The Executive Director of the International Energy Agency (IEA), Dr. Fatih Birol, (the organization used to be an apologist for the fossil fuel industry, but not anymore) describes COP28 as “a moment of truth” for coal, oil and gas. Almost everything being talked about by these companies and countries indicates they are committed to continue to explore for new finds, increase production from existing assets, and pay lip service to climate change mitigation but only if they receive financial assistance from taxpayers. Becoming “part of the solution” is not in the fossil fuel industry’s DNA.
Dr. Birol is unequivocal in stating the “uncomfortable truth.” To mitigate climate change, fossil fuel production has to be reduced. Demand for oil and gas needs to be curtailed. There cannot be continued expansion and the cutting of new production and exploration deals blatantly being explored at COP28. There can’t be, and yet there are.
To call what is going to take place at this meeting hypocritical is an understatement. COP28 was to be the meeting that would produce the global measuring stick to lower carbon emissions.
With Dubai the host city for COP28, and with the President of the COP, Dr. Sultan al-Jaber being the head of Masdar, the UAE’s state oil company, it shouldn’t surprise us that briefing documents that leaked to the press show plans for discussions on fossil fuel deals involving 15 nations were to be discussed at the upcoming meeting. The nations involved include Australia, Brazil, Canada, China, Colombia, Egypt, France, Germany, Kenya, Mozambique, The Netherlands, Saudi Arabia, the UAE, the UK, and the US.
The leaked briefing documents show that projects being proposed include several to increase oil and gas development. The IEA as I have previously reported here, has stated that no new fossil fuel projects should be developed. The reality today is that the oil and gas industry today budgets hundreds of billions annually on capital expenditures to support its operations. Of that amount, US $20 billion, or 2.5% is allocated to clean energy projects. What’s needed is 50% to be spent on clean energy not including investments to reduce emissions from operations in the run-up to 2030.
The Globe and Mail newspaper recently highlighted commitments by the Alberta provincial and Canada’s federal governments to provide grants and tax breaks covering more than 50% of the cost of new carbon capture emission reduction projects. The IEA has described carbon capture as the status quo solution the fossil fuel industry has proposed would allow it to continue or increase production levels.
To limit global mean temperature rise to 1.5 Celsius (2.7 Fahrenheit), however, the agreed lower target set in 2015 in the Paris Climate Agreement requires the industry to capture 32 billion tons of carbon for utilization or storage by 2050 including 23 billion tons from direct air capture (DAC) projects. Existing carbon capture projects capture 45 million tons annually. To achieve industry carbon capture targets, the IEA has noted that the amount of electricity needed exceeds current power usage for the planet.
At a recent press conference, COP28’s Director General, Majid al-Suwaidi claimed that Dr. al-Jaber “is singularly focused on the business of COP and delivering ambitious and transformational climate outcomes.” The other stuff going on where meetings with oil and gas companies will discuss business opportunities are “fully independent” and have nothing to do with the “meaningful climate action” that Dr. al-Jaber expects to come out of the UAE-hosted event.
In 2022, the fossil fuel industry produced US $5 trillion in revenue. Earlier in 2023, two of the world’s largest companies, BP and Shell, announced they were rolling back previous commitments to cut oil production. The lure of profits was just too great. Meanwhile, President Biden in the U.S., and Prime Minister Sunak, in the U.K., have continued to grant oil and gas exploration permits which certainly sounds like business as usual for the singular industry responsible for the impending climate change crisis we face. In September, global mean temperatures reached 1.8 Celsius (3.2 Fahrenheit) above pre-industrial levels.
]]>One sector is contributing more GHGs than any other while another is using the products produced by the former to add to atmospheric carbon dioxide and methane. Although coal is not mentioned in the government documents, its legacy remains in the atmosphere today even with plans to phase out coal-fired powerplants in the country. What the backgrounder specifically mentions are the oil and gas sector, and electrical power.
The oil and gas sector in Canada today produced 182 megatons of carbon dioxide (CO2) in 2021. The goal by 2030 is to reduce that number to 110 megatons. The challenge to get there is greater because as a country we are net producers of oil and gas for domestic and world markets. The sector employs directly hundreds of thousands, and indirectly through the industries its products support, millions. Canada is the fourth largest producer in the world.
When a private U.S. company abandoned an oil pipeline expansion project, the federal government stepped in to be the purchaser of last resort to help sustain current and future jobs in the sector. The move to do this has been met with mixed reviews by Canadians, some seeing it as a handout to an industry that right now because of the Russian invasion of Ukraine has seen energy prices shoot upward dramatically.
The federal government recognizes that before oil and gas consumption can go down, there is still the need to ensure that the industry survives within new environmental guidelines. That’s because despite efforts to reduce global oil and gas dependency, demand for it in power generation, transportation, manufacturing, and other industries remains high and is continuing to grow. We haven’t yet reached peak oil.
The International Energy Agency’s Net-Zero Scenario, of which I have previously written, sees the continued need for oil and gas through the mid-century and beyond but sees it peaking near the end of this decade or in the early 2030s. Only then will demand decline as the world moves to renewables and alternative energy sources.
What does this mean for areas in Canada dependent on the industry today and in the future?
The 2030 plan calls for energy diversification as a means of reducing our carbon emissions. It means inventing new ways to make the oil and gas sector less carbon-intensive. Carbon intensity has been used by the industry in the past to demonstrate it was making efforts to lower the collective carbon footprint. This has led to process improvements in harvesting and conversion at extraction and production facilities, but to date, total emissions have barely moved downward because improvements in intensity per barrel of oil or cubic metre of gas have been offset by increased production.
The 2030 plan has developed a model for the sector to achieve emission reductions of 31% below 2005 levels by 2030 (or 42% below 2019 levels). This involves implementing a cap on oil and gas sector emissions, but not on production, which means the industry needs to develop technologies and infrastructure to further decarbonize its processes.
The industry has toyed with carbon capture and sequestration (CCS) technology for more than a decade but has always asked for government assistance to cover a good percentage of the cost of these add-on facilities and infrastructure. Many projects have seen oil and gas companies abandon CCS projects leaving the government with nothing to show for its money. A few have survived after receiving healthy government subsidies.
In terms of immediate dollars to help with CCS development, in addition to investment tax credits, the federal government is providing $194 million for the Industrial Energy Management System to help create expertise in carbon reduction and capture technologies. In this way, oil and gas production can continue generating revenue and jobs. But for how long? Will the policy to assist the industry continue to scale as the enforced cap goes down? This is not made clear in the 2030 plan.
That covers CO2 but not methane (CH4). CH4 in the atmosphere can linger for a couple of decades and unlike CO2 immediately contributes to global atmospheric warming. The 2030 plan has set a CH4 emissions reduction target of 75% by 2030.
From where will these reductions come? Capturing methane from orphaned wells, ending flaring, and ensuring that fracking infrastructure for exploration is designed to eliminate methane leaks requires new investments in technology. The federal government will partner with the industry through subsidies and tax breaks sufficient to get the sector to act. Captured methane has many industrial applications including as fuel for boilers, dryers, furnaces, kilns, heaters, and rocket fuel.
The transition to 100% electrification is already underway in transportation, industrial processes, and the heating and cooling of homes and buildings. This sector in 2021 was responsible for 43 megatons of carbon emissions. The goal is to see that number decline to 14 megatons by 2030.
Canada already produces more than 80% of its electricity from renewable or emission-free sources via hydroelectricity and nuclear power. There is a growing installed base of wind turbines and solar farms as well. But to meet the future needs of an all-electric transportation sector, and to counter rising atmospheric temperatures through increased use of HVAC systems means electricity demand will grow dramatically through 2050 and beyond.
The plan for the federal government is to aid in the investments being made in clean electricity infrastructure. A Pan-Canadian Grid Council involving the provinces will promote investments in the power grid fueled by $600 million for the existing Smart Renewables and Electrification Pathways Program, and $250 million will be made available for the predevelopment of future electricity production projects.
In the next installment of our look at Canada’s 2030 plan we will look at the transportation sector which is currently the second-largest source of carbon emissions in the country.
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