Earlier this week, one of the most respected energy forecasters, the Paris-based International Energy Agency, released a bomb-shell report with some pretty serious implications for Canada.
The most stunning projection is that according to the IEA's analysis, the U.S. is set to top Saudi Arabia in oil production and achieve energy self sufficiency by 2035.
Here in Canada, this projection raises some serious questions about the federal government's mission to become an "energy superpower" through the rapid development of the oil sands. At present, the U.S. is practically the only buyer of oil sands oil. So, if they aren't interested in it, we have a problem.
In fact, in response to the report, Natural Resources Minster Joe Oliver said that the United States' new found oil could mean that Canada's "resources will be left in the ground and the legacy will be lost."
For Oliver, this strengthens the case for new pipelines, like the proposed Northern Gateway pipeline, which could help gain access to Asian markets.
But Oliver's admission that the oil could be left in the ground is huge. For many Canadians, it is assumed that the oil sands will be developed. There's just too much money to be had there. But this report, and Oliver's comments, shows that it's not a done deal.
And good thing too: According to the IEA, in order to limit climate change to the generally agreed safe threshold of two degrees of warming, no more than one third of the proven reserves of fossil fuels can be burned before 2050.
This alone should prompt a more thoughtful approach to the oil sands. Canada has to do its part to limit climate change, and that means keeping some of the oil sands undeveloped. In fact, for many people, the main argument against the oil sands has to do with climate change and the extremely damaging environmental impacts of oil sands projects themselves and the pipelines needed to get that oil to market. But this report really draws our attention to the risks of an oil-based economic strategy.
America's new-found oil will almost certainly affect the global price of oil, and it could have an even larger impact here. Alberta's oil is already discounted from the world price, and a glut of North American oil would further depress prices. Which is a real problem for the oil sands, because they are more costly to develop and need a higher price in order to break even.
By some counts, new projects need an $80-barrel in order to be viable. Others find that the average project needs a $113-barrel to turn a profit. And it's worth noting that the oil sands are responsible for all the growth in production, and are expected to be the source of 80 per cent of Canadian oil by 2025.
The point is, Canada's entire "energy superpower" strategy hinges on high-priced oil, and the IEA report demonstrates that betting on high prices is risky.
So what, then, should be done? That brings me to another of the IEA's findings: in the coming decades, renewable energy will experience phenomenal growth. In their words, renewables have become "an indispensable part of the global energy mix." By 2035, they will "approach coal as the primary source of global electricity." And all of this growth is projected based on existing policies.
As the impacts of climate change hit home, I have no doubt that we'll be prompted to action, meaning the renewable energy sector will grow a lot faster.
And, although Canadians may not know it, we are in a position to realize some serious gains as a result of a transition to renewable energy. Thanks to policies like Ontario's Green Energy Act, and its local content requirements, we are ahead of most of the rest of North America. We have the manufacturing plants here to build windmills and solar panels and thousands of Canadians are already working in our newest industry. Moreover, these jobs are good jobs. Take it from the people who have them: hear how much they like their new jobs, and how proud they are to be part of the solution to climate change.
Canada should recognize this trend, and pin our future prosperity to the burgeoning renewables market, rather than doubling down on oil. It's the only choice we have for the sake of our environment. And it's the best path forward for our economy, too.