Stephen Harper’s G7 commitment to a no-carbon economy by the end of the century isn’t about to cause mass disruption in the oilsands because the industry is already changing faster than the Canadian government, experts say.
Canada’s prime minister signed an agreement Monday with the Group of Seven countries at their annual meeting in Germany pledging to aim for deep emissions cuts by 2050, which Harper said would mean the oilsands industry would have to transform itself over the long-term.
The G7 agreement to phase out the use of oil, gas and coal is another indication that the conversation about carbon and climate change is getting more serious, said economist Jeff Rubin, author of The Carbon Bubble.
“It’s a recognition that climate change is not a hoax, it’s real, that it’s not tomorrow’s problem it is today’s problem,” he told Huffington Post Canada.
“It’s not about Harper, it doesn’t matter if he continues to champion the oilsands. The world is changing regardless,” he said, adding that shares in oil companies have been depressed in recent years as shareholders recognize the outlook for the sector looks increasingly bleak.
The agreement comes as more Canadian provinces are considering carbon taxes, an idea that has also been endorsed by the CEO of Canadian oilsands giant Suncor Energy, as well as several other big name companies including Shell Canada, Loblaws and Desjardins Group.
Harper, who has repeatedly voiced his opposition to a carbon tax, told reporters after the meeting that changes will come through technology rather than sacrificing the oilsands.
"Nobody's going to start to shut down their industries or turn off the lights. We simply got to find a way to create lower-carbon emitting sources of energy,” he said.
Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers, said Monday that the challenge will be to reduce greenhouse gas emissions as global demand for energy is expected to rise over the next several decades. Like Harper, he also emphasized the importance of technology and innovation.
“While it is impossible to tie technological breakthroughs to a timetable, our industry is focused on technological innovation and have already reduced our GHG emissions per barrel by about 30 per cent since 1990,” he said in an emailed statement.
But Rubin believes the industry has a far shorter time horizon for transformation as he sees oil demand dropping by as much as 15 per cent by 2030. Oilsands players will have to form a new economic model to adapt to a permanent shift that has already started, he added.
“This is more than a cyclical downturn, this is a secular long term decline in the combustion of oil,” he said.
Oil prices fell by as much as 50 per cent from their highs last June by the beginning of this year before rebounding slightly to hover around $58 a barrel. That has slammed the brakes on oilsands expansion.
“I don’t think there’s going to be any big rebound in world oil demand or in world oil prices that would validate the expansion of the oilsands,” Rubin said.
“I think in that world the conversation changes from expansion to sustainability.”
Ed Whittingham, executive director of the Pembina Institute, said energy companies might need to reinvent themselves.
“Many have rebranded themselves from Oil Inc. or Gas Inc. to Energy Inc., recognizing that they just want to provide the energy services and they're not as partial as to what source it's coming from,'' he said.
“For the companies that take a very long-term orientation, I don't think it is business as usual. I think this is another sign that the world economy is going in a low-carbon, clean-energy direction.''
The G7 statement was a watered-down version of the one German Chancellor Angela Merkel was seeking, which would have seen leaders agree to a more stringent commitment to a low-carbon economy by 2050.
Reports suggested that Canada and Japan were holding out on committing to more aggressive targets.
The statement might be the best world leaders could muster from Harper, a staunch supporter of Alberta’s oilsands, said Kathryn Harrison, a political science professor at the University of British Columbia.
The agreement does articulate that if politicians are committed to meeting targets to reduce climate change, they must also agree to targets to reduce emissions, she said. In signing on to the agreement, the Harper government was able to avoid international scandal so close to an upcoming election.
“The more controversy there is, including that Canada has been a laggard on climate change, the more it makes climate change an issue in domestic politics,” she said, adding the agreement is unlikely to mean any change in policy from the government.
Canada has a 25-year history of announcing bold targets to reduce greenhouse gases, then getting close to those target dates only to realize those targets won’t be met and adopting a new target further out into the future, Harrison said. Canadian greenhouse gases have actually been rising since 2009, she noted, adding that the country is on track to fall 50 per cent short of its emission reduction targets for 2020.
“So the fact that Mr. Harper is saying ‘don’t worry, in the next 85 years, we’ll solve this problem,’ doesn’t seem to me to be a commitment to regulating the main source of emissions growth in Canada, which is the tar sands,” she said.
“It’s a bit like Charlie Brown and Lucy. She just keeps lifting up the football and Charlie falls flat, but then he trusts her again.”
Harrison said it’s unlikely industry executives are “freaked out” by this announcement, adding that many companies are already operating using a “shadow price” on carbon to build in the price of carbon emissions because they expect some sort of emissions pricing scheme is coming.
“Ironically, what we’re starting to see is spokespeople from the oil industry calling for more aggressive policies in some cases than we’re hearing from Mr. Harper’s government.”
-- With a file from The Canadian Press
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