By Heather Exner Pirot
March 31, 2023
Debating the ethics of Alberta oil was perhaps an
interesting intellectual exercise five years ago. In 2022 it seems absurd. The
stability and prosperity of the liberal world order depends to no small extent
on Canada being a significant exporter of oil. It would be unethical to stop
producing it.
There are some for whom no oil production, regardless of
origin, is ethical, due to its contribution to greenhouse gas emissions and
global warming. I won’t downplay the existence and seriousness of the climate
crisis, but I will point out that many competing crises demand our attention.
From the point of view of human well-being, the energy crisis is by far the
most urgent. Its impacts this year alone will be counted in the trillions of
dollars, to which will be added millions of victims of famine, extreme poverty
and political turmoil.
Fossil fuels provide over 80 per cent of the world’s primary
energy, of which the largest share, about a third, comes from oil. If all oil
use were eliminated overnight, we’d surely meet our goal of keeping planetary
warming to under 1.5°C. But billions of people, especially in cities, would
soon die, because we’d lack the ability to produce and transport the food and
manufacture the goods that are required for us to survive.
The growth of the human population to eight billion has only
been possible with the cheap energy that fossil fuels provide and the forces of
globalization it has unleashed. Every important indicator of human development,
from GDP per capita to literacy to mortality to gender equality, is positively
correlated with energy use per capita. Abundant energy is critical to human
development. I’m among those that agree we need to transition, and soon, to
lower-carbon sources. But it would be catastrophic to reduce oil supply before
we have alternative energy sources at comparable cost and availability.
The case against Albertan oil is environmental. Because most
of Alberta’s supply is from oil sands bitumen, it has a relatively high carbon
intensity per barrel. This has fallen appreciably since 2011, however, and
credible plans exist to further reduce those emissions, including carbon
capture, the use of small modular nuclear reactors and other technologies.
These should be supported rather than dismissed, because the
consequences of becoming reliant on authoritarian regimes to supply the world
with its most important source of energy are dire. Canada is the largest oil
exporter of any Western/OECD country, and the only one in the top 10 globally
for proven reserves. It’s not an exaggeration to say that the energy security
of our allies in the decades to come will rely on Alberta continuing to export
significant quantities of oil.
Alberta has been blessed with one of the world’s largest
reserves of the most important commodity in the history of the human species.
The ethical choice is not to shut it down, but to produce that oil in the most
environmentally and socially responsible way possible.
Janetta McKenzie, the senior analyst at the Pembina
Institute, says no.
Alberta’s oil industry has contributed to an enviable
quality of life in our province for many decades. The industry and those who
work in it have much to be proud of, including a record of technical
innovation, strong safety standards and good jobs for generations of Albertans.
But does all this make its product ethical?
A decade ago, when the term “ethical oil” was coined, no
global consensus existed on the need to urgently reduce carbon emissions to net
zero by 2050 to prevent the worst impacts of the climate crisis. Things have
changed. Today authoritative bodies such as the International Energy Agency
(IEA) conclude that to achieve this goal, oil consumption must decline to less
than a quarter of its current level, and in less than 30 years. That shift is
already happening: the IEA and oil majors such as bp and Equinor project global
demand will start to fall this decade.
Shrinking oil demand, coupled with governments aiming to
reduce emissions across supply chains, is driving competition for lower-carbon
fuels—which presents a problem for Alberta oil. On average, Canadian oil
remains the second-most greenhouse-gas-intensive in the world. And, unlike in
other sectors in Canada, GHG emissions from oil and gas have grown of late—up
20 per cent since 2005, driven in large part by increased production in the oil
sands but only modest progress on reducing the carbon emitted per barrel
produced. If Canadian producers don’t take urgent steps to cut emissions, they
might soon be struggling to compete globally.
In light of the sector’s outlook, we must also consider
local oil and gas companies’ serious liability problem, including 1.3 trillion
litres of tailings waste and a growing inventory of thousands of abandoned well
sites. Albertans will be on the hook to pay potentially billions of dollars for
cleanup if companies default on their liabilities. What’s ethical about that?
Ultimately “Is Alberta’s oil ethical?” is probably the wrong
question. A better one might be: What is the role for our high-carbon oil in a
world focused on addressing climate change? Facing this head-on now will matter
to Albertans in the future. For example, we are currently experiencing the
first-ever Alberta oil boom not accompanied by an uptick in jobs. The jobs
aren’t coming back, due to automation, mergers and a lack of new megaprojects
given the uncertain future for demand.
Albertans could be world specialists in decarbonization and
clean energy, from methane-reduction technicians to designers and installers of
solar and wind technology. To do so we must abandon outdated slogans and
embrace the reality of rapid change. For the Alberta government this means
finally catching up with most jurisdictions by producing a climate plan, which
should include credible details on how we will reduce emissions on the path to
reach net zero. For our oil industry it means starting to substantially invest
in the proven technology needed to reduce emissions and future-proof their own
operations.
Heather Exner-Pirot responds to Janetta McKenzie
Before the Ukraine war and post-COVID energy crisis, it was
easy to find vocal, ideological defenders of the proposition that Alberta’s oil
is unethical and the oil sands should be shut down. I am relieved to read
McKenzie’s argument, which to me represents the shift to a more pragmatic
discussion about the role of Alberta oil in the provincial and global economy.
If I can fairly summarize her argument as (1) oil sands and
other producers should reduce their emissions, and (2) we should ensure that
companies remediate wells and reclaim lands affected by oil sands mining, then
there is very little daylight between our views or those of the Alberta
government or oil industry. There can be healthy debate on how fast those
emissions should come down and what incentives or penalties governments should
offer to achieve that, or about whether the Alberta Energy Regulator collects
the appropriate level of security on oil sands mines’ environmental
liabilities. But this is no longer a discussion on whether the oil is ethical
or whether we should stop producing it altogether. It is about how to balance
the economic benefits and environmental costs. Almost all Albertans fall in the
large grey zone between the two extremes of let ’er rip and stop everything.
I do have some quibbles. McKenzie asserts that Alberta needs
to give up “outdated slogans and embrace the reality of rapid change.” Perhaps
she missed the announcements for transformative investments in net-zero
petrochemicals and blue hydrogen in Alberta over the past two years: the
$1.6-billion net-zero hydrogen Air Products complex in Edmonton; the
$2.5-billion carbon-neutral ammonia and methanol production facility in Grande
Prairie by Northern Petrochemical Corporation; the up to $10-billion investment
by Dow to triple the size of its current petrochemical facility in Fort
Saskatchewan and make it net-zero. Our endowment of hydrocarbons will allow the
next generation of Albertans to prosper too, if we’re smart about the industry
and its potential, instead of fatalistic.
With global demand for oil and gas expected to grow for at
least another decade, I see no threat in McKenzie’s claim that “if Canadian
producers don’t take urgent steps to cut emissions, they might soon be
struggling to compete globally.” We surely learned over the past year that
Canadian oil is more attractive to our allies than that from Saudi Arabia,
Russia, Iran or Venezuela, and that security of supply is essential.
Regardless, global oil and gas investment over the past decade has been far
short of what’s needed to meet future demand, and energy importers won’t be in
a position to discriminate. The world is on the precipice of having not too
much oil but too little.
McKenzie is also concerned about Alberta oil’s economic
outlook, citing the very bearish, and annually revised, oil demand forecasts
from the IEA and bp. First, let me point out that arguing “Alberta oil is
unethical and should be voluntarily shut in for environmental reasons” is very
different from “Alberta’s oil sands are destined to be a stranded asset and
should be voluntarily shut in for economic reasons.” But since it was brought
up, let me also address the latter: major oil sands companies are now producing
oil at upstream operating expenses of as low as $12.50/barrel. The upfront
capital investment has largely been made. Oil sands mining, unlike conventional
or shale oil, has a very low decline rate, meaning it will produce for the next
few decades without needing much more investment. This is a wonderful thing for
Albertans because our royalties will now be charged at a much higher rate now
that oil sands companies are hitting “payout.” This will allow the province to
invest billions more in education, health and infrastructure as well as pay off
debt and build savings for future generations.
Burning fossil fuels absolutely causes climate change. But
it is also essential to human development. I don’t understand those who
minimize the role affordable oil plays in societal well-being or think it’s
just a matter of political will to give it up. In fact, it’s required for
living and thriving. We urgently need to diversify into other energy sources,
but they have to be just as affordable and accessible as oil, or billions of
people will fall into energy poverty. The capital, labour and logistics
required to build a new global energy system are enormous and the process will
take decades. The consequences of doing it in a chaotic, rushed fashion will be
catastrophic.
Giving up market share to OPEC cannot be the way Canada
addresses climate change. The most ethical thing we can do is to supply Alberta
oil to our allies as responsibly as possible—by using carbon capture and
storage and other strategies to reach net zero in the coming decades, and by
producing economic benefits to all Albertans along the way.
Janetta McKenzie responds to Heather Exner-Pirot
Heather Exner-Pirot’s central argument is that the world
needs abundant energy resources, now and in the future, to underpin peace,
prosperity and a good quality of life for all. I agree—the world does need
abundant energy supplies, and the price crisis we (especially Europe) are now
experiencing underlines that.
Twenty years ago, that energy mostly came from fossil fuels,
in part because cost-effective substitutions weren’t available. That’s no
longer the case: the cost of renewable energy has been falling for a decade.
This year the Intergovernmental Panel on Climate Change noted that wind and
solar are now cheaper than fossil fuels in many contexts. The cost of solar in
particular has fallen drastically—by more than 85 per cent since 2010—and in
some places solar is the cheapest source of electricity ever. The price tag of
an electric vehicle is shrinking too: Bloomberg New Energy Finance projects
that EVs could reach cost-parity with gasoline-fuelled cars by 2026.
Meanwhile, the most recent energy crisis has thrown into
sharp relief the results of fossil fuel dependence. Oil markets are
historically volatile, and recent events have again reminded us that fossil
fuel energy access and affordability can be put at risk by invasions, embargoes
or other geopolitical developments.
But the answer to all these crises—climate change,
affordability, energy security—is to reduce global reliance on fossil fuels and
diversify our energy supply. Indeed, the International Energy Agency notes that
regions with greater renewable capacity have been better protected from rapidly
rising fossil fuel prices. This makes sense, given renewables tend to be more
domestic, providing insulation from the global oil and gas sector volatility.
The switch to clean energy won’t happen overnight. Fossil
fuels still make up the lion’s share of energy consumption globally. But while
a significant gap remains between today’s policies and what the world needs to
do to reach its goal of net-zero greenhouse gas emissions by 2050, we’ve
already made strides. The IEA estimates that, even under existing government
policies, by 2030 renewables’ share of electricity production will exceed that
of fossil fuels. Meanwhile, the IEA and even oil majors such as bp and Equinor
expect global demand for oil to start declining in the next five years, never
to rebound. In an ambitious scenario, where the world reaches its target of
net-zero emissions by 2050, bp and Equinor anticipate a drop in demand by 75
per cent and 53 per cent, respectively, from 2019 levels.
This should put an end to the oft-repeated rhetoric that
Alberta is just not ready to move away from fossil fuels. The truth is that a
transition is happening already. Renewables will continue to get cheaper,
efficiency improvements in buildings and appliances are being made, electric
vehicles are being purchased. According to the IEA, the world is on track to
add more renewable power capacity in the next five years than over the past 20.
In that inevitable shift, Alberta must not let itself lose out on this
remarkable economic opportunity.
We should also remember what’s at risk by continuing to
delay. The World Health Organization estimates that between 2030 and 2050
climate change will cause at least 250,000 additional deaths per year worldwide
from malnutrition, malaria, heat stress and other impacts. Our cities and
infrastructure will be increasingly vulnerable to floods, sea level rise and
wildfires—events that are already causing deaths and financial distress,
including in Canada. My interlocutor is right to point out the human suffering
caused by the energy crisis and dependence on autocracies for oil, but we can’t
lose sight of the suffering also being caused by the climate crisis, and the
potential to prevent it from getting worse by rapidly cutting our emissions and
moving to clean energy.
Industry, including Canada’s oil and gas sector, can do
their part by reducing their emissions and capitalizing on the opportunities of
a safe and prosperous net-zero future. For instance, we’ve heard plenty about
the potential for carbon capture in Alberta’s oil sands, as well as low-cost,
readily available measures such as mitigating methane leaks. But our research
shows that so far a significant gap remains between talk and action. It’s time
firms put their money on the table and turned those promised projects into
reality.
And Albertans know it’s time to get behind the clean
economy. According to recent surveys by Janet Brown, some 60 per cent of
Albertans agree that transitioning away from oil and gas will be beneficial in
the long run. We’re already mulling whether we want to keep putting all our
eggs in the fossil-fuel basket. It’s time to put our foot on the
electric-powered accelerator, commit to diversifying our economy and take
advantage of the opportunities a clean energy economy will provide.
Source: https://bit.ly/3K4hszg
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