What on Earth is Happening? Energy Emissions are Falling in Advanced Economies

In 2019 something incredible happened – the International Energy Administration (IEA) reported that energy related CO2 emissions in advanced economies fell to 11.3 gigatonnes (See Figure 1.1). This is significant for a variety of reasons, but most notably because the countries with the capabilities to act on emissions reductions are doing so, and with encouraging results. Energy related CO2 emissions in advanced economies haven’t been this low since 1990. The gradual decline of CO2 emissions has largely been underpinned by efficiencies and fuel substitutions in the power sector, which contributed to 85% of the reduction in emissions in advanced economies from 2018 to 2019. While renewables continue to play an ever-expanding role in the global power mix, the most significant reductions in carbon emissions were achieved through the substitution of coal-fired power stations for natural gas and nuclear power options.Several countries including the United Kingdom – the birthplace of the industrial revolution – are set to completely phase out coal-fired power stations in favor of more environmentally-friendly options by mid 2020.

Figure 1.1 – Energy Related CO2 Emissions, 1990 – 2019(1)(2)

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Source: IEA Global CO2 Emissions in 2019, IEA CO2 Emissions from Fuel Combustion by Country.

1. Advanced economies: Australia, Chile, European Union, Iceland, Israel, Japan, Korea, Mexico, Norway, New Zealand, Switzerland, Turkey, and United States.

2. Canadian emission data 1990 – 2017

While emissions reductions in advanced economies are encouraging, it is hard to ignore the proverbial elephant in the room – the fact that global emissions have steadily crept up over the same period, largely due to rapid industrialization in developing economies. In 2015, Bill Gates aptly stated that we need an energy miracle in order to see global emissions fall; “[Most problems can be solved locally – but this one is a world problem. … [I]t doesn’t really matter whether it’s a coal plant in China or a coal plant in the U.S. – the heating effect for the entire globe is the same.”

Many advanced economies enjoy the luxury of choice while grappling with the pragmatism of climate change. It is undeniable that cheap and abundant energy played a major part in industrializing economies at the turn of the 19th century, and many developing countries desire the same access to low-cost energy that allowed advanced economies to flourish.

Natural gas can offer a viable bridge between heavy-emitting carbon pollution, and sustainable renewable resources. However, natural gas is often priced out of consideration for many developing countries without the domestic infrastructure necessary for extraction and transportation. Therefore, advanced, energy producing economies like Canada, have an opportunity to continue to provide clean and affordable sources of energy to developing economies so these countries can continue to advance, and we can all benefit from a more sustainable future.

Canada’s Contribution to Global Emissions

While emissions in advanced economies have fallen to a level not seen since the launch of the Hubble Space Telescope (1990), Canada has struggled to reduce emissions at the same pace. Canada agreed to cut its GHG emissions by 30 per cent under the Paris Agreement (from a 2005 baseline) but the Country faces a tough set of obstacles to achieve this end. While many advanced economies are reducing emissions by transitioning away from coal, Canada’s electricity mix was largely already free of heavy GHG emitting sources.  Approximately 82% of Canada’s electricity is supplied by non-GHG emitting sources such as hydroelectric and nuclear power, which leaves little room for reductions compared to the peer group of advanced economies. As Jackie Forrest notes, “If the U.S. could transform their power system to match Canada’s current electricity mix, this alone would achieve most of their Paris target.”  

Figure 1.2 – Change in Emissions from Fuel Combustion, Canada, 1990 – 2017.

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Source: IEA CO2 Emissions from Fuel Combustion by Country.

Despite Canada’s high baseline for non-GHG emitting power generation, the Country has made significant improvements elsewhere to reduce CO2 emissions from fuel combustion since 1990, particularly in the residential housing sector (-7.3%), and in industrial applications (-11.8%) (See Figure 1.2). Canada experienced an immigration boom between 1990 and 2018, which resulted in a net population increase of more than 33%. The increase in Canada’s population coincided with the rapid development of carbon intensive industries, which contributed to large gains in emissions from transportation (37.6%), commercial buildings (21.9%), agriculture (157.1%), and the energy industry (192.7%). Canada is a major exporter of both energy and agricultural products, which disproportionately elevates Canada’s overall carbon footprint. Between 1990 and 2017, Canada’s overall net carbon footprint increased by 31.0% (130 Mt CO2). It is important to recognize that without Canadian supply, countries with less stringent environmental standards would be required to produce these goods, and the impressive reduction in advanced economy emissions (Figure 1.1) would likely be diminished.

To augment the Country’s role as a resource supplier, Canada is implementing trailblazing technologies and processes to reduce its GHG emissions. The C$1.2 billion Alberta Carbon Trunk Line (ACTL) opened on June 3rd, 2020, and is the world’s newest integrated, large-scale carbon capture, utilization, and storage system. The ACTL will transport captured CO2 from the Agrium fertilizer plant and the NWR Sturgeon Refinery to be injected underground as part of an enhanced oil recovery process. The ACTL is capable of sequestering 14.6 Mt CO2 per year at full capacity, which represents a 20% reduction in all oil sands emissions, or the rough equivalent of taking 2.6 million cars off the road.

Canada set the standard for low-carbon electricity generation 20 years ago with a steadfast commitment to non-GHG emitting sources. This model is now being adopted across the globe, and Canada is again at the forefront of new carbon reduction technologies. With the appropriate support, investment climate, and global exposure, Canada’s practical applications of carbon technologies will hopefully again, provide a model for developing economies seeking to navigate towards a low-carbon future.

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Author

Michael Hebert, Viewpoint Research Team

Canada Urgently Needs a Reset of National Priorities

Canada was in a slow-moving crisis of underperformance and dysfunction before the pandemic health crisis and consequent economic collapse. It is imperative that Canadians see this clearly. Only then will we have a better chance to reset our priorities and place our country on a different trajectory.

In recent years, we have been particularly focused on environmental priorities, most notably, our commitment to reduce emissions in accordance with the United Nations Paris Accord. It must be emphasized that this is not the problem. The problem has been the rigidity of focus on this priority at the expense of other essential priorities which has impaired the future for all Canadians.

There has been a relative neglect of critical economic, social, and governance priorities in Canada with cumulative negative impacts that are staggering We entered the pandemic and economic collapse in a position of serious vulnerability.

There is ample evidence that portrays a grim picture of Canada’s investment performance, competitiveness, and productivity in recent years.

• Since 2014, growth in GDP per capita was the worst of all G7 countries and less than half that of the US (4% versus 8.7%).  

• Business investment is about 20% below peak levels in 2014.

• 2019 per-worker investment ranks Canada 15th among the 17 OECD countries. In Switzerland, businesses invest twice as much per worker as Canadian businesses. This is critical to competitiveness and higher productivity.

• Canada’s productivity has significantly lagged that of the United States, our main customer and competitor. In 2018, Canada generated US$55.00 GDP per hour of labour compared to US$76.50 in the United States.

• A 2017 survey of 60 of Canada’s largest businesses foreshadowed our declining performance; “a third said the investment climate had deteriorated over the past five years, [and] only 2 per cent said it had improved.”

We were in a slow-moving crisis of investment, competitiveness, and economic underperformance before the pandemic, and now we’ve gone right over the edge. There have been sharp regional disparities in economic conditions but ultimately, over time, there is no person and no sector that is unaffected by a country that underperforms.

Our national priorities also include the quality of life for all people in all regions of our country. The fact that social distress may be concentrated in one region, specifically in Alberta at this time, does not detract from the point that this is a national issue.

The distress in Alberta since 2014 is serious.

• The number of unemployed not covered by employment insurance has risen 53 per cent, from 75,000 to 115,000;

• Unemployment among young men is up 156%;

• Food bank usage is up 80 per cent;

• Suicide hotline calls have increased by 85 per cent;

• The number of individuals seeking counselling support in Calgary has increased 46 per cent;

• Incidents of domestic violence in Calgary have increased by 150 per cent;

• Non-violent crime is up 34 per cent;

• Business insolvencies have increased by 58 per cent; and

• Consumer bankruptcies are up 101 per cent.

This data is before the horrendous impact of the pandemic and oil price collapse. It is frightening to contemplate the hardship that is now occurring.

Underlying our economic underperformance and the social distress in Western Canada is cumulative regulatory and governance dysfunction.

According to the 2020 World Bank Ease of Doing Business Index, Canada ranks 30th out of 34 OECD countries in the time to get a permit for a construction project.

There has been over $200 billion worth of major energy and resource development projects cancelled or withdrawn since 2014. Some because of market conditions, but most because of regulatory delay, changing and inconsistent rules and guidelines, decision making arbitrariness, cumulative undue expense, and intensely politicized in-fighting. The Teck Frontier mine decision and Warren Buffett’s withdrawal from the Quebec-based Saguenay LNG project are the two latest examples of this.

Governance excellence is about effectiveness. During the recent rail blockades led by a small group of eco-activists, a DART & Maru/Blue poll found that two thirds of Canadians agreed with the statement, “Canada is broken.”

Governance integrity is about fairness and creating trust. This points to what is arguably the most serious red flag of governance failure in Canada. This is the emergence of extreme alienation in Western Canada. A large proportion of the 7.5 million people in the energy producing region of the West no longer trust that their interests are fully considered as part of the national interest of Canada.

Our longer-term national priorities need a reset, which arguably in the post-pandemic recovery, will be forced by a set of new realities. The direction is a renewed focus on economic priorities and on the social conditions for all Canadian citizens, and on rebuilding trust in the full functioning of our nation.

The most important renewed priority is governance excellence and integrity and the functioning of our nation. Otherwise the polarization and infighting will continue to message to investors that Canada is a poor destination for new capital, our economic performance will continue to erode, and social distress and alienation will become even more extreme and dysfunctional.

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Author

Mac Van Wielingen