prices and demand, while the rest of the world transitions to cleaner energy sources.
“We cannot ignore what is happening internationally, and betting on failure internationally is economically risky for Canada,” said Dale Beugin, executive vice president of the Canadian Climate Institute, an Ottawa-based climate policy think tank.
Suncor equipment is displayed at their oil sands plants in Alberta. According to analysis by the Canada Energy Regulator, Canadian oil production will peak in a zero-emissions future, but when exactly that will happen depends on how quickly other countries cut their emissions. (Jason Franson/The Canadian Press)
Global prices boost Canadian oil exports
The projections come at a particularly lucrative time for the industry; the five largest companies operating in Canada’s oil sands made approx $35 billion in profit by 2022.
But the models should serve as a warning to many oil and gas companies, say climate experts, who question the future of fossil fuel use and production in Canada.
On the other hand, the analysis points to a dramatically increased role for cleaner energy in Canada’s future, from sources such as hydro, wind, nuclear and hydrogen.
“The rate of international decarbonization — the rate at which the rest of the world is taking climate change seriously and reducing its emissions, perhaps very quickly — is really impacting demand for Canadian oil and gas exports,” Beugin said.
“And the biggest threat to Canada’s oil and gas sector isn’t domestic climate policy. It’s actually longer-term market conditions.”
An aerial view of the Trans Mountain marine terminal in Burnaby, BC, which serves as a distribution point for crude and refined oil. (Jonathan Hayward/The Canadian Press)
Exactly when oil and gas production will peak depends on how far other countries go in their efforts to reduce greenhouse gas emissions, the CER said. It has modeled two net-zero emissions scenarios: one in which global emissions are net-zero in 2050, and one in which the world isn’t acting that fast, but Canada is still moving towards net-zero for its own emissions in 2050 .
Canada’s oil production begins to decline by 2026 in the global scenario and by 2029 for the Canada-only scenario, with similar results for gas.
Beugin emphasized that these were projections based on different scenarios, not predictions of what would happen.
But the projections could still influence decisions about expanding oil production and investing in carbon capture technologies, which would capture the industry’s carbon emissions and keep them out of the atmosphere.
Choose where to invest
The report shows that “we have to be careful, especially where public money is spent. We have to make sure it goes to projects that will be competitive in the long run,” said Jan Gorski, director of the oil and gas program. at the Pembina Institute, an energy think tank.
“And not every project is going to be competitive. Some of those projects are likely to go offline as oil demand declines, but some are going to be competitive and stay there.”
The Quest carbon capture and storage facility in Fort Saskatchewan, Alta. Quest is designed to capture and store more than one million tons of CO2 annually. (Jason Franson/The Canadian Press)
The CER’s analysis also looked at how much carbon the Canadian oil and gas industry would need to capture during production. In the global net-zero scenario, the industry would need to capture approximately 22.5 megatons of CO2 per year by 2036.
By the end of 2022, Alberta had the capacity to capture about three megatons of CO2 each year, although this could increase if several proposed carbon capture projects are implemented.
That depends on more help from the government, according to Mark Cameron, vice president of external relations at Pathways Alliance, the oil sands industry group.
Cameron says globally, in places like Norway or the US, government investment in carbon capture covers much more of a project’s cost than in Canada.
“We need more fiscal certainty,” he said.
The need for more public support has been disputed by some. The federal government’s tax credit for carbon capture projects is expected to cost about $1.5 billion per year.
Cameron also said he doubts that the CER’s global net-zero emissions scenario will materialize, or that demand for Canadian oil will decline so quickly.
“The global net zero scenario implies a very aggressive collective action to reduce emissions, which we don’t see happening anytime soon. Last year we saw oil demand reach record levels in 2022,” he said. ,
“And we’re still seeing China’s economy recovering from COVID and so on. So we don’t think we’ll see a spike in oil demand as early as 2026.”
Much more clean electricity
The CER’s scenarios show electricity consumption increasing to power all the electric cars, building heating systems and other clean technologies that will replace fossil fuels in Canadians’ lives. And that new electricity will come from cleaner sources – with wind power nearly seven to nine times its current level by 2050.
A wind installation in Nova Scotia. The role of wind energy, one of the cheapest sources of energy, will increase dramatically in a zero-emission future. (Andrew Vaughan/The Canadian Press)
That is not surprising to Binnu Jeyakumar, director of the electricity program at the Pembina Institute.
“The reason models do this is because wind is the cheapest source of electricity, so it makes sense to build a lot of wind,” she said.
That’s because wind power plants have become much cheaper to build and install and, unlike other energy sources such as gas plants, they use no fuel – an advantage it shares with solar power.
“By 2030 you will get to a place where new wind and solar energy will be cheaper than existing gas plants. So that is how fast the clean energy economics are changing,” Jeyakumar said.
