What Should A Canadian Energy Strategy Accomplish?
Author — Merran Smith
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Suncor Energy asked me to share my perspective on the energy strategy conversation, and the role of oil sands in a world facing climate change. The company published my responses on its OSQAR blog.

The Council of the Federation is moving forward with a Canadian energy strategy. What should such a strategy seek to accomplish?

The Canadian energy strategy should primarily seek to enable provinces to work together to diversify their energy economies.

Many business and political leaders appear to be ignoring the changes unfolding around us, and the risks they present for Canada’s prosperity, social services, and employment. Take climate change. It’s often dismissed as an “environmental” story within which Canada plays only a very minor contributing role. But as its economic impacts begin to bite hard in key export markets such as the United States, political pressure will inevitably mount for regulatory and policy responses that would, by design, depress demand for oil sands products. So even though producers’ contribution to the overall problem may be relatively small, the sector remains highly exposed.

Roll in oil price volatility and discounts that have created significant deficits in British Columbia, Alberta and Newfoundland, and I’d suggest it’s time to rethink business as usual. Any prospective energy strategy must primarily serve as a road map to help provinces transition their economies so that they reduce their dependence on hydrocarbon resources for public revenue and employment, and embrace a prudent shift towards efficiency, renewables, and energy services innovation. The global economy is evolving to a low-carbon future; any energy strategy that fails to acknowledge and position Canada for this reality represents a huge opportunity lost.

What role can the hydrocarbon energy sector play in this transition?

As a leading driver of Canadian prosperity, the sector could play an important role in the transition to a more robust, sustainable, and ultimately profitable Canadian economy and energy system. Both public sector (e.g. taxes and royalties collected by governments) and private sector revenue could be re-deirected into clean energy development and deployment, leveraging our fossil fuel wealth to smooth our economic transition to cleaner forms of energy. It can also advocate, as we do, for necessary policies such as a market price on carbon—a portion of revenue from which could advance innovative research and development (R&D) and low-carbon technology implementation that will position Canada to compete in the low-carbon economy. On both counts, Alberta has an opportunity to assume a leadership role, which could have the co-benefit of increasing social license for current levels of oil sands production.

Though it’s important to acknowledge leadership—Suncor, for example, owns more than 250 megawatts of wind generation assets—oil companies can’t really be expected to transform themselves into true energy companies without a supportive policy framework. However, it is in their best interest to do so. China, the United States, and other economies are currently investing billions of R&D dollars in pursuit of breakthroughs expressly designed to reduce petroleum demand. Meanwhile, other jurisdictions such as Europe are taking regulatory approaches, such as, for example, setting targets to ban internal-combustion vehicles outright from major cities by 2030.

Norway, Australia, and other resource economies have shown leadership. So must we.

Why should Canada diversify its energy sector?

In simplest terms, doing so will help insulate our economies from commodity price shocks, carbon risk, and decreasing demand in key markets such as the United States and, eventually, China. We must do so in a way that protects jobs and our most vulnerable citizens. Finally, climate change presents a moral imperative for all oil-producing nations. Our reputation as a global citizen has value that may be difficult to calculate on a ledger, but is nonetheless undeniable. For centuries we have been hewers of wood and drawers of water. I’d wager it’s time for us to reconsider what we are capable of, and put plans in place to change.

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