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Canadian Energy Centre

A Matter of Fact: The IEA’s updated net zero scenario is still unrealistic

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11 minute read

From the Canadian Energy Centre

By Deborah Jaremko

Canada can lead the world with reliable, affordable energy supply and clean technology as countries work to reduce emissions

The International Energy Agency (IEA) has updated its net zero scenario, pushing for governments to implement more aggressive climate policies on the energy industry.  

The IEA itself acknowledges the scenario is “a pathway, but not the only one” for the energy sector to reduce emissions to net zero by 2050. 

The agency acknowledges the world is not on this trajectory, but the Government of Canada uses the net zero scenario as the basis for policies like its proposed oil and gas emissions cap, which will hurt Canadians without environmental gain 

“We’re the fourth-largest oil producing country, and we’re the only ones that are saying oil and gas is not here to stay. That’s a huge roadblock for all of us,” Gurpreet Lail, CEO of Enserva, the national trade organization representing energy service and supply companies, told the Globe and Mail during the World Petroleum Congress last week. 

Canada can lead the world with reliable, affordable energy supply and clean technology as countries work to reduce emissions. But the sector needs to be allowed to thrive rather than being phased out while it is needed.  

Here are the facts.  

Fact: The IEA net zero scenario is not a forecast 

The IEA’s updated net zero scenario envisions that the world does not need any new coal, oil and natural gas projects. By 2030, it imagines world oil demand will drop by 23 per cent, natural gas demand by 18 per cent, and coal demand by 44 per cent.  

It’s difficult to see how this could actually come about, given that even with accelerating investment in low carbon energy resources the world’s consumption of oil, gas and coal is as high or higher than it has ever been. And rising.  

The IEA reports both oil and coal demand are at record levels. The agency itself projects the world’s total energy consumption – which increased by 15 per cent over the last decade – will increase by a further 24 per cent by 2050.

On the world’s current trajectory, the IEA says oil, gas and coal will still account for 62 per cent of world energy supply in 2050, compared to 78 per cent in 2021.   

“There’s no evidence that oil demand is going to peak any time soon,” Arjun Murti, former partner with Goldman Sachs, said at the recent Global Business Forum in Banff.

“Oil is not in its sunset phase.” 

Fact: The IEA net zero scenario is unrealistic 

The IEA’s net zero scenario includes components that are unrealistic.  

For example, it says electricity transmission and distribution grids need to expand by around two million kilometres each year to 2030. But it also acknowledges that today, building these grids can take more than a decade, putting that scale and timeline already out of reach.   

The net zero scenario also hinges on a “unified effort in which governments put tensions aside and find ways to work together.” But the IEA also acknowledges the world today is “a complex and low-trust geopolitical environment.”  

Consider that Russia is trying to boost trade with Asia as economic ties with the West shrivel over Moscow’s actions in Ukraine, according to Reuters News. In just one example, state-owned Gazprom plans to start gas deliveries to China through the Power of Siberia pipeline in 2025 and expand that service in 2030 with Power of Siberia-2.    

Russia’s invasion of Ukraine accentuated the world’s reversal away from the concept of globalization, where everyone benefits from the global economy, leading energy analyst and Pulitzer Prize-winning author Daniel Yergin said on a recent ARC Energy Ideas podcast 

“The era of globalization was what I call the WTO consensus: we’re all in this global economy together. In China, hundreds of millions of people come out of poverty. India enters the global economy, standards of living go up and you get really impressive economic performance,” Yergin said.  

“Well, that era is ending and it’s heading pretty fast now as we move into this new era of great power competition, which hopefully does not become great power confrontation.” 

Energy is at the heart of the “new map,” as Yergin calls it. 

Responsibly produced, reliable energy from Canada can benefit world energy security while helping reduce emissions. That is why it is essential the sector is not phased out through government policy. 

Fact: Canadian energy and clean technology can help reduce world emissions 

One of the fastest and most effective ways to reduce emissions is to switch from coal-fired power to power generated from natural gas, traded globally as LNG.    

Consider that between 2005 and 2019, emissions from the U.S power sector dropped by 32 per cent because of coal-to-gas switching, according to the U.S. Energy Information Administration.   

Natural gas from the LNG Canada project alone could reduce emissions in Asia by up to 90 million tonnes annually, or the equivalent of shutting down up to 60 Asian coal plants, the project says.  

That’s a reduction of more than the entire emissions of the province of British Columbia, which were 64 million tonnes in 2022.    

Expanding Canada’s LNG exports to Asia could reduce emissions by 188 million tonnes per year, or the annual equivalent of taking all internal combustion engine vehicles off Canadian roads, according to a 2022 study by Wood Mackenzie.   

One of the reasons LNG from Canada has a lower emissions intensity than LNG from other jurisdictions is the success producers have seen reducing methane emissions. It’s an opportunity for technology exports. 

The IEA views cutting methane emissions from oil and gas as a critical component of achieving climate targets.  

The latest data shows that oil and gas producers in Alberta decreased methane emissions by 44 per cent between 2014 and 2021, a 10 per cent drop from 2020. The sector is expected to surpass the target of reducing methane emissions by 45 per cent by 2025.   

“I don’t know of any other jurisdiction that is as far forward in terms of its methane management as Canada,” says Allan Fogwill, chief operating officer of Petroleum Technology Alliance Canada.  

“There’s nothing to suggest we couldn’t have similar impacts in the United States, the Middle East, or former Soviet countries that also are involved in oil and natural gas production.” 

Fact: Canada’s carbon capture and storage leadership can benefit the world 

The IEA says “rapid progress” is required to deploy more carbon capture, utilization and storage (CCUS) projects to reduce emissions.  

This is another area where Canada’s energy sector can take the lead 

Since 2000, CCS projects in Saskatchewan and Alberta have removed more than 47 million tonnes of emissions, or the equivalent of taking more than 10 million cars off the road. This work has helped inform development of major CCS projects globally including Northern Lights in Norway.  

Canada has five of the world’s 30 commercial CCS facilities, accounting for about 15 per cent of global CCS capacity even though Canada generates less than two per cent of global CO2 emissions, according to the Global CCS Knowledge Centre.  

Among CCS projects under development in Canada is one of the largest in the world, proposed by the Pathways Alliance of oil sands producers.  

The first phase of the Pathways CCS project will connect 14 oil sands facilities to a CO2 storage hub in northern Alberta. The target is to reduce emissions from operations by 22 megatonnes by 2030 on the way to net zero in 2050. 

Fact: Oil and gas still needed in IEA net zero scenario 

Even in the IEA’s net zero scenario, in 2050 about 14 per cent of world energy needs are still supplied by oil and gas.   

This includes non-combustion uses like petrochemical feedstock and asphalt, which crude from Canada’s oil sands is particularly well suited to supply. Researchers with Queen’s University recently found that asphalt from Alberta’s oil sands can extend pavement lifespan by 30 to 50 per cent.    

The world needs more Canadian oil and gas, not less.   

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Canadian Energy Centre

Saskatchewan Indigenous leaders urging need for access to natural gas

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Piapot First Nation near Regina, Saskatchewan. Photo courtesy Piapot First Nation/Facebook

From the Canadian Energy Centre

By Cody Ciona and Deborah Jaremko

“Come to my nation and see how my people are living, and the struggles that they have day to day out here because of the high cost of energy, of electric heat and propane.”

Indigenous communities across Canada need access to natural gas to reduce energy poverty, says a new report by Energy for a Secure Future (ESF).

It’s a serious issue that needs to be addressed, say Indigenous community and business leaders in Saskatchewan.

“We’re here today to implore upon the federal government that we need the installation of natural gas and access to natural gas so that we can have safe and reliable service,” said Guy Lonechild, CEO of the Regina-based First Nations Power Authority, on a March 11 ESF webinar.

Last year, 20 Saskatchewan communities moved a resolution at the Assembly of First Nations’ annual general assembly calling on the federal government to “immediately enhance” First Nations financial supports for “more desirable energy security measures such as natural gas for home heating.”

“We’ve been calling it heat poverty because that’s what it really is…our families are finding that they have to either choose between buying groceries or heating their home,” Chief Christine Longjohn of Sturgeon Lake First Nation said in the ESF report.

“We should be able to live comfortably within our homes. We want to be just like every other homeowner that has that choice to be able to use natural gas.”

At least 333 First Nations communities across Canada are not connected to natural gas utilities, according to the Canada Energy Regulator (CER).

ESF says that while there are many federal programs that help cover the upfront costs of accessing electricity, primarily from renewable sources, there are no comparable ones to support natural gas access.

“Most Canadian and Indigenous communities support actions to address climate change. However, the policy priority of reducing fossil fuel use has had unintended consequences,” the ESF report said.

“Recent funding support has been directed not at improving reliability or affordability of the energy, but rather at sustainability.”

Natural gas costs less than half — or even a quarter — of electricity prices in Alberta, British Columbia, Ontario, Manitoba and Saskatchewan, according to CER data.

“Natural gas is something NRCan [Natural Resources Canada] will not fund. It’s not considered a renewable for them,” said Chief Mark Fox of the Piapot First Nation, located about 50 kilometres northeast of Regina.

“Come to my nation and see how my people are living, and the struggles that they have day to day out here because of the high cost of energy, of electric heat and propane.”

According to ESF, some Indigenous communities compare the challenge of natural gas access to the multiyear effort to raise awareness and, ultimately funding, to address poor water quality and access on reserve.

“Natural gas is the new water,” Lonechild said.

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Alberta

The beauty of economic corridors: Inside Alberta’s work to link products with new markets

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From the Canadian Energy Centre

Q&A with Devin Dreeshen, Minister of Transport and Economic Corridors

Devin Dreeshen, Alberta’s Minister of Transportation
and Economic Corridors.

CEC: How have recent developments impacted Alberta’s ability to expand trade routes and access new markets for energy and natural resources?

Dreeshen: With the U.S. trade dispute going on right now, it’s great to see that other provinces and the federal government are taking an interest in our east, west and northern trade routes, something that we in Alberta have been advocating for a long time.

We signed agreements with Saskatchewan and Manitoba to have an economic corridor to stretch across the prairies, as well as a recent agreement with the Northwest Territories to go north. With the leadership of Premier Danielle Smith, she’s been working on a BC, prairie and three northern territories economic corridor agreement with pretty much the entire western and northern block of Canada.

There has been a tremendous amount of work trying to get Alberta products to market and to make sure we can build big projects in Canada again.

CEC: Which infrastructure projects, whether pipeline, rail or port expansions, do you see as the most viable for improving Alberta’s global market access?

Dreeshen: We look at everything. Obviously, pipelines are the safest way to transport oil and gas, but also rail is part of the mix of getting over four million barrels per day to markets around the world.

The beauty of economic corridors is that it’s a swath of land that can have any type of utility in it, whether it be a roadway, railway, pipeline or a utility line. When you have all the environmental permits that are approved in a timely manner, and you have that designated swath of land, it politically de-risks any type of project.

CEC: A key focus of your ministry has been expanding trade corridors, including an agreement with Saskatchewan and Manitoba to explore access to Hudson’s Bay. Is there any interest from industry in developing this corridor further?

Dreeshen: There’s been lots of talk [about] Hudson Bay, a trade corridor with rail and port access. We’ve seen some improvements to go to Churchill, but also an interest in the Nelson River.

We’re starting to see more confidence in the private sector and industry wanting to build these projects. It’s great that governments can get together and work on a common goal to build things here in Canada.

CEC: What is your vision for Alberta’s future as a leader in global trade, and how do economic corridors fit into that strategy?

Dreeshen: Premier Smith has talked about C-69 being repealed by the federal government [and] the reversal of the West Coast tanker ban, which targets Alberta energy going west out of the Pacific.

There’s a lot of work that needs to be done on the federal side. Alberta has been doing a lot of the heavy lifting when it comes to economic corridors.

We’ve asked the federal government if they could develop an economic corridor agency. We want to make sure that the federal government can come to the table, work with provinces [and] work with First Nations across this country to make sure that we can see these projects being built again here in Canada.

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