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Guilbeault phaseout plan for the oil sector would lead to economic devastation and little reduction in global emissions

Shawn LoganFederal Environment and Climate Change Minister Steven Guilbeault is continuing to plot a painful course toward a short-sighted phase-out of Canada’s world-class oil and gas sector based on an unrealistic view of the world’s future energy mix.

In an interview with Euractiv, Guilbeault said he supports the phase-out of unabated fossil fuels, those without the technology to minimize emissions, by 2050 to align with the International Energy Agency’s Net Zero Scenario, a path that is largely out of touch with the current global reality.

Based on that increasingly unlikely scenario, the minister said he anticipates Canada’s oil and gas sector will follow suit with a 50 percent to 75 percent reduction in the production of oil and gas by 2050, which would be devastating for the Canadian economy, hurt our economic allies, and make little to no progress towards reducing global emissions.

Steven Guilbeault oil sector canada

Steven Guilbeault

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Here are the facts.

Fact: The IEA’s Net Zero Scenario is largely aspirational, not practical

Guilbeault’s vision of a massive global reduction of fossil fuel usage is growing even less likely amid a lingering energy crisis prompted by several years of declining investment in oil and gas followed by Russia’s invasion of Ukraine.

The fact is, this year, the world will use more oil and more coal than at any time in human history.

According to the IEA’s latest short-term outlook, global oil use will hit a record high of 102 million barrels per day this year and is expected to grow to 106 million barrels per day by 2028. Last week, OPEC forecasted that, by 2045, global oil demand will reach 110 million barrels per day.

Meanwhile, demand for natural gas, particularly liquefied natural gas (LNG), is soaring.

By 2040, global LNG demand – driven primarily by growing Asian economies – is expected to reach 700 million tonnes, a more than 75 percent increase from 2022. Demand for LNG is expected to outpace supply by the middle of this decade.

Relying on the IEA’s Net Zero scenario, Guilbeault said he believes oil use will decline to between 25 to 30 million barrels per day, a 75 percent reduction. Rapid deployment of renewables, he said, would fill that void despite some significant hurdles that could hinder a sweeping transition.

The bottom line is pretty clear. In the IEA’s most likely scenario, oil and gas will still account for 47 percent of the global energy mix in 2050, a reduction of five percent from 2021. While the share of renewables will more than double, it is still expected only to account for 29 percent of the world’s energy mix in 2050.

Fact: A rapid phase-out of oil and gas would hurt Canada and its allies

Canada’s oil and gas sector is a critical part of our economy, supporting hundreds of thousands of jobs from coast-to-coast, including thousands of jobs in manufacturing, environmental, and financial services tied to the industry, especially in Ontario and Quebec.

A recent analysis by commodity data firm S&P Global focusing specifically on the oil sands suggests that efforts to meet federal emissions targets for 2030 would likely force the industry to slash production by up to 1.3 million barrels per day.

According to the analysis, that could result in the elimination of between 5,400 and 9,500 jobs. With just over 54,000 oil and gas extraction jobs in Canada, that would mean the elimination of as much as 17 percent of the workforce.

In addition to jobs, the industry is also an economic bulwark, generating $168 billion in GDP in 2021, about 7.2 percent of Canada’s economic activity. Oil and gas also accounted for nearly a third of Canada’s exports in 2021, injecting $140 billion into the economy.

Amid the ongoing global energy crisis, some of Canada’s international allies have turned to Canada as a potential key supplier as they look for stable and responsible suppliers to replace Russian oil and gas.

The leaders of Germany and Japan made direct appeals to Canada to supply more LNG to help meet their energy needs.

Yamanouchi Kanji, Japan’s ambassador to Canada, made it clear that some of our Asian allies see Canada as a critical player in the world’s future energy, particularly when it comes to LNG.

“The world is waiting for Canada,” he said earlier this year. “Canada can and should play a very important role to support the energy situation not only in Japan and South Korea, but the world.”

Fact: Reducing global emissions starts with Canadian natural gas

If Canada is truly serious about tackling global greenhouse gas emissions, we could make a much more significant impact by supplying energy-hungry Asian countries with some of the cleanest LNG on the planet to replace coal. Climate change is a global issue, not a local one.

Despite being one of the world’s largest energy producers, Canada is still only responsible for about 1.6 percent of total global emissions.

Developing Asian counties, particularly China, have turned to coal to help power their growing economies. According to the IEA, switching to natural gas to generate power reduces emissions by 50 percent on average. And according to Energy for a Secure Future, Canadian natural gas shipped as LNG could perform even better, reducing emissions from coal by about 65 percent.

With analysts expecting world LNG demand to double over the next two decades, Canada could make a real, measurable impact on lowering global emissions by unlocking its LNG potential.

A recent study by Wood Mackenzie found that Canadian LNG exports could reduce net emissions in Asia by 188 million tonnes per year through 2050. Put another way that would be the annual equivalent of removing the emissions of all vehicles on Canadian roads or wiping out nearly three times B.C.’s total emissions.

Meanwhile, a coalition of six companies representing 95 percent of Canada’s oil sand production has jointly committed to achieving net zero emissions by 2050. The Pathways Alliance is looking to harness emerging technology like carbon capture and storage as well as small modular nuclear reactors to reach that target.

The reality is that if Canada significantly curtails its oil and gas industry, other national producers, some of which lack Canada’s commitment to democratic ideals and the environment, will fill that void. This could see bad actors like Russia continue to maintain a strategic and economic advantage over Europe by maintaining European reliance on its energy.

Fact: Phasing out oil and gas would hurt Indigenous communities

Over the last decade, Indigenous communities have emerged as key players in Canada’s energy sector, allowing First Nations, in many cases, to create intergenerational opportunities for their people.

From pipelines to LNG terminals, dozens of Indigenous communities have entered into ownership agreements on major oil and gas projects.

In B.C., 16 First Nations will acquire a 10 percent stake in the Coastal GasLink pipeline once it’s completed later this year. In Alberta, another 23 First Nation and Métis communities are now approximately 12 percent owners of seven operating Enbridge oil sands pipelines, the largest Indigenous energy transaction ever in North America.

And in northwest B.C., the Haisla Nation is 50 percent owner of the proposed Cedar LNG project, which would be the first Indigenous-owned LNG terminal in the world.

“When Europeans, Asians and Americans think of Canada’s Indigenous peoples, they often think we oppose all energy development. We aren’t victims of development. Increasingly we are partners and even owners in major projects,” Haisla Nation Chief Councillor Crystal Smith said during an April press conference after leading a delegation of Indigenous leaders to meet key international diplomats.

Indigenous employment in Canada’s oil and gas sector has continued to grow, rising by more than 20 percent since 2014 to reach an estimated 10,400 jobs in 2020.

Indigenous-owned businesses also benefit from the industry, with three major projects – the Trans Mountain Expansion, Coastal GasLink, and LNG Canada – spending some $9 billion with Indigenous- and locally-owned businesses.

Shawn Logan is Campaign and Advocacy Lead with the Canadian Energy Centre, a Troy Media Editorial Content Provider Partner.

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