Saturday, June 27, 2015

Which Energy Strategy Should Canada Pursue to Match the Environmental Policy? 加拿大应该追求一个什么样的能匹配环境政策的能源战略?

oil and gas : Oil Pumpjack at Sunset Illustration 

Abstract: The major reason for change of the polls, the author believes, is the present energy policy. First, there is the Copenhagen Accord. However, both Alberta and Saskatchewan’s emissions increased between 2005 and 2012. Alberta now produces more greenhouse gas emissions than Ontario and Quebec put together.  British  Columbia's carbon tax, clean energy requirements and low carbon fuel standard, QC's cap and trade system for greenhouse gas emissions allowances, Ontario's gradual phrasing out of coal for electricity have contributed to reduce their greenhouse gas emission level to 3-19% below the one in 2005. However, the country’s total emissions continue to climb. The chief culprit is the oil sands sector — Canada’s fastest-growing source of carbon emissions. Secondly, there is a reliance on exporting oil and gas to the US, which is no longer demanding as much as before. Thirdly, the oil and gas reserves are mainly located in the OPEC countries, which can easily control the oil prices. Fourthly, Canadians’ ratio of household debt in disposable income has approached such an alarming figure that a new economic strategy is needed to guide the country. The recent takeover of Crescent Point Energy over Legacy shows taxation can have a huge impact on the economy. While it is good to take the direction towards renewable energies, it should be borne in mind that the goose that lays the golden eggs cannot be killed. An integrated energy strategy is urgently needed, and some of the implementation measures have been put forward.

Key Words: Greenhouse gas emissions, oil exports, reserves, household debt, integrated strategy

If you watched Alberta’s Progressive Conservatives suddenly go from a dynasty to the third place, or the Bloc Québécois get virtually swept of their province in favor of a party that previously held only one seat there, or even Ontario’s provincial Tories who accidentally turned off people they were sure would support them, it becomes possible that even some conservatives may change their stand in the coming Federal election in October 2015. According to a poll, 16% of the population said they would only consider voting NDP in the coming election, which is 1% higher than the conservatives[i]. Looking at the larger provinces, we can see British Columbia, Ontario and Quebec all have the Liberal Party in power. Though we cannot say for sure which party will win the coming Federal election, we can be certain that we will not see an overwhelming win for the conservatives. But what made this happen? Did it happen overnight? What is behind the change in voting preferences in the Canadian population? The writer believes the economic policy is a critical reason (just as put by Clinton before the US election) besides the ethical problems tha have been plaguing the Conservatives. The pivotal reason, the author believes, is the Conservatives’ energy policy.

The economic policy should embrace a healthy growing economy with sustainable development, one lauded by citizens and beneficial to businesses. It is noted that the NDP in Alberta will raise the corporate tax and oil and gas loyalties, which has encouraged Crescent Point Energy to take over Legacy in southeast Saskatchewan. There is a saying that you cannot kill the goose that lays the golden eggs. While the writer is not emphasizing an expansion of oil and gas, a policy which encourages investment and employment should be pursued. Also, a political party that looks not only at the majority of voters but also at the minority (as they may form an alliance to become a formidable interest group and their interests should not be marginalized), not only at short-term benefits but also at long-term prospects, is much wiser. As Claire Brownell puts it, at least 40% of the adult population and 25% of Canadian households are single and not living with children, and this ratio is increasing[ii]. Catering to their needs will bring forth accessible transit, walkable suburban neighborhoods and a healthy living environment. It will be more beneficial to the economy if we change from promising things to certain groups of people to thinking about how to improve society as a whole.

This article will not forecast the result of the coming Federal election, as the writer has to consider many more factors before doing that. However, a clear integrated energy strategy is needed to ensure both steady votes and a good blue print for the future.

I. Problems of the Present Energy Strategy

First, there is a lower contribution of the manufacturing industry and a higher contribution of the oil and gas industry to the economy. According to research by David Parkinson, in the first half of the year in 2014, energy accounted for 30% of Canada's economic growth and 40% of export growth, weighing more than retail, construction, agriculture and public sector service[iii]. However, the oil and gas industry is very fragile, relying too much on quality of the reserves, exploration cost and many external factors.

Secondly, there is a high reliance on exports to the US (more than 90%) while the US is diversifying its imports and starting to produce its own oil and gas at a much lower cost and has even begun exporting oil and gas to Quebec. This indicates that what we used to count on may vanish all of a sudden.

Thirdly, too much emphasis on oil and gas leads to an unstable and shaky economy. More than 50,000 workers have been laid off in Alberta, since the glut in world oil, with many businesses shut down or half-closed, but a lower interest rate to energize the economy might stimulate a credit crisis like the one in the US. Meanwhile, the ratio of household debt in disposable income (163.3%) surpasses that of the US (150%) and that of Europe (160%) during their crisis and approaches that of Greece, implying a potential similar crisis[iv].

Fourthly, there is a big debate over the pollution and safety issues of the oil pipelines and railway cars as well as the greenhouse effect. Some provinces, including Alberta and Saskatchewan, remain highly reliant on fossil fuel production and combustion – and as a result, the emissions are moving in the wrong direction. Between 2005 and 2012, only Alberta’s and Saskatchewan’s emissions profiles worsened in absolute terms, while every other province or territory reduced or maintained the absolute size of their emissions inventories. Both provinces’ emissions increased between 2005 and 2012: Alberta’s at a rate of 7% above 2005 levels, and Saskatchewan at a rate of 5% above 2005 levels. According to Environment Canada, per capita emissions in Saskatchewan and Alberta are significantly above average, at 68.8 tons and 64 tons respectively. Comparatively, Ontario, British Columbia, and Quebec’s per capita emissions are vastly lower — measuring just 12.5 tons, 13.2 tons, and 9.7 tons respectively. Alberta now produces more greenhouse gas emissions than Ontario and Quebec — home to over 60% of Canada’s population — put together[v].

British  Columbia's carbon tax, clean energy requirements and low carbon fuel standard, QC's cap and trade system for greenhouse gas emissions allowances, Ontario's gradual phrasing out of coal for electricity have contributed to reduce their greenhouse gas emission level to 3-19% below the one in 2005[vi]. However, the country’s total emissions continue to climb. The chief culprit is the oil sands sector — Canada’s fastest-growing source of carbon emissions.

Despite its pledge as part of the Copenhagen Accord to reduce greenhouse gas emissions nationally to 17% below 2005 levels by 2020, Canada is making very little progress. As the energy sector contributes 80% of all greenhouse gas emissions in Canada, we must focus on emissions reductions from oil and gas development as well as introducing clean energy policy to combat climate change[vii]. Without clear leadership from the highest level of government, the provinces will continue along a piecemeal path. In some cases, provincial leaders have stepped up, as in the case of British Columbia, Quebec, and Ontario, but that is not enough. A lack of federal policy allows provinces to maintain the status quo, and in fact further doom our climate. To date, there has been a notable lack of support from the Federal government on climate initiatives, putting the onus on the provinces and creating a patchwork of policy across the country.

Therefore, Ottawa must come up with a comprehensive strategy that paves the way for collaboration between the different levels of government, invest in low-carbon-emission technologies, and develop an integrated over-arching policy vision with specific strategies and measurable outcomes. “Failing to act, delaying action, or taking inappropriate actions could be costly in the long term,” the Conference Board of Canada said. “The consequences might include reduced competitiveness for Canadian goods on world markets, reduced access for our energy suppliers to key markets in the United States, mounting environmental pressures, excessive energy consumption, or investment in technologies that have become obsolete.”[viii]

It is up to us to ask all the Federal government candidates what their party’s plan is for a national price on carbon and their commitment to renewable energy development and make it known that we support a party that believes in their duty to be a leader on climate policy.

Fifthly, there is a need to have more sustainable and cheaper energies. While other countries are transitioning away from fossil fuels, it is imprudent for Canada to approve infrastructure that could result in oil sands production at levels known to be inconsistent with International Energy Agency (IEA) scenarios for 2°C of warming. Furthermore, RBN Energy estimates that netback for unit trains to be approximately $60 per barrel (with the development cost of $45-50 per barrel) delivered to the U.S. Gulf Coast for pipelines to the same market average nearly $75 per barrel delivered (with a cost of $10-15)[ix].

II. Energy Strategy Options

Basically there are three options:
1. Emphasis on Oil and Gas as in present Canada
2. Emphasis on Renewable Energies like Solar Power as in Europe
3. Combination with a gradual shift to 100% renewable energies

As we have already seen the demerits of the first option, we will be more easily inclined to the other options. However, Natural gas is expected to continue its growth spurred by falling or stable prices, and thanks to the growing contribution of unconventional gas, such as shale gas. If the unconventional oil resources such as oil shale, oil sands, extra heavy oil and natural bitumen are taken into account, the oil endowment of the world could be quadrupled. An increasing share of oil will be consumed in the rapidly growing transport sector, where it will remain the principal fuel. In addition to power generation, natural gas is expected to play an increasing role as a transport fuel.

The second option is expensive, and Germany has already found out that we need to consider the lapse of time and the costs in research and development and product innovation. Despite the exponential growth of renewable resources in percentage terms, in particular wind power and solar photovoltaic array, renewable energy still accounts for a small percentage of types of energy sources in most countries. Their contribution to the energy supply is not expected to change dramatically in the coming years. The continuing growth of renewable energy strongly depends on subsidies and other support provided by governments. Integration of intermittent renewables in the electricity grids also remains an issue, as it results in additional balancing costs for the system and thus higher electricity bills.

Then there comes the third option. More than 80% of oil and half of gas reserves are located in a few countries, OPEC countries with oil and the CIS and the Gulf region with gas[x]. In order not to be too reliant on the above countries, and in order to have a more permanent solution for energy sources, a combination strategy is needed.

III. Implementations and Forecast

For implementations, we need to pay attention to the following points:
- More development of hydroelectricity and increase its percentage in energy (presently 7.5%) production and then biomass (presently 3.5%), nuclear (1.9%), wind, tidal, solar and geothermal (0.1%)[xi] (note that while some countries, mainly in Europe, are making plans to withdraw from nuclear, other countries are looking to establish nuclear power generation like China, and about 40% of electricity in the United States and 79% of the electricity in China is generated in coal-fired thermal plants, which will continue to run for decades[xii])
- More exports of oil and gas to China and other Asian countries
- More exports of refined oil other than crude oil
- Encourage the cap and trade system to be used nationally as it is a market solution to the pollution problem and will achieve energy savings and reduce the environmental impacts of energy production and use and the spill-off effect
- Further research to both reduce the cost of oil exploration and protect the local environment
- Expansion of the automobile and industrial equipment industry in a period of low oil prices

With an integrated strategy and the above policies in place, the writer believes that both the environmental target and the energy target can be achieved. Thus the party which can combine both political and economic wisdom, balance both short-term and long-term growth, consider factors both internal and external, look at both the middle-class and the politically marginal people like students and single adults should be voted for.

[i] Lynn: A Third for Each: Three Polls of the Canadian Federal Election Point to the Same Result,, June 5, 2015.
[ii] Claire Brownell: They’re One of Canada’s Fastest Growing Demographics, So Why Are Politicians Ignoring the Single Voter? National Post, June 12, 2015.
[iii] David Parkinson: As Oil Goes, So Does Canada's Economy, the Globe and Mail, Oct 16, 2014.
[iv] Garry Marr: Canada Household Debt Ratio Hits New Record of 163.3%, Financial Post, March 12, 2015; Investment Department, Bank of Montreal.
[v] Erin Flanagan, Crafting an Effective Canadian Energy Strategy, please see the webpage, April 14, 2015, pp3,5-6.
[vi] Erin Flanagan, Crafting an Effective Canadian Energy Strategy, please see the webpage, April 14, 2015, Page 5.
[vii] Copenhagen Accord,, last updated May 26, 2015; Government of Canada: Greenhouse Gas Emissions, see the webpage
[viii] Roma Luciw: Canada Lacks Integrated Energy Policy, Globe and Mail Update,, May 31, 2007.
[ix] Erin Flanagan, Crafting an Effective Canadian Energy Strategy, please see the webpage, April 14, 2015, Page 8.
[x] EU Research: World Energy Technology Outlook Report, Chapter 2: Energy and Technology Trends to 2030,,   Page 28 & 30.
[xi] Natural Resources Canada: Additional Statistics on Energy,, modified November 4, 2013.
[xii] World Energy Council 2013: World Energy Resources: A Summary, see the webpage, Page 25.


摘要:有关民意调查变化的主要原因,笔者认为,是目前的能源政策。首先,加拿大签有一个哥本哈根协议。然而,阿尔伯塔省和萨斯喀彻温省的2005年到2012年间排放量增加了。艾伯塔省现在产出的温室气体排放比安大略省和魁北克省放在一起还要多。不列颠哥伦比亚省的碳税,对清洁能源的需求和低碳燃料标准,温室气体排放配额,魁北克省的排放总量控制与交易制度,安大略省的逐步排除用煤发电,都使得温室气体的排放水平减少为2005年的3-19%。然而,全国总排放量继续攀升,其罪魁祸首是油砂行业,加拿大增长最快的碳排放源。其次,加拿大依赖于对美国出口石油和天然气,但是美国已不再像以前那样地依赖于加拿大。第三,石油和天然气储量主要分布在欧佩克国家,而它们可以很容易地控制油价。第四,加拿大人家庭可支配收入的债务比例已接近一个惊人的数字,一个新的经济战略必须作出一应付当前的紧急局势。Cresent Point能源公司对Legacy公司的收购显示了税收会对经济可能产生的巨大影响。向再生能源的发展虽然是好事,但应该牢记,生金蛋的鹅是不能杀死的。本文提出拟订一个集成的能源战略迫切需要,而有关执行措施也被提了出来。


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