The big trade-off

C ould our nation become an even bigger player in the world energy trade and at the same time help contribute to solutions to global warming? We asked Dr. Fatih Birol, the Chief Economist and Director of Global Energy Economics at the International Energy Agency in Paris, for his views.

In terms of global energy trade and security, what are Canada’s most significant contributions now and in the foreseeable future?

Canada has a very rich endowment of energy resources, including oil, natural gas, coal, hydroelectricity and uranium. This has enabled it to become one of the world’s largest producers and exporters of energy. The importance of its energy sector for global energy security and for the Canadian economy has grown steadily and is set to become even more important in the decades ahead. This is best demonstrated by our World Energy Outlook 2012 projections for Canadian oil production, which see output rising steadily as oil sands production grows by two-and a-half times by 2035, more than offsetting a decline in conventional output.

You have spoken passionately about the need to stabilize and reduce greenhouse gas emissions globally. How may Canada contribute to solutions?

According to recent IEA estimates, global energy-related carbon dioxide (CO2) emissions rose by 1.4 per cent in 2012, reaching a record high of 31.6 gigatonnes and putting the world on a path that is more likely to result in a temperature increase of between 3.6°C and 5.3°C, with catastrophic consequences. The World Energy Outlook 2013 Special Report Redrawing the Energy-Climate Map presents the results of a 4-for-2°C Scenario, which proposes a set of four proven measures that could stop the growth in global energy-related emissions by the end of this decade at no net economic cost. The measures are: (i) targeted energy efficiency in buildings, industry and transport; (ii) limiting the construction and use of the least-efficient coal-fired power plants; (iii) actions to halve expected methane (a potent greenhouse gas) releases into the atmosphere from the upstream oil and gas industry; and (iv) implementing a partial phase-out of fossil fuel consumption subsidies accounts.

I believe Canada can play a key role in speeding up the widespread adoption of these measures, both at home and internationally. Domestically, Canada already has a number of policies that target measures similar to the ones we are proposing in our report, including, for example, recent moves to improve the fuel economy of passenger cars, as well as various other minimum performance standards to improve energy efficiency. Canada also prohibits construction of certain coal-fired power plants and is engaged in venting and flaring initiatives for oil and gas production. Many of these measures will require enforcement and, in some parts, strengthening. This would build momentum in advance of the important meeting of the Conference of the Parties to the UN Framework Convention on Climate Change in Paris in 2015.

What if Canada simply constrained its hydrocarbon exports?

If Canada chose to limit its hydrocarbon exports, it may be to the detriment of global energy security. This is particularly true when it comes to oil: Canada is increasing the diversity of global oil supply, for it represents one of the few areas where significant growth in production is possible among traditional major oil exporters. It is also true for natural gas, as the prospect of Canadian exports to Asia is set to accelerate the movement towards a more diversified and flexible international market.

Is there a way for Canada to rationalize the apparently divergent goals of increasing energy exports and helping to address climate change?

Let’s start with the oil sands. It is true that their production generally emits more greenhouse gases per barrel than that of most types of conventional oil. However, on a well-to-wheels basis, the difference is much less, since most emissions occur at the point of use (combustion in a vehicle, for example). We estimate that well-to-wheels CO2 emissions for oil sands production are between 0 per cent and 15 per cent higher than conventional sources.

Nonetheless, it is important that Canada continues the work it is doing on mitigation measures to reduce emissions from oil sands production. These include developing more efficient extraction technologies and using carbon capture and storage. Continuing to make improvements with water and land management techniques is also crucial.

In terms of natural gas, Canada’s plans to export growing volumes could play an important part in a transition to a low-carbon energy future. But even though it brings environmental gains when substituting for other fossil fuels, reliance on gas alone is not sufficient to meet the international goal of limiting the increase in global temperatures to 2°C. To meet that goal will require a much larger shift to lowcarbon energy sources, increasing energy efficiency, choosing renewables = and nuclear power, and deploying innovative technologies.

Canada is also an important coal exporter. Coal met nearly half of the rise in global energy demand over the last decade. Whether coal demand and trade carries on rising strongly or changes course is particularly uncertain. It will depend on the strength of policy measures that favour lower-emissions energy sources, the deployment of more efficient coal-burning technologies and, especially important in the longer term, carbon capture and storage. 

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