Gattinger: What The IEA’s Net Zero By 2050 Report Means For Canada

Editor’s note: Two of the DOB’s contributors are looking at last week’s release by the International Energy Agency of its first in-depth study into pathways for reducing emissions from the energy sector to reach net-zero greenhouse gas emissions by 2050. Today, Monica Gattinger outlines what the report means for Canada. And tomorrow, Vince Lauerman kicks off a two-part series examining the implications for Alberta.

The IEA released a study last week that lays out a proposed pathway to global net zero GHG emissions by 2050. The part that’s grabbing the headlines? That there should be no development of new oil and gas fields if the world is to achieve net zero targets.

This will undoubtedly be used by some to call for the winding down of Canada’s oil and gas industry. This would be a narrow and incorrect reading of the report. Nowhere does the IEA say oil and gas won’t be part of the global energy mix in the decades to come. According to the scenario, in 2050, the world would be producing 24 million bbls/d of oil and 1,750 billion cubic metres of natural gas. These are big declines to be sure (a three-quarter drop for oil, and gas supplies cut by more than half), but the report does not spell the end of oil and gas.

What’s more, achieving net zero hinges on innovation in the oil and gas sector: technological advancements in carbon capture, utilization and storage (CCUS) and in hydrogen produced from natural gas with carbon capture (blue hydrogen) will be necessary to reduce emissions in hard to abate sectors like cement as well as to develop global hydrogen markets.

This underscores there is lots of room for the Canadian oil and gas sector to contribute to net zero in the years ahead, both by selling into global energy markets and by helping to develop the technologies and new energy sources needed to reduce emissions. There will also be opportunities for other parts of the energy economy, from renewable electricity to mining to nuclear.

Of course, as the IEA itself notes, the scenario is just a scenario, not the scenario. But it is a much needed wake-up call about the complexity, scale and pace of change that net zero commitments entail. What’s more, even a cursory reading of the document makes plain it would require a dizzying array of political, technical, economic and social stars to align for the scenario to come to pass. More on this below.

Highlights of the report

So what’s in the report? The scenario carves up action into two key time periods: now to 2030 and now to 2050.

An ‘unprecedented clean technology push’ of existing technologies is needed between now and 2030 to drive energy intensity of GDP down by four per cent per year. This means aggressive efficiency measures and electrification, ramping up renewable electricity, and reducing methane emissions by 75 per cent. The proposed increase in renewables alone is equivalent to adding the world’s largest solar PV park (over 2,000 MW) to the grid each and every day. It would also mean that 60 per cent of new car sales by 2030 would be EVs (from five per cent in 2020) and 20 per cent of heavy truck sales would be fuel cell or electric (from less than 0.1 per cent in 2020). Not surprisingly, battery production would need to skyrocket to meet these new demands (from 160 GWh to 6600 GWh, an increase of 4,000 per cent in nine short years — one wonders what it would take to ramp up supply chains at such a rapid clip).

But battery production isn’t the only thing that will need to skyrocket. So will investment. Spending on the electricity grid alone would need to triple. And investment to achieve all of the changes put forward in the scenario is estimated at a jaw-dropping US$5 trillion per year, a five-fold increase from today. This is far from incremental stuff. It underscores that achieving net zero is anything but a small undertaking.

Between now and 2050, the report calls for ‘unprecedented clean technology innovation.’ In the scenario, fully half of emissions reductions to 2050 come from technologies at the demonstration or prototype stage (the proportion is higher for heavy industry and long distance transportation).

By 2050, the energy system would be transformed: two-thirds of total energy supply would come from wind, solar, bioenergy, geothermal and hydro; low emissions fuels like hydrogen and biomethane would account for 20 per cent of supply (up from one per cent today), and nuclear would contribute about 10 per cent (roughly a doubling of nuclear capacity). Fossil fuel sources would plummet from 80 per cent to 20 per cent of supply, and would be used predominantly for products (e.g., plastics), in plants with CCUS and for hard to abate sectors. Solar would become the largest energy source accounting for one-fifth of energy supply, 50 per cent of total energy consumption would be electricity, and 90 per cent of electricity would be generated from renewables. Coal demand would plunge 90 per cent to represent just one per cent of energy use.

Needless to say, this constitutes a complete remaking of energy and economic systems over the next 30 years. The IEA provides a full 400 milestones needed to achieve the ambitious changes laid out. They include the above-mentioned prohibition on new oil and gas field development, along with no new unabated coal-fired power plants as of now. As of 2030, most emissions reductions technologies in heavy industry would need to be demonstrated at scale and unabated coal plants would need to be phased out in advanced economies. As of 2035, governments would need to mandate no new internal combustion engine car sales, the electricity sector would need to have reached net zero in advanced economies, and 50 per cent of heavy truck sales would need to be electric. As of 2040, 50 per cent of fuels used in aviation would need to be low emissions, the global electricity sector would need to have reached net-zero emissions, and all unabated coal and oil power plants would need to be phased out. As of 2045, 50 per cent of heating demand would need to be met by heat pumps, and as of 2050, almost 70 per cent of electricity generation would consist of solar and wind. To put it mildly, this is a very tall order.

Is it feasible? Perhaps, but there’s no question that the ‘real worlds’ of politics, regulation, energy demand, investment, innovation, and consumer desires for reliable, convenient and affordable energy could put a sharp brake on any one of the myriad changes and milestones the scenario contemplates.

So could geopolitics. If this scenario came to pass, by 2050, OPEC would be providing over half of global oil supplies (up from a third), the highest proportion in the history of oil markets. Will non-OPEC countries and producers, notably the United States, accept this? It’s a very open question.

Implications for Canada

For Canada, the report raises a number of crucial questions requiring robust policy dialogue. Chief among them is how the country sees the oil and gas sector in this possible future. If the ‘no new fields’ milestone is used to bash the oil and gas sector over the head — or worse, is interpreted as no further investment or development of existing fields — it would divide the country at precisely the moment people need to come together to bend Canada’s emissions curve downward.

The report represents an opportunity for Canada to clarify how the oil and gas sector can supply energy that will continue to be needed in domestic and global markets and how it can contribute to emissions reductions in the years ahead. Innovation will be key. For example, the scenario sees CCUS playing a pivotal role on the road to net zero, with captured amounts growing from 40 MtCO2 per year now to 1.6 GT by 2030 and 7.5 GT by 2050. With four of the world’s large-scale integrated projects (the two largest are in oil and gas – Shell Quest and the Alberta Carbon Trunk Line/North West Redwater refinery, followed by the Boundary Dam coal-fired power plant and the ACTL/Nutrien fertilizer plant), Canada has the potential to play a leadership role in this space.

What’s more, the learnings and cost reductions from CCUS development in oil, gas and coal-fired electricity will be needed to develop and deploy CCUS in other sectors, notably heavy industry. The IEA doesn’t mince words on this point: ‘failure to develop CCUS for fossil fuels would be likely to delay or prevent the development of other CCUS applications.’ In other words, not developing CCUS for oil, gas and coal will slow down emissions reductions elsewhere. In this light, one wonders whether the federal budget’s condition that carbon capture involving enhanced oil recovery be ineligible for Ottawa’s forthcoming CCUS tax incentives should be reconsidered.

The scenario sees blue hydrogen as pivotal to rapidly developing the global hydrogen economy. Mobilizing the oil and gas sector’s growing expertise and investment in blue hydrogen is likewise a rich opportunity for Canada in both the short and long terms. Even in 2050, the IEA scenario sees only 60 per cent of hydrogen produced from electrolyzers. This adds further impetus to the importance of CCUS for Canada. The development of the hydrogen economy also holds promise for the natural gas delivery industry, where infrastructure can be leveraged to transport low carbon fuels like hydrogen and renewable natural gas (biomethane).

Making products like carbon fibre, asphalts and polymers with oil is another opportunity area. Canada’s long-life assets in the oilsands are a competitive advantage here, giving the stability to commit to a long-term innovation pathway for things like CCUS, blue hydrogen and bitumen beyond combustion.

The prospects for Canada in a net zero future extend across the energy economy, notably to low emissions electricity and electrification. Thanks to hydro and nuclear, the country has one of the lowest emitting grids in the world (82% non-emitting, with federal commitments to ramp this up to 90% by 2030). Electrification makes sense now and will be increasingly beneficial as emissions track down (whether through renewables, nuclear or gas with CCUS). Cross-country and Canada-U.S. trade of low emissions power holds tremendous potential.

Moreover, the scenario sees nuclear as vital for net zero, with failure to deploy nuclear energy raising costs and adding to the risk of not achieving emissions reductions. The opportunity for small modular reactors is significant here both for electricity and low emissions process heat in hard to abate sectors like heavy industry. Finally, the massive scale-up of battery production is a clear opportunity for Canada in terms of technology and mining.

But all of this is not just about technical innovation. It will also require policy, regulatory, social, economic, and institutional innovation. It means identifying how to move technologies rapidly from lab to prototype to demonstration to market. It means collaboration between scientists and engineers, along with those in the social sciences and humanities, co-operation among industry, government, academia and civil society, and all of this at the domestic and international levels.

The IEA states it will also require ‘skillful policy development and implementation’. That’s a major challenge for governments that struggle with interdepartmental and intergovernmental co-ordination at the best of times. Given the complexity, scope and pace of change that net zero signifies globally, many of the measures put forward in the report may well falter at the implementation stage. Policies and programs that look good on paper don’t always cut it in the real worlds of energy markets, global geopolitics, consumer behaviour and community preferences.

Of course, the IEA’s report is not a prediction of the future. It is a possible future. But it offers a compelling opportunity for Canada to articulate how the country views its energy future — notably the future of oil and gas. Positive framing, inclusive approaches, building on areas of strength, and cross-country collaboration will be pivotal to making progress on emissions reductions. Let’s hope energy, environmental and political leaders will make that the headline, rather than using the IEA report to stoke conflict and division.

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