Eyes on the Road Ahead

The following is testimony I delivered to the federal Standing Committee on Natural Resources on October 18. The committee is currently undertaking a study of Canada’s Clean Energy Plans in the Context of North American Energy Transformation.

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My comments today centre on the need to ensure that policymaking is grounded in credible analysis, and an understanding that successfully navigating this transition requires that we keep our eyes on the road ahead, not fixed on the rear-view mirror.

Some argue the transition to clean energy will be slow. They would prefer policymakers focus on enabling increased production and use of Canada’s oil and gas resources, citing ever-growing global demand. But increasingly, energy analysts are forecasting a future, based on current market trends, that paints a very different picture with sweeping implications for Canada.

I’d like to draw your attention to a forecast released last week by DNV, global experts in assurance and risk management. As they put it, “Unlike most energy forecasters, DNV does not develop scenarios…our analysis produces a single ‘best-estimate’ forecast of the energy future.” 

In this ‘best-estimate’ forecast they foresee that coal, oil, and gas will each begin an inescapable decline before the end of this decade. Particularly material for Canada are the implications for oil and gas. Oil demand tips from growth to decline in 2027 as electrification of road transport accelerates. Global demand for gas also peaks in 2027, plateaus for a decade and then declines.

But it is their forecast for North American oil and gas production that is particularly noteworthy, and in stark contrast to what you might hear about on the news or as members of this committee. North American oil is foreseen plateauing at around 17 million barrels per day until 2024, then declining to 7 million barrels per day in 2050. North American gas production peaks in the 2020s and declines to 2030 and beyond. Liquefaction capacity to produce LNG in North America is forecast to peak in 2030 and plateau. These declines are faster and steeper in net zero scenarios—in which the world succeeds in limiting warming to 1.5 degrees Celsius—whether produced by DNV, the International Energy Agency, or even Shell and BP.

A passage of dialogue from Ernest Hemingway’s 1926 novel, The Sun Also Rises seems particularly relevant to this future:

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually, and then suddenly.”

The flip side of this is the extent to which deployment of clean energy is and will continue to accelerate. The key technologies for achieving net zero— solar, wind, batteries, heat pumps and green hydrogen—are not and will not grow on a linear basis, but are following an S-shaped, exponential curve driven by self-reinforcing feedback loops that accelerate their cost reductions and scaling.

The risk to Canada, then, is that we continue to pay short shrift to the opportunities at hand—in critical minerals, batteries and other technologies, and clean and renewable electricity—in favour of trying to prop up the viability of our oil and gas sector. That we focus on the sunset, rather than the sunrise.

There is a very real opportunity cost when it comes to the efforts of policymakers and the spending of public dollars, neither of which are limitless. To achieve net-zero we need to target public policy and spending to help shift capital from fossil fuel to clean energy investment at a ratio of $4 invested in clean energy for every $1 invested in fossil fuels in this decade.

The key takeaways for the committee to consider are:

First, that we need to prepare for a net-zero future in which the oil and gas sector will not be growing and proactively manage the implications—to communities, workers, and government revenue—while ensuring the sector responsibly reduces its emissions and manages its environmental liabilities.

Second, that we need to prepare and position for a future that includes abundant opportunities to produce, refine, use and ultimately recycle our critical minerals in clean energy technologies, to harness our clean and renewable energy resources to power this growth, and to leverage our skilled workforce, innovators and entrepreneurs.

And third, that we don’t attempt or aspire to simply mirror the IRA and our American neighbours, but surgically select those sectors and opportunities in which Canada can compete and win throughout the energy transition.

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