Much has been made about the recent announcement that the United States will not ratify the Kyoto Protocol.
One thing is certain: Canada’s oil and natural gas industry will continue to reduce greenhouse gas (GHG) emission intensity of our own operations, while growing our important industry.
GHGs present a long-term challenge for the world. The UN Framework Convention on Climate Change set a tentative target of limiting concentrations of GHGs in the atmosphere to two times the pre-industrial level by the year 2100. Stabilizing atmospheric concentrations of GHGs at or below two times this level would require a 70 per cent or more reduction from current levels of emissions.
In that context, the Kyoto Protocol is seen as the first of many escalating steps in reductions. An important question is whether the protocol represents the right first step environmentally, economically, technologically and politically.
Recognizing the long-term nature of the problem, Canada’s oil and gas industry, like other sectors of the Canadian economy, has been voluntarily taking actions that reduce its emissions for much of the past decade. We continue to participate in the domestic and worldwide process for reducing GHGs. While improving efficiency of energy use and reducing the emission intensity of oil and gas production are important initial steps in reducing GHG emissions, achieving the UNFCCC target will require major changes in the technology of the world’s energy system.
Roughly 80 per cent of Canada’s total GHG emissions arise from the production and combustion of oil products, natural gas and coal. Oil and natural gas account for about four-fifths of that 80 per cent. Within oil and gas, end-use combustion of petroleum products and gas accounts for about 85 per cent, while production, processing and distribution accounts for 15 per cent.
Clearly, end-use consumption is the key driver of GHG emissions, even while emission intensity of production is being reduced through improved technology. Consumption will drive production, from either domestic or foreign resources.
In the near term, improved energy efficiency is critical to slowing the growth of global emissions. Although both developed and developing countries have made significant improvements in energy efficiency, it will be a challenge to keep concentrations of GHGs below the two-times pre-industrial levels, as living standards and energy consumption rise.
Even if the developed countries lead the way on emission reductions, for any long-term solution to be acceptable the world must find some way of meeting rising global energy consumption. We will achieve this by developing non-emitting end-use energy — moving over time to an economy driven by hydrogen and electricity.
What this will require is rising amounts of primary energy to generate the power and produce the hydrogen. Advances in renewable energy can contribute to, but will not provide enough energy to meet rising global energy demand. Given the immense capital stock associated with the current energy system and the absence of an alternative to hydrocarbons as a large viable source of primary energy, the change will take decades and will rely on the use of hydrocarbons to produce the hydrogen and generate electricity. That alone will take significant research and major investments over several decades.
Canada must play its part in promoting energy efficiency, reducing non-energy GHG emissions and developing new energy technology. To have an effect, the effort must be global and sustainable. To be acceptable in terms of cost, reductions must be timed with the development of new technology and the turnover of capital.
In the near-term, Canadian strategy, policy and action on GHGs has to be consistent with and co-ordinated with that of our major trading partner the United States. It must recognize that there are significant differences between the Canadian and U.S. situations, most notably our increasing role in supplying oil and natural gas to meet US needs.
It is also key that Canada’s GHG strategy treat each region of the country equitably.
As we move forward, the focus should be on improving energy efficiency and R&D in such areas as zero emission hydrocarbons and renewable energy sources. Most importantly, we need an integrated approach that addresses environmental issues within an economic context rather than the traditional approach of separately addressing economic and environmental policy issues.
The Canadian position in any future negotiations should be developed with a broad examination of fundamental issues in mind. This means going beyond the sinks, mechanisms and compliance topics already under discussion and must include the issues of Canada’s energy exports.
(Pierre Alvarez is president of the Canadian Association of Petroleum Producers.)
