Prime Minister Justin Trudeau got multiple standing ovations from an oil industry crowd in Houston earlier this month, where he told them “As I said on the very first trip to the oil patch back in 2012, no country would find 173 billion barrels of oil in the ground and just leave them there. The resource will be developed. Our job is to ensure that this is done responsibly, safely and sustainably.”
In his relentless promotion of building pipelines, one of Trudeau’s main talking points is that we don’t have to choose between economy and environment: we can have a healthy economy and meet our Paris climate commitments. This is certainly possible, but not in all cases; there are some kinds of economic development that simply aren’t consistent with a stable climate.
The German government recognizes this, so they asked the International Energy Agency (IEA) and International Renewable Energy Agency (IRENA) to prepare an assessment of what changes would be required in the energy sector to achieve the primary aim of the Paris climate agreement. That agreement, signed by 195 countries including Canada, aims to limit global temperature rise this century to “well below 2 degrees Celsius and to drive efforts to limit the temperature increase even further to 1.5 degrees Celsius above pre-industrial levels”.
The results of that research do not support Trudeau’s ‘the resource will be developed’ claim, unless he’s prepared to ignore his government’s climate commitments.
The report – Perspectives for the Energy Transition: Investment Needs for a Low-Carbon Energy System – contains two scenarios for meeting the Paris target. The IEA, which is closely connected to the legacy fossil fuel and nuclear energy sector, emphasizes how difficult this will be to achieve resulting in headlines like “Only ‘unparalleled ramp up’ of cleantech will prevent spike in temperature: IEA”.
To ensure a two-thirds chance of [keeping warming below 2 degrees Celsius], the IEA said, "would require an unparalleled ramp up of all low-carbon technologies in all countries."
Ambitious measures would include "the rapid phase-out of fossil fuel subsidies, CO2 prices rising to unprecedented levels, extensive energy market reforms, and stringent low-carbon and energy efficiency mandates would be needed to achieve this transition," it said.
"Such policies would need to be introduced immediately and comprehensively across all countries," the IEA added.
The scenario prepared by IRENA, which is closely connected to the emerging renewable energy sector, conveys a sense of excitement and possibility that is captured in the headline “Paris Accord Could Make the World $19 Trillion Richer”.
“Efforts to slow climate change won’t just keep the planet habitable. They will also boost the world economy by $19 trillion.
Investments in renewable power and energy efficiency will add about 0.8 percent to global gross domestic product by 2050, the International Renewable Energy Agency, or Irena, said Monday in a report produced for the German government….
Irena, which produced the study along with the International Energy Agency, said the share of renewable energy needs to increase to 65 percent of the primary energy supply in 2050, from about 15 percent in 2015.
That sweeping transformation of the energy sector could also force fossil fuel companies to leave $10 trillion of coal, oil, gas and other assets stranded underground and elsewhere, according to Abu Dhabi-based Irena. That’s higher than the $320 billion forecast under the IEA’s scenario.
The investment in renewables and energy efficiency, however, would more than offset these losses and create about 6 million jobs, Irena found.”
Ultimately I think the IRENA’s optimism re the benefits and possibilities will prove closer to the truth, but I’ll focus here on the IEA scenario as its more fossil-friendly approach still challenges Trudeau’s claim that expanded tar sands production can co-exist with a serious attempt to achieve the Paris climate goals.
First, a short recap of IEA scenarios. Prior to this report, the IEA used three scenarios:
- The Current Policies Scenario is a business-as-usual forecast that assumes no changes in policies from the mid-point of the year of publication. It is expected to result in 6°C of warming.
- The New Policies Scenario takes account of broad policy commitments and plans that have been announced by countries, including national pledges to reduce greenhouse-gas emissions and plans to phase out fossil-energy subsidies, even if the measures to implement these commitments have yet to be identified or announced. It is expected to result in ~4°C degrees of warming.
- The 450 Scenario sets out an energy pathway consistent with limiting concentration of greenhouse gases in the atmosphere to around 450 parts per million of CO2. This emissions trajectory gives a roughly 50% chance of limiting the average global temperature increase to 2°C.
The IEA’s new 66% 2°C Scenario provides a 66 percent chance of keeping warming below 2°C. So still not really “well below 2 degrees” as called for in the Paris agreement, but getting closer.
As in earlier low-carbon scenarios, coal takes a big hit because it is easy (and relatively cheap) to replace coal-fired electricity with renewables and natural gas. What is relatively novel, however, is that in the IEA’s new 66% 2°C Scenario, oil and gas also see a big reduction in demand.
Oil demand peaks in the 2020s, then falls 40% from current levels by 2040 and over 55% by 2050. Natural gas demand peaks in the 2030s and also declines rapidly, while new renewables (primarily wind and solar power) go from being the smallest to the largest share of energy production.
Contrary to Trudeau’s ‘no country would leave oil in the ground’ claim, the IEA found that “Comparing cumulative fossil fuel production in the 66% 2°C Scenario up to 2050 with the remaining reserves of each fuel individually, we find that around 40% of gas, 50% of oil and over 80% of steam and coking coal current reserves would be ‘unburnable’.”
Academic analysis has found that oil from the tar sands and Arctic are the most likely to be left in the ground because of its high cost of production. This has been borne out by experience – as the oil price crashed in 2014, investment in greenfield tar sands production dried up. The dim prospects for bitumen are one of the likely reasons that Shell, which acknowledges demand for oil could peak in the 2020s due to rapid uptake of electric vehicles and other climate policies, has sold off its tar sands holdings.
The IEA 66% Scenario didn’t explicitly address the prospects for Canadian oil, but the IRENA scenario is blunt: “The world will not run out of fossil fuels, but it will stop using the most challenging resources that have high production costs, such as oil sands and Arctic oil.”
There’s a lot of fascinating detail and analysis in this report, but there are three big take-aways for Canadians.
- There is no scenario where we meet the Paris climate goals and new tar sands pipelines make economic sense.
- Contrary to the Prime Minister's assertion to his oil audience in Houston, we do have to leave most of the oil in the ground if we are going to bequeath a habitable planet to our kids.
- The longer we wait to make the transition to low-carbon energy, the more expensive and disruptive the transition will be.
So let's get started.