COP28, the world’s foremost climate conference, is known for spawning tension and frustration, but this recent one seemed especially fraught.
This is the first COP where participants found themselves face-to-face with the reality of breaching the 1.5 C warming limit that was the central aspiration of the 2015 Paris Agreement. It was also the first to be chaired by an oil and gas executive, putting a crude spotlight on the conflicting interests that have become entrenched in this United Nations process.
But all was not lost. The final wording of the COP28 agreement – which required consensus among all nations and the chair – codified a commitment to transition away from fossil fuels in energy systems.
To anyone paying attention to global oil and gas demand future forecasts, even under existing policies, the COP28 agreement should not be a surprise. As governments roll out their climate policies, deployment of renewable energy has been rapidly increasing, while the costs of power from these sources and battery storage decrease.
This outcome also presents a dilemma for Canada, which, while positioning itself as a climate leader, also happens to be the world’s fourth largest oil producer and fifth largest gas producer. Adding to the problem is that the fossil-fuel sector is Canada’s fastest-growing source of emissions.
The world is starting to notice. Canada was publicly called out at the UN’s September Climate Ambition Summit for being, “one of the largest expanders of fossil fuels last year” – a dubious distinction for a country whose federal government is proclaiming itself aligned with the Paris Agreement.
So how does a fossil-fuel producing nation square the circle with its climate ambitions and knowledge that fossil-fuel demand will drop in the coming decades, if not earlier?
For Canada to be competitive in the future global economy, it must invest in industries that will be growing in the coming years, which it has been and is set to continue doing.
In 2022, for example, the EV supply chain attracted 13 per cent of all foreign direct investment into this country. The Conference Board of Canada expects it to buoy up manufacturing projections in 2024, unlike petroleum and coal products that were dragging down our manufacturing sales numbers this fall.
It’s a sign of things to come: Jobs modelling from Clean Energy Canada shows that there will be 700,000 more energy jobs in a net-zero 2050, with growth in clean energy employment outpacing the decline in fossil fuels.
But for this country to truly be competitive, it also means that Canada must ensure that pollution from existing fossil-fuel production declines to both hit the country’s emissions targets and access markets increasingly concerned with carbon intensity.
The federal government, to its credit, has done an admirable job threading this needle. New federal methane regulations, investment tax credits and the emissions cap on the oil and gas industry are – setting aside the objections from certain premiers – the right moves. But they must not come at the cost of investing in the future economy.
For example, Ottawa has already offered up a generous carbon capture, utilization and storage (CCUS) tax credit, which represents an estimated $10-billion helping hand to the oil and gas industry’s decarbonization ambitions. And yet, the sector is still asking for billions more taxpayer dollars for the technology on the heels of a year laden with windfall oil and gas profits.
The reality is that relying solely on carbon capture technology to cut oil and gas emissions will be enormously expensive and is still unproven at the scale required. It’s hardly an effective use of the public bank account when Canada’s critical minerals, automotive manufacturing and clean energy (to name a few) are poised for growth.
Indeed, the evident prioritization of the CCUS tax credit both in terms of timing and generosity over its investment tax credits in cleantech and clean electricity raises some questions – especially when it should be the other way around.
Canada has long had a cultural fixation on its fossil-fuel industry that has elevated it beyond its actual contributions to the economy, fanned in part by a series of Albertan premiers. But good governance means safeguarding future Canadian jobs and economic prosperity over the demands of one sector, no matter how big a role it has played in the past.
The world has agreed to transition away from fossil fuels, and evidence suggests the shift is already well underway. It’s time Canada faced this reality.
This post first appeared in the Globe and Mail.
