This week, two international bodies have called for the recovery from COVID-19 to involve a structural shift in world energy systems to continue the path of declining greenhouse gas emissions that have resulted from the unprecedented lockdown of the global economy.
The United Nations’ Renewable Energy Policy Network for the 21st Century (REN21) called for a ‘total fossil fuel lockdown’ and for government stimulus arising from the pandemic to be dedicated to an immediate shift towards renewable energy and energy efficiency programs. Meanwhile, the International Energy Agency (IEA) released a Sustainable Recovery Plan that calls for US$3 trillion to be invested over the next three years focused primarily on acceleration of wind and solar power development, electric vehicles and energy efficiency.
While continued effort to reduce emissions and adapt to climate change are important, a rapid phase-out of the world’s primary energy sources such as oil and natural gas could come with some significant unintended consequences. Some facts to consider:
Keep the lockdown going?
The global lockdowns prompted by COVID-19 could see Earth’s CO2 emissions reduced by 4-7 per cent in 2020, the UN reports says, noting “even under these extreme circumstances, such an emissions decline is not enough to meet global goals,” of hitting the mark of an annual decrease in emissions of 7 per cent.
The economic realities of the COVID-19 pandemic have been devastating for Canada, with some 2.7 million jobs being shed as of May, according to Statistics Canada. By the second quarter of 2020, the Conference Board of Canada says the decline in Canada’s GDP will hit 25 per cent. Prior to this year, the largest hit to the nation’s GDP in the past 60 years was an 8.7 per cent contraction in the first quarter of 2009.
Continuing at that same pace would leave Canada, which accounts for only about 1.5 per cent of global greenhouse gas emissions, far behind the recovery curve as other nations lean on well established and profitable fossil fuels to be the linchpin to rebuilding their economies.
University of Guelph environmental economist Ross McKitrick says trying to build a green economy from scratch while the economy is still incredibly vulnerable makes no sense.
“The idea that the recovery from a recession is an ideal time to make a transition to green energy is really contradicted by the history of renewables and green energy, which is that they are very expensive, they’re technically unreliable, they drive up electricity prices, and they dampen growth and investment,” he says.
“When you’re trying to recover from a recession and you’ve got 15 per cent unemployment, that’s the worst imaginable time to opt for power systems that you know are going to be more expensive and wasteful. With so many people out of work and so many businesses struggling, we have to invest in things that we know have a positive rate of return, that lead to growth.”
Building more “democratic” energy?
The UN report’s authors argue renewable energy systems “support energy sovereignty and democracy, empowering citizens and communities instead of big fossil fuel producers and consumers” and calls for an end to any government support for the fossil fuel economy.
The narrative around massive subsidies to the fossil fuels industry has been a common one, but doesn’t necessarily apply to Canada. A review by the Canadian Energy Centre of national oil and gas subsidies based on trackable data found $1.9 billion was provided between 2010 and 2016, compared to $12.6 billion in subsidies to the motion picture industry, $12.8 billion to crop production an $27.8 billion to public transit over the same period.
Between 2000 and 2018, Canada’s oil and gas industry contributed approximately $359 billion to federal and provincial revenues; funds that are managed and distributed by democratically elected leaders. More than 550,000 people were directly or indirectly employed by the sector in 2018, with a supply chain of thousands of businesses across the country. The research shows the industry is incredibly important to not only our national economy, but to our local communities.
Canadian oil and gas also benefits Indigenous communities, who are increasingly partners in development. For example, since 2012 major oil sands producers have spent more than $13 billion with Indigenous-owned companies, according to BMO Capital Markets. In 2017, two First Nations acquired 49 per cent ownership in Suncor Energy’s East Tank Farm for $545 million, the largest business investment to-date by a First Nations entity in Canada.
As for helping impoverished communities, a study by Portland State University, published last year in the journal Energy Research & Social Science, found that in 175 nations studied between 1990 and 2014 shifts towards renewable energy consumption did reduce carbon emissions, but it came at the cost of disproportionately affecting those with lower incomes.
The authors found that shifting to renewable energy is done primarily through incentive such as tax subsidies, reducing energy costs for homeowners who can afford to install solar panels or energy-efficient appliance, but driving up prices of fossil fuel energy leading to higher utility bills for other customers, including low-income families.
“People who are just making ends meet and can barely afford their energy bills will make a choice between food and their energy,” co-author Julius McGee said. “We don’t think of energy as a human right when it actually is. The things that consume the most energy in your household — heating, cooling, refrigeration — are the things you absolutely need.”
Canada’s cautionary tale
The UN and IEA call for policy makers to take swift action to bolster policies and provide stimulus packages that actively support the adoption of renewables, decrease energy demand, and accelerate the phase out of fossil fuels. They argue that “green” recovery measures are more cost-effective, yield more returns and create more jobs.
But Canada has already had a sneak preview of the challenges posed by an epochal shift toward a renewable energy-based system. And the unintended consequences that resulted should serve as a cautionary tale.
In 2009, Ontario passed the Clean Energy Act, which aimed to expand renewable energy production, encourage energy conservation and create green jobs and included many of the measures recommended by REN21, such as feed-in tariff rates for different types of energy sources.
The Clean Energy Act and other programs resulted in Ontario electricity prices skyrocketing as much as 75 per cent higher than competing jurisdictions in North America, according to the Canadian Manufacturers and Exporters. Meanwhile, residential customers saw their own electricity rates soar some 122 per cent in nine years, according to a 2019 report by the Fraser Institute.
In 2015, Ontario’s auditor general found Ontarians paid $37 billion in extra fees for electricity and projected they could be on the hook for a further $133 billion because of the program by 2032.
As for job creation, a 2017 report by University of Guelph environmental economists Ross McKitrick and Elmira Aliakbari found that Ontario’s manufacturing industry lost 75,000 jobs between 2008 and 2015 as a result of the province’s high electricity prices. The authors concluded Ontario may have lost at least 1.8 permanent manufacturing jobs for every new job, including temporary employment, created under green energy initiatives since 2008.
Ignoring the progress of energy companies
Warnings that the world may miss out on a once-in-a-lifetime opportunity to shift to a low-carbon economy ignore significant efforts by Canadian and many international oil and gas producers in reducing their environmental footprint while potentially becoming a contributor to the global reduction of greenhouse gas emissions by providing the most environmentally responsible supply for growing markets looking for cleaner alternatives to coal, biomass and other fuel sources.
According to Natural Resources Canada, oil sands producers saw their emissions per barrel slashed by 28 per cent between 2000 and 2017, largely due to technological and operational efficiency improvements.
With B.C.’s LNG Canada terminal planning to exporting western Canada’s abundant supply of natural gas to global markets, it represents one of the environmentally responsible supplies on the planet thanks to the use of emission-less hydroelectricity to power LNG facilities, a short shipping distance to energy hungry Asian markets and a colder climate reducing the energy need to cool natural gas to a liquid for overseas transport.
Natural gas is expected to surpass coal as the world’s second-largest energy source over the next 20 years, with China and India expected to more than double their gas consumption as part of their efforts to reduce GHGs and tackle noxious air pollution. The IEA has previously said that replacing coal-fired electricity generation with natural gas can provide some of the quickest and deepest cuts to global GHG emissions.