Canadian oil production could peak as early as 2026 in net-zero future, energy regulator says | 24CA News

For the primary time, Canada’s nationwide vitality regulator has checked out how oil and fuel manufacturing will change in a net-zero world, the place international locations hit their local weather objectives — and it exhibits a future with out a lot demand for Canadian fossil fuels.

In its broadly learn annual report on the nation’s vitality future, the Canada Energy Regulator (CER) modelled eventualities the place the world and Canada efficiently head towards net-zero carbon emissions by 2050, which is seen as key to limiting world warming to 1.5 C above pre-industrial ranges — the purpose of the worldwide Paris Agreement.

The regulator discovered that in such eventualities, oil and fuel manufacturing in Canada would begin declining as early as 2026, due to falling oil costs and demand, as the remainder of the world turns towards cleaner vitality sources.

“We can’t ignore what’s happening internationally, and betting on failure internationally is an economically risky thing to do for Canada,” mentioned Dale Beugin, government vice-president on the Canadian Climate Institute, a local weather coverage think-tank in Ottawa.

Global costs drive Canadian oil exports

The projections come at a very profitable time for the trade; the 5 largest corporations that function in Canada’s oilsands made about $35 billion in earnings in 2022.

But the fashions needs to be a warning for a lot of oil and fuel corporations, local weather specialists say, calling into query the way forward for fossil gasoline use and manufacturing in Canada. 

On the opposite hand, the evaluation spells out a dramatically expanded function for cleaner vitality in Canada’s future, from sources like hydro, wind, nuclear and hydrogen.

“The rate of international decarbonization — the rate at which the rest of the world takes seriously climate change and reduces its emissions, maybe very quickly — has really big implications for demand for the exports of Canadian oil and gas,” Beugin mentioned.

“And the biggest threat to the oil and gas sector in Canada isn’t domestic climate policy. It is actually market conditions over the longer term.”

Exactly when oil and fuel manufacturing peaks is determined by how far different international locations go of their efforts to slash greenhouse fuel emissions, in accordance with the CER. It modelled two net-zero emissions eventualities: one the place world emissions head to net-zero by 2050, and one the place the world does not act as quick, however Canada nonetheless heads to net-zero for its personal emissions by 2050.

Canada’s oil manufacturing begins declining by 2026 within the world state of affairs and by 2029 for the Canada-only state of affairs, with related outcomes for fuel. 

Beugin burdened that these had been projections based mostly on totally different eventualities, and never predictions of what was going to occur. 

But the projections may nonetheless affect selections on increasing oil manufacturing and investing in carbon seize applied sciences, which might seize the trade’s carbon emissions and maintain them out of the environment.

Choosing the place to speculate

The report exhibits that “we need to be careful, especially where public money is dedicated. We need to ensure that it goes to projects that are going to be competitive in the long term,” mentioned Jan Gorski, director of the oil and fuel program on the Pembina Institute, an vitality think-tank.

“And not every project will be competitive. Some of those projects will likely come offline as oil demand declines, but some will be competitive and will stick around.”

The CER’s evaluation additionally checked out how a lot carbon Canada’s oil and fuel trade must seize throughout manufacturing. In the worldwide net-zero state of affairs, the trade would want to seize about 22.5 megatonnes of CO2 per 12 months by 2036.

By the tip of 2022, Alberta had the capability to seize round three megatonnes of CO2 yearly, though this might enhance if a number of proposed carbon seize initiatives go forward.

That is determined by extra assist from the federal government, in accordance with Mark Cameron, vice-president of exterior relations at Pathways Alliance, the oilsands trade group.

Cameron says globally, in locations like Norway or the U.S, public funding in carbon seize pays for way more of a undertaking’s prices than in Canada.

“We need more fiscal certainty,” he mentioned. 

The want for extra public help has been disputed by some. The federal authorities’s tax credit score for carbon seize initiatives is anticipated to value about $1.5 billion a 12 months.

Cameron additionally mentioned he doubts the CER’s world net-zero emissions state of affairs will come to fruition, or that demand for Canadian oil will gradual so quickly.

“The global net-zero scenario implies a very aggressive collective action on reducing emissions, which, right now, we’re not seeing things moving that quickly. Last year, we actually saw oil demand hit a record level in 2022,” he mentioned, 

“And we’re still seeing the Chinese economy rebounding from COVID and so on. So we don’t think that we’re seeing peak oil demand as early as 2026.”

Much extra clear electrical energy

The CER’s eventualities present electrical energy use rising to energy all the electrical vehicles, constructing heating techniques and different clear applied sciences that can change fossil fuels within the lives of Canadians. And that new electrical energy will come from cleaner sources — with wind vitality rising almost seven to 9 instances its present ranges by 2050.

That’s not shocking for Binnu Jeyakumar, director of the electrical energy program on the Pembina Institute.

“The reason models do this is because wind is the cheapest source of electricity, so it makes sense to build a lot of wind,” she mentioned.

That’s as a result of wind crops have change into a lot cheaper to construct and set up and, in contrast to different energy sources like fuel crops, they do not eat any gasoline — a bonus it shares with photo voltaic vitality.

“By 2030, you’ll get to a place where new wind and solar will be cheaper than existing gas power plants. So that’s how fast the economics are changing for clean energy,” Jeyakumar mentioned.