By Stewart Muir and Margareta Dovgal, August 31, 2022
It’s been obvious for months that a global energy crisis was coming. Then on Monday, just when we thought things couldn’t get any worse, the chief executive of Shell predicted that Europe is headed for a multi-winter energy crisis, with consequences that cascade around the world.
The situation is drawing attention to humanity’s intensive reliance on energy. In the Financial Times, economics writer Philip Cogan said that despite an extensive programme of renewable energy production called energiewende, the share of fossil fuels in Germany’s primary energy supply has only declined from about 84 percent in 2020 to 78 percent today. It’s the same story everywhere.
Even after all the international protocols and summits, global fossil fuel consumption rose by 45 per cent in the first two decades of the 21st century, thanks largely to China’s economic growth.
If the technical challenges of converting to new forms of energy could be overcome, the capital investment required will be enormous. There is also an ongoing debate over whether new energy sources will be more efficient than the old ones. In short, the economic impact of an attempt to shift to net zero carbon emissions could be much bigger than expected.
Might Canada offer some relief by sending its natural resources to Europe to stave off economic collapse? Alas, it is too invested in the anti-petroleum narrative to be of any use.
The late August Trudeau-Scholz meeting in Canada produced nothing of short-term value, including no progress on the single most effective thing Canada could do to challenge Russia’s grip on European gas consumers: firm commitment to deliver LNG to Europe.
After the Russian initial invasion of Crimea in 2014, Canada received expert advice to get to work on LNG because it takes multiple years to build these complex projects. A couple of attempts were made but came to nothing.
Today, LNG is an even more commonly used gas product. Import facilities are proliferating globally. Sellers have the upper hand at the moment. In current crisis conditions, it is said that a single shipload can be traded for up to US$200 million. When Prime Minister Justin Trudeau went so far as to question the business case for LNG last week, experts everywhere were flummoxed.
Why would he make such a statement? A revealing claim from anti-fossil-fuel campaigners followed Chancellor Olaf Scholz’s visit to Canadian shores.
“The fact we did not see any LNG deals [out of the meeting] is the result of tireless mobilizing by land defenders and civil society that pushed for a rapid, clear-sighted and climate-safe response to Europe’s energy needs,” said Caroline Brouillette of the Climate Action Network Canada (CANC). “This mobilization will continue, to ensure this moment marks the beginning of a real just transition, rather than superficial change.”
The braggadocio of this claim comes across as delusional. It ignores the role of LNG as an explicitly green fuel under European Union rules. Yet it’s quite possible that this group has the prime minister cornered.
A poll we conducted at Resource Works this spring showed that nearly half of British Columbia residents think fossil fuels will vanish from our energy system in 20 years or less. It’s an absurd belief if you consider the hard evidence, but (at least up until our looming Winter of Energy Reality) has been a source of votes for political candidates taking up the banner of radical energy transition.
The CANC reference to “tireless mobilizing by land defenders” will resonate deeply with First Nations in Canada that have been subjected to the sudden appearance of environmental pressure groups wherever an opportunity arises to weaponize Indigenous concerns – usually legitimate ones that deserve attention – too often resulting in the loss of sizeable economic benefits.
The Wet’suwet’en conflict – an LNG-related story on the other side of the country from last week’s ill-fated LNG encounter – is the best current example of how pre-existing issues that might be resolvable through negotiation can be whipped up into high-conflict, media-friendly campaigns that polarize communities, even contributing to lateral violence between members of the same nations, clans and families.
Ottawa is currently abuzz with stories of how Canadian allies in Europe are starting to panic over energy, with entreaties to Canada to do more. It must be incredibly frustrating as these countries face a humanitarian disaster this winter to see their requests for help be airily dismissed by politicians hemmed in by radical political strategies, unable to acknowledge even the most fundamental truths about our energy needs as a civilization.
The world could be on the brink of a deadly global famine. The Economist estimates 250 million are already at-risk today. Partly this is because of soaring energy costs, but also because of climate policies that might look fine on paper. Sri Lanka’s catastrophic decision to ban fertilizer began with a paper from an NGO recommending it plunge into organic farming. Given that synthetic ammonia used in fertilizer comes from fossil fuel, if climate policy requires eliminating such fuels, inevitably less food will be grown.
In a world where physical systems have grown increasingly interconnected, disruption in one place cascade onwards. Russia’s invasion of Ukraine results in Germany’s gas shortage which becomes America’s ammonia shortage which becomes the road transportation sector’s dearth of a critical ingredient for running today’s high performance, environmentally-improved diesel engines.
As we move into the chillier northern hemisphere season, the full weight of what numerous commentators point to has not yet been acknowledged. Those who have been watching for years the growth of an urban-rural divide will derive only cold comfort as it becomes evident just how fully detached our DoorDash fuelled large cities are from the realities of how the world really works.
There is a role for Canada to play in how all of this resolves at the global level.
Over the past several decades, the Alberta mantra was simple: “How do we supply increasing global demand for hydrocarbon products?” Over half a million Canadian jobs were created getting oil and gas from the ground, benefiting Alberta the most but also contributing 5 percent of the Canadian economy and accounting for a tenth of the combined value of Canadian publicly traded companies.
At the same time, climate change can’t be ignored. The Calgary of 2022 is, when one leans in, a far different place than its critics claim. Alberta’s energy patch is leaner today, with a renewed determination to succeed in the new, low-emissions world. Oil companies are going into the carbon-management business. Not just companies but also governments, small business owners, workers and First Nations with their own economic aspirations are seeing the writing on the wall: only with greatly improved environmental performance can this story continue.
Hydrogen truly is a promising opportunity. (We ourselves are part of a team developing a project to produce competitively priced green hydrogen using a pioneering, proven process.) Nonetheless it remains the responsible development of existing, commercially-deployable-right-now, high-value assets in energy that positions Canada to invest in clean tech.
Capital formation for innovation and decarbonization requires real commercial viability and an enabling regulatory regime. Why would anyone ever invest in building these (speculative) things in Canada when we can’t even get the existing goods to market? Why invest in Canada’s energy future, when we can’t even project confidence on the present opportunities?
A rules-based international regime only works on our behalf when we supply the commodities on which the world runs. If our strength in energy, agriculture, mining and forestry wanes, so does our greatest safeguard for Canadian security, prosperity and well-being.
A poor, weak, irrelevant country can’t reduce emissions, adapt to climate change, defend its borders or invest in healthcare, education and reconciliation.
Clean streets, thriving local economies and the reality of abundant socio-economic mobility require exports and trade.
If you believe that a Canada that is economically sterilized has anything to offer the millionaires parking their wealth in our residential real estate, you are sorely mistaken. Natural resources are not incidental to our exceptional quality of life. They are the foundation. They are the way to ensure a future for Canada where we all thrive, combat climate change, develop high-impact science and technology exports, and make a better world possible.
Stewart Muir is executive director of Resource Works and Margareta Dovgal is managing director. A longer version of the article was first published on the Resource Works website.