This article originally appeared in Alberta Views.
By Heather Exner Pirot, March 31, 2023
Heather Exner-Pirot, the senior fellow at the Macdonald-Laurier Institute, says yes.
Debating the ethics of Alberta oil was perhaps an interesting intellectual exercise five years ago. In 2022 it seems absurd. The stability and prosperity of the liberal world order depends to no small extent on Canada being a significant exporter of oil. It would be unethical to stop producing it.
There are some for whom no oil production, regardless of origin, is ethical, due to its contribution to greenhouse gas emissions and global warming. I won’t downplay the existence and seriousness of the climate crisis, but I will point out that many competing crises demand our attention. From the point of view of human well-being, the energy crisis is by far the most urgent. Its impacts this year alone will be counted in the trillions of dollars, to which will be added millions of victims of famine, extreme poverty and political turmoil.
Fossil fuels provide over 80 per cent of the world’s primary energy, of which the largest share, about a third, comes from oil. If all oil use were eliminated overnight, we’d surely meet our goal of keeping planetary warming to under 1.5°C. But billions of people, especially in cities, would soon die, because we’d lack the ability to produce and transport the food and manufacture the goods that are required for us to survive.
The growth of the human population to eight billion has only been possible with the cheap energy that fossil fuels provide and the forces of globalization it has unleashed. Every important indicator of human development, from GDP per capita to literacy to mortality to gender equality, is positively correlated with energy use per capita. Abundant energy is critical to human development. I’m among those that agree we need to transition, and soon, to lower-carbon sources. But it would be catastrophic to reduce oil supply before we have alternative energy sources at comparable cost and availability.
The case against Albertan oil is environmental. Because most of Alberta’s supply is from oil sands bitumen, it has a relatively high carbon intensity per barrel. This has fallen appreciably since 2011, however, and credible plans exist to further reduce those emissions, including carbon capture, the use of small modular nuclear reactors and other technologies.
These should be supported rather than dismissed, because the consequences of becoming reliant on authoritarian regimes to supply the world with its most important source of energy are dire. Canada is the largest oil exporter of any Western/OECD country, and the only one in the top 10 globally for proven reserves. It’s not an exaggeration to say that the energy security of our allies in the decades to come will rely on Alberta continuing to export significant quantities of oil.
Alberta has been blessed with one of the world’s largest reserves of the most important commodity in the history of the human species. The ethical choice is not to shut it down, but to produce that oil in the most environmentally and socially responsible way possible.
Janetta McKenzie, the senior analyst at the Pembina Institute, says no.
Alberta’s oil industry has contributed to an enviable quality of life in our province for many decades. The industry and those who work in it have much to be proud of, including a record of technical innovation, strong safety standards and good jobs for generations of Albertans. But does all this make its product ethical?
A decade ago, when the term “ethical oil” was coined, no global consensus existed on the need to urgently reduce carbon emissions to net zero by 2050 to prevent the worst impacts of the climate crisis. Things have changed. Today authoritative bodies such as the International Energy Agency (IEA) conclude that to achieve this goal, oil consumption must decline to less than a quarter of its current level, and in less than 30 years. That shift is already happening: the IEA and oil majors such as bp and Equinor project global demand will start to fall this decade.
Shrinking oil demand, coupled with governments aiming to reduce emissions across supply chains, is driving competition for lower-carbon fuels—which presents a problem for Alberta oil. On average, Canadian oil remains the second-most greenhouse-gas-intensive in the world. And, unlike in other sectors in Canada, GHG emissions from oil and gas have grown of late—up 20 per cent since 2005, driven in large part by increased production in the oil sands but only modest progress on reducing the carbon emitted per barrel produced. If Canadian producers don’t take urgent steps to cut emissions, they might soon be struggling to compete globally.
In light of the sector’s outlook, we must also consider local oil and gas companies’ serious liability problem, including 1.3 trillion litres of tailings waste and a growing inventory of thousands of abandoned well sites. Albertans will be on the hook to pay potentially billions of dollars for cleanup if companies default on their liabilities. What’s ethical about that?
Ultimately “Is Alberta’s oil ethical?” is probably the wrong question. A better one might be: What is the role for our high-carbon oil in a world focused on addressing climate change? Facing this head-on now will matter to Albertans in the future. For example, we are currently experiencing the first-ever Alberta oil boom not accompanied by an uptick in jobs. The jobs aren’t coming back, due to automation, mergers and a lack of new megaprojects given the uncertain future for demand.
Albertans could be world specialists in decarbonization and clean energy, from methane-reduction technicians to designers and installers of solar and wind technology. To do so we must abandon outdated slogans and embrace the reality of rapid change. For the Alberta government this means finally catching up with most jurisdictions by producing a climate plan, which should include credible details on how we will reduce emissions on the path to reach net zero. For our oil industry it means starting to substantially invest in the proven technology needed to reduce emissions and future-proof their own operations.
Heather Exner-Pirot responds to Janetta McKenzie
Before the Ukraine war and post-COVID energy crisis, it was easy to find vocal, ideological defenders of the proposition that Alberta’s oil is unethical and the oil sands should be shut down. I am relieved to read McKenzie’s argument, which to me represents the shift to a more pragmatic discussion about the role of Alberta oil in the provincial and global economy.
If I can fairly summarize her argument as (1) oil sands and other producers should reduce their emissions, and (2) we should ensure that companies remediate wells and reclaim lands affected by oil sands mining, then there is very little daylight between our views or those of the Alberta government or oil industry. There can be healthy debate on how fast those emissions should come down and what incentives or penalties governments should offer to achieve that, or about whether the Alberta Energy Regulator collects the appropriate level of security on oil sands mines’ environmental liabilities. But this is no longer a discussion on whether the oil is ethical or whether we should stop producing it altogether. It is about how to balance the economic benefits and environmental costs. Almost all Albertans fall in the large grey zone between the two extremes of let ’er rip and stop everything.
I do have some quibbles. McKenzie asserts that Alberta needs to give up “outdated slogans and embrace the reality of rapid change.” Perhaps she missed the announcements for transformative investments in net-zero petrochemicals and blue hydrogen in Alberta over the past two years: the $1.6-billion net-zero hydrogen Air Products complex in Edmonton; the $2.5-billion carbon-neutral ammonia and methanol production facility in Grande Prairie by Northern Petrochemical Corporation; the up to $10-billion investment by Dow to triple the size of its current petrochemical facility in Fort Saskatchewan and make it net-zero. Our endowment of hydrocarbons will allow the next generation of Albertans to prosper too, if we’re smart about the industry and its potential, instead of fatalistic.
With global demand for oil and gas expected to grow for at least another decade, I see no threat in McKenzie’s claim that “if Canadian producers don’t take urgent steps to cut emissions, they might soon be struggling to compete globally.” We surely learned over the past year that Canadian oil is more attractive to our allies than that from Saudi Arabia, Russia, Iran or Venezuela, and that security of supply is essential. Regardless, global oil and gas investment over the past decade has been far short of what’s needed to meet future demand, and energy importers won’t be in a position to discriminate. The world is on the precipice of having not too much oil but too little.
McKenzie is also concerned about Alberta oil’s economic outlook, citing the very bearish, and annually revised, oil demand forecasts from the IEA and bp. First, let me point out that arguing “Alberta oil is unethical and should be voluntarily shut in for environmental reasons” is very different from “Alberta’s oil sands are destined to be a stranded asset and should be voluntarily shut in for economic reasons.” But since it was brought up, let me also address the latter: major oil sands companies are now producing oil at upstream operating expenses of as low as $12.50/barrel. The upfront capital investment has largely been made. Oil sands mining, unlike conventional or shale oil, has a very low decline rate, meaning it will produce for the next few decades without needing much more investment. This is a wonderful thing for Albertans because our royalties will now be charged at a much higher rate now that oil sands companies are hitting “payout.” This will allow the province to invest billions more in education, health and infrastructure as well as pay off debt and build savings for future generations.
Burning fossil fuels absolutely causes climate change. But it is also essential to human development. I don’t understand those who minimize the role affordable oil plays in societal well-being or think it’s just a matter of political will to give it up. In fact, it’s required for living and thriving. We urgently need to diversify into other energy sources, but they have to be just as affordable and accessible as oil, or billions of people will fall into energy poverty. The capital, labour and logistics required to build a new global energy system are enormous and the process will take decades. The consequences of doing it in a chaotic, rushed fashion will be catastrophic.
Giving up market share to OPEC cannot be the way Canada addresses climate change. The most ethical thing we can do is to supply Alberta oil to our allies as responsibly as possible—by using carbon capture and storage and other strategies to reach net zero in the coming decades, and by producing economic benefits to all Albertans along the way.
Janetta McKenzie responds to Heather Exner-Pirot
Heather Exner-Pirot’s central argument is that the world needs abundant energy resources, now and in the future, to underpin peace, prosperity and a good quality of life for all. I agree—the world does need abundant energy supplies, and the price crisis we (especially Europe) are now experiencing underlines that.
Twenty years ago, that energy mostly came from fossil fuels, in part because cost-effective substitutions weren’t available. That’s no longer the case: the cost of renewable energy has been falling for a decade. This year the Intergovernmental Panel on Climate Change noted that wind and solar are now cheaper than fossil fuels in many contexts. The cost of solar in particular has fallen drastically—by more than 85 per cent since 2010—and in some places solar is the cheapest source of electricity ever. The price tag of an electric vehicle is shrinking too: Bloomberg New Energy Finance projects that EVs could reach cost-parity with gasoline-fuelled cars by 2026.
Meanwhile, the most recent energy crisis has thrown into sharp relief the results of fossil fuel dependence. Oil markets are historically volatile, and recent events have again reminded us that fossil fuel energy access and affordability can be put at risk by invasions, embargoes or other geopolitical developments.
But the answer to all these crises—climate change, affordability, energy security—is to reduce global reliance on fossil fuels and diversify our energy supply. Indeed, the International Energy Agency notes that regions with greater renewable capacity have been better protected from rapidly rising fossil fuel prices. This makes sense, given renewables tend to be more domestic, providing insulation from the global oil and gas sector volatility.
The switch to clean energy won’t happen overnight. Fossil fuels still make up the lion’s share of energy consumption globally. But while a significant gap remains between today’s policies and what the world needs to do to reach its goal of net-zero greenhouse gas emissions by 2050, we’ve already made strides. The IEA estimates that, even under existing government policies, by 2030 renewables’ share of electricity production will exceed that of fossil fuels. Meanwhile, the IEA and even oil majors such as bp and Equinor expect global demand for oil to start declining in the next five years, never to rebound. In an ambitious scenario, where the world reaches its target of net-zero emissions by 2050, bp and Equinor anticipate a drop in demand by 75 per cent and 53 per cent, respectively, from 2019 levels.
This should put an end to the oft-repeated rhetoric that Alberta is just not ready to move away from fossil fuels. The truth is that a transition is happening already. Renewables will continue to get cheaper, efficiency improvements in buildings and appliances are being made, electric vehicles are being purchased. According to the IEA, the world is on track to add more renewable power capacity in the next five years than over the past 20. In that inevitable shift, Alberta must not let itself lose out on this remarkable economic opportunity.
We should also remember what’s at risk by continuing to delay. The World Health Organization estimates that between 2030 and 2050 climate change will cause at least 250,000 additional deaths per year worldwide from malnutrition, malaria, heat stress and other impacts. Our cities and infrastructure will be increasingly vulnerable to floods, sea level rise and wildfires—events that are already causing deaths and financial distress, including in Canada. My interlocutor is right to point out the human suffering caused by the energy crisis and dependence on autocracies for oil, but we can’t lose sight of the suffering also being caused by the climate crisis, and the potential to prevent it from getting worse by rapidly cutting our emissions and moving to clean energy.
Industry, including Canada’s oil and gas sector, can do their part by reducing their emissions and capitalizing on the opportunities of a safe and prosperous net-zero future. For instance, we’ve heard plenty about the potential for carbon capture in Alberta’s oil sands, as well as low-cost, readily available measures such as mitigating methane leaks. But our research shows that so far a significant gap remains between talk and action. It’s time firms put their money on the table and turned those promised projects into reality.
And Albertans know it’s time to get behind the clean economy. According to recent surveys by Janet Brown, some 60 per cent of Albertans agree that transitioning away from oil and gas will be beneficial in the long run. We’re already mulling whether we want to keep putting all our eggs in the fossil-fuel basket. It’s time to put our foot on the electric-powered accelerator, commit to diversifying our economy and take advantage of the opportunities a clean energy economy will provide.