By Jack Mintz, February 12, 2020
The federal Liberals now find themselves stuck in quicksand, with deep-seated regional divisions over oil and gas development and climate change policy. Many Quebec and Ontario Liberal MPs are opposed to Teck’s $20.6-billion Frontier oilsands project, since its development would add four megatonnes of greenhouse gas (GHG) emissions annually for 40 years, making it more difficult to achieve net zero emissions by 2050. Undoubtedly, though, rejecting any oil and gas development from here on in will stoke Alberta separatism.
A rumour that the federal government is preparing an aid package — including a stabilization fund, subsidies for the cleanup of oil and gas wells and infrastructure support — has been met with vitriol in the West. Alberta and Saskatchewan are looking for investment and jobs, not handouts. Besides, the benefit package is something that should not be linked to the project’s approval, but instead address the unfair fiscal imbalance currently faced by Alberta.
Albertans find the opposition to the project particularly galling, since Frontier will create thousands of jobs and $55 billion in federal and provincial tax revenues, while achieving a significant reduction in GHG emissions per barrel. In the meantime, Ontarians and Quebecers will continue driving their SUVs and heating their homes with foreign imports, if Western Canadian development is denied by the elites in Central Canada.
The prime minister has said that the cabinet will take a “responsible” position in the national interest, which presumably includes an expected delay in the decision. Moving the goal posts after a long process of regulatory approvals will signal to the investment community that Canada remains off bounds for any oil and gas investment, while other parts of the world develop their deposits.
The root of the problem is that a promise to legislate a climate-change target leaves open any mix of proposals, regardless of feasibility and cost, including compensation to be paid to achieve it.
At the global level, the International Energy Agency (IEA) provided a plan in 2017 to keep temperatures rising by less than 2 C. To achieve net zero emissions by 2060, 15 per cent of reductions would be achieved by the adoption of renewables, 32 per cent by carbon capture and storage (CCS), 34 per cent by efficiencies, one per cent by nuclear developments and 18 per cent by fuel efficiencies. Oil, gas and coal demand would fall to 35 per cent of the energy supply, instead of 82 per cent today.
However, the IEA target is based on hope and prayer at an unknown economic cost. Each step needs new, transformative technologies that take time to find and commercialize, but also result in the expensive replacement of old infrastructure. Voters will look for other climate strategies besides mitigation if an expensive energy transformation leads to higher transportation and heating prices and less personal income and tax revenues.
Not only do we not have a single path to achieve our targets, but we can’t compare alternative paths to meet our climate-change objectives. Perhaps nuclear energy and battery storage shall be workable substitutes for fossil fuels. Or fossil fuel companies themselves may develop decarbonization technologies like CCS and hydrogen. Maybe carbon can be taken from the air, rather than changing the energy system. The point is that we cannot pick the best alternative technologies unknown at this time.
Recent testimony given by Prof. Gautam Kalghatgi of Imperial College at a U.K. parliamentary committee illustrates the uncertain path forward. The complete shift of 1.8 billion light vehicles to electric vehicles by 2050, which represents roughly 45 per cent of oil and gas transportation demand, raises all sorts of difficult issues. Electric vehicles are far from zero emission, since the fuel needed for electricity and the mining and manufacturing of electric batteries create substantial GHG emissions on a life-cycle basis.
They have a greater upfront cost than oil-powered autos, which is only offset by subsidies that governments can ill afford. Charging stations would need to be built and be widely available, while some petroleum infrastructure would be disbanded. The copper and cobalt needed for large-scale battery production will likely push up input prices over time. In the case of shipping and aviation transportation, current battery technology is unworkable since it would be excessively large.
Targets in the face of unknown technological paths are only aspirational at best. When we really think about it, a target based on temperature is quite odd. Other factors also affect temperatures, and besides, climate computer models predict a wide range of temperature change, from 2 C to 4.5 C, if GHG emissions are doubled.
As recently pointed out in the reputable “Journal of Economic Perspectives,” the wide range of uncertainty in computer models arises from the imperfect representation of physical processes and the imperfectly known initial conditions of the models. Thus, it is not surprising that the actual observations have almost fallen below the lowest part of the computer-predicted temperature range in this century so far.
The Liberals will go down a dangerous path if they choose to legislate a net zero emission target without knowing how to achieve it at the lowest cost possible. As seen with the debate over Teck’s proposed oilsands mine, an underdeveloped decarbonization plan fosters national disunity as resource-rich provinces are pitted against Central Canada. This is no way to run the railroad, electric or not.
Jack M. Mintz is the President’s Fellow at the University of Calgary’s School of Public Policy and is a Distinguished Fellow at the Macdonald-Laurier Institute.