The oil sands sector will have to embrace new technology and new products if it is going to prosper as the world transitions to a low-carbon economy.
Addressing a roundtable hosted by Corporate Knights on May 27, Natural Resources Minister Seamus O’Regan said the federal government is working on a strategy that will not only exceed Canada’s existing commitment to reduce greenhouse gas (GHG) by 2030, but put the country on a path to net-zero emissions by 2050.
He said Canada’s oil sector – the fourth largest producer in the world – will not disappear over the medium-term and has to be part of a national climate-change strategy.
“Recognizing the importance of oil and gas to our current national economy doesn’t mean we hide from the reality of climate change,” O’Regan said.
“It means we have to have a plan and . . . the plan has to be honest and confront the reality of our economy. That does not hinder us from bold moves,” he added. “It just means we have to make smart ones.”
The minister gave little indication of what those “smart moves” might entail but said they will have to drive dramatic reductions in carbon emissions while maintaining a competitive energy sector.
The Corporate Knights roundtable was part of its seven-part Building Back Better event series. It was held amid growing calls for the Liberal government to ensure its planned post-pandemic economic stimulus program serves to accelerate the country’s transition to a low-carbon economy.
A white paper produced for the session proposed that Ottawa create a $25-billion investment fund that would cover the research and development costs for oil and gas innovation. The fund would also help finance the adoption of those technologies to ensure they are rapidly deployed by industry.
Canada could be a global leader in the production of carbon fibre and activated carbon, both of which are rapidly growing markets, as well as in the production of clean-burning hydrogen for transportation, said the paper, which was co-authored by Ralph Torrie, Céline Bak and Corporate Knights’ publisher Toby Heaps.
Given its exceptional strength and flexibility, carbon fibre could replace steel and other metals in industry and auto manufacturing, while activated carbon is increasingly used in filtration and purification processes.
A proposed $25-billion federal Energy Innovation Fund would generate $100 billion on overall investment, create 50,000 full-time jobs per year over 10 years, and up to $125 billion in sales of zero-carbon commodities for Canadian firms by 2030. It could divert some 30% of current oil sands production to markets where the bitumen is not burned as fuel, thereby reducing its GHG impact.
“We have a lot to lose if we don’t invest wisely now to create an economic engine for the future,” the authors wrote. “At the same time, the current moment offers an opportunity to act quickly and place Canada in a leadership position in fast-growing global markets.”
However, critics contend that any plan for the industry to increase – or even maintain – crude production will prevent Canada from reaching its net-zero target in 2050.
“The industry is using the potential for new markets and unbelievable projections of emission reductions to justify their plans to expand production,” Tzeporah Berman, international program director for Stand.Earth, said in an interview.
She noted the Intergovernmental Panel on Climate Change has concluded that global oil production will have to decline by 37% by 2030 and 87% by 2050 to put the world on track to limit the increase in global average temperatures to less than 2 degrees Celsius.
“The federal government and the industry simply have not come to terms with the need for production declines,” Berman said.
Meanwhile, natural gas producers are eying new opportunities to produce hydrogen, which is touted as a more efficient transportation alternative for trucks, buses and trains than battery-powered motors.
With its abundant natural gas and high quality wind and geothermal resources, Canada is poised to be a world leader in low-cost production of hydrogen, said Dan Wicklum, chief executive officer at the Alberta-based Transition Accelerator, a non-profit group that works to commercialize low-carbon technologies. The hydrogen would be produced from renewable energy and natural gas, with the resulting carbon dioxide emissions captured and sequestered.
“We’re just about the cheapest place on the planet to produce hydrogen,” even with the additional cost of carbon capture, Wicklum told the roundtable. “We could be a globally dominant exporter of a zero-carbon fuel that the world can’t get enough of.”
But while the industry works on potentially game-changing technologies, government should not lose sight of existing opportunities for reducing GHG content in transportation fuels.
Finland’s Neste used to be mainly fossil fuel oil refiner, and has since diversified to produce biodiesel and jet fuel from food waste and fatty residues, which essentially recycle carbon molecules that are already circulating in the economy. As a result of its big bet on biofuels, it now earns half its profits from renewable fuels and has more than tripled in value in the past five years while its oil and gas peers have seen their value cut in half.
Jeremy Baines, president of Neste U.S., was also at the roundtable and said that, by 2040, 70% of the vehicle fleet will still rely on internal combustion engines. Advanced biofuels represent a cost-effective way to reduce the GHG emissions from those engines, Baines said.
“We can’t wait for ‘some day solutions’ when we have solutions today that work,” he said.