The following speech was delivered by Chris Severson-Baker, executive director of the Pembina Institute, at the World Petroleum Congress in Calgary, September 19.
If you live, as I do, in a region of a country with a large oil industry – so big that you call it oil country – the realities of the energy transition are very different than if you don’t.
Most places in the world are concerned about having a cheap and secure – ideally clean – supply of energy.
They don’t want energy that fluctuates in price – and is controlled by another jurisdiction. Even if that other jurisdiction is nice safe friendly Canada.
These countries want to get off oil and gas, but it’s a big change.
Change is hard – building out your electricity supply and electrifying everything is very hard – but if your citizens start demanding action on climate, it is very doable. And that is what is happening. That is the reality of the energy transition.
But if you govern oil country or run an oil company, you might prefer a different version of reality. One where the customer is not motivated to change or is incapable of change.
Oil and gas are the central pillars of the economy here in Alberta and have been for my whole life.
I was born in Calgary and went to school in Edmonton. My dad was a geophysicist. He found oil and gas. His last job was CEO of a start-up oil and gas company. Just before that he was Senior VP Exploration for Devon in Calgary. I grew up as a kid of an oil and gas executive and reaped all the benefits that come from that.
My whole career I have worked on oil and gas here in Alberta, but with a clean energy think tank, focussed on minimizing the impacts of oil and gas and preventing dangerous climate change. Over my career I have seen climate change move from a future problem to a now problem.
Now most of us think that climate change is causing more fires and floods and drought. For people here in Alberta, climate change was in your face every single day this summer. Tens of thousands of Albertans had to flee their homes, vast areas of the province burned, and some places are still on fire.
As you know, it was a bad year everywhere. You might have heard two weeks ago that the United Nations Framework Convention on Climate Change's Global Stocktake report did not mince words. It stated that to meet agreed-upon climate goals requires “phasing out all unabated fossil fuels.”
Polls show that Albertans are concerned about climate change. Most think we need to get to net zero. Albertans understand oil and gas are non-renewable resources and have always had anxious thoughts about the day that they run out. A newer concept is that the demand for oil and gas will fall long before we run out.
On Sunday at the kick-off dinner, Minister Wilkinson pointed out that the International Energy Agency will update their World Energy Outlook in October. It will show that demand for both oil and gas will peak this decade.
This year, the Canada Energy Regulator released research that said if the world achieves net zero emissions by 2050, Canadian oil productions drops by 76%. It too has produced scenarios that point to a decline in oil production in 2030.
This is because most economies of the world are now sufficiently motivated to undertake the hard work of transitioning off oil and gas. Adoption of electric vehicles globally – cars, buses, bikes (especially in China) – is expected to destroy demand for oil. And adoption of heat pumps, especially by Europeans, will do the same to demand for gas.
But despite all this, when Albertans vote, all the parties promise to maintain a vibrant growing oil and gas sector because, taken as a whole, Albertans strongly favour the status quo. They want the wealth that comes from this industry to continue if they are confident that it will continue a bit longer.
And so Alberta is not meaningfully engaging in the transition. Alberta has recently committed to achieving net zero in 2050, but it has no interim targets.
The province is threatening to go to court if the federal government follows through with a two-year commitment to cap the emissions from the oil and gas sector. The province has even imposed a seven-month moratorium on approvals for renewable energy projects.
My organization is advocating for the government to take a different approach.
We are saying this: listen to what the International Energy Agency and your own Canadian Energy Regulator. In a few short years, demand will peak. Prices will permanently fall. The rational thing to do is decarbonize, on the assumption that consumers will pay a premium for lower carbon oil and gas.
Give subsidies as an incentive to decarbonize but recognize that companies won’t put up their own cash unless you impose regulations.
Last week my organization updated our Waiting to Launch report showing that the oilsands companies are on track for their second highest annual profit in a decade, yet they are making no new investments in reducing emissions. In the first half of 2023, 75% of all available cashflow was returned to share shareholders in the form of share repurchases and increased dividends. Companies will not act until there is a regulatory requirement forcing them to decarbonize.
Suncor CEO Rich Kruger recently told investors during Suncor's second-quarter results conference call that the company had a “disproportionate" focus on the longer-term energy transition to low-emitting and renewable fuels… He promised a "revised direction and tone" focused more on the immediate financial opportunities in the oilsands.”
In other words, Suncor will wait for the regulations.
We are also calling on the government to end the moratorium on new renewable energy projects and drive hard towards a net-zero grid because it is achievable in resource-rich Alberta, and you need to have a clean power grid to attract net zero aligned investments.
My province, Alberta, has yet to come to grips with the reality of the energy transition. It is too tempting to think that the status quo can be maintained.
I wonder what my province will take away from this World Petroleum Congress.
This Congress recognizes the need to get to net zero by 2050. But I am not hearing calls to cut emissions from oil and gas by 50% in a decade, which is what you must do if you are genuine about reaching net zero by 2050.
Most of the world economies are now engaging in the hard work of decarbonization because they don’t want to rely on oil and gas from Canada or anyone else.
As an Albertan, I worry this Congress will reinforce the idea instead that a transition is a long way away.
