Canada well placed to meet world’s growing energy demands

By Jock Finlayson
and
Denise Mullen
Business Council of British Columbia

When an irresistible force meets an immovable object, conflict typically ensues. So it is with the world-wide effort to come to grips with the unprecedented challenges posed by climate change.

While most countries – minus Donald Trump’s America – have notionally signed on to the 2015 Paris Agreement goal of working towards holding the global temperature rise to a maximum of two degrees centigrade, few are on track to slash their greenhouse gas (GHG) emissions sufficiently to meet the target. Indeed, world-wide emissions are still increasing – climbing by 1.8 per cent in 2018, driven by growing energy use and ongoing economic development in China, India and many other emerging market economies.

Jock Finlayson
Jock Finlayson

Even as concerns mount over the effects of a warming climate, the world remains overwhelmingly dependent on GHG-producing fossil fuels. True, a transition to “clean” energy – i.e., energy that doesn’t generate GHGs – is underway, but the pace is slow and the adoption of less carbon-intensive energy is largely restricted to the electricity sector. Stupendous amounts of energy are needed for heating and cooling, transportation, and to support many industrial processes – all served by ubiquitous fossil fuels. In 2018, heating and cooling accounted for more than half of overall global energy use, and transportation for almost one-third. While there is welcome progress in shifting away from fossil fuels to produce electricity, this is less true for the other components of energy demand; electricity is not a substitute for many of these uses.

A glance at recent projections for energy production and consumption highlights the central role of fossil fuels in meeting the world’s voracious energy needs. For example, according to BP’s 2019 baseline energy outlook:

  • Global primary energy demand will increase by one-third to 2040, mainly from economic growth and rising living standards in Asia, Africa, and the Middle East. While “energy intensity” – the amount of energy used per dollar of economic activity – is expected to decline, total energy consumption still increases.
  • Energy used in buildings (heating and cooling) and industry represents about three-quarters of the jump in cumulative energy use to 2040, according to BP’s baseline forecast.
  • The transition to a lower-carbon energy mix continues, led by growing demand for natural gas and renewables. The share of primary energy demand met by coal and oil falls. However, in overall terms fossil fuels still provide a large majority of the world’s energy, even in 2040.
  • Global reliance on oil and demand for liquid fuels remains strong in the transport sector, albeit edging lower thanks to more energy-efficient vehicles and incremental market penetration by electric vehicles. But even in 2040, oil is projected to supply 85 per cent of the energy required to move cars, trucks, trains, ships and aircraft.
  • Production and trade in liquefied natural gas (LNG) is set to increase sharply in the next two decades. This underscores the opportunity for Western Canada to become a significant LNG producer and exporter given the region’s abundant reserves of natural gas.
Denise Mullen
Denise Mullen

What are the implications of the evolving global energy landscape for Canada? Our country is endowed with an enviable mix of energy riches, including the world’s third largest oil reserves. Energy plays an outsized role in Canada’s economy, amounting to 10 per cent of GDP and supplying 20 to 25 per cent of all merchandise exports. Canada is the fourth biggest global producer of natural gas and oil. In the electricity sector, Canada boasts among the highest shares of carbon-free generation (more than two-thirds) among all advanced economies – we have done more than most countries to reduce the GHG footprint of electricity.

As an oil and gas producer, Canada has well-respected environmental standards and rigorous project approval processes. Indeed, compared to most other major oil and gas exporting nations – including Russia, Venezuela, Angola, and various Middle Eastern petro-states – Canada clearly ranks as a responsible supplier. Even as efforts continue to tamp down GHG emissions and reduce the carbon intensity of energy use, a fast-growing world will continue to demand energy. Canada is well-placed to help meet it.

Jock Finlayson is executive vice-president and Denise Mullen Director of Environment and Sustainability with the Business Council of British Columbia.

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