Prime Minister Justin Trudeau is under pressure to bring the Canada Energy Regulator (CER)’s energy futures modelling in line with the Paris climate agreement, The Energy Mix has learned, just as an international agency warns that the world’s 1.5°C climate stabilization target is slipping out of reach.
The CER’s annual Energy Futures report is a critically important tool in national energy policy, used by investors and businesses to project future supply, demand, and pricing for fossil fuels. Invariably, it projects continuing growth in fossil fuel production, despite the government’s promise to reduce greenhouse gas emissions by 40 to 45% this decade and bring the country to net-zero by 2050.
Now, in a July 8 letter obtained by The Mix, nearly two dozen climate scientists, academics, and energy system modellers are urging Trudeau to instruct the CER to model an energy future that supports the “monumental task” of bringing global greenhouse gas emissions to net-zero by 2050.
So far, the regulator “has only modelled a suite of scenarios that imply the Paris Agreement’s goals will not be met, where the world does too little to reduce its production and consumption of oil, gas, and coal, and where Canada’s climate policies lack ambition and fail to achieve net-zero emissions by 2050,” the letter states.
While the CER “presents itself as the authoritative source of [Canadian] energy information”, the regulator “does not currently model scenarios where Canada’s energy sector aligns with the government’s net-zero by 2050 goal,” the letter adds. As a signatory to the Paris Agreement and a member country to the International Energy Agency (IEA), “Canada should bring its energy futures modelling into alignment with international best practice and the government’s net-zero goal.”
To make that happen, Trudeau must direct the CER to model energy futures that are “informed” by the IEA’s recent Net Zero by 2050 report, which called for an immediate to end to new fossil fuel projects, the 21 signatories say. The projections in the IEA’s May 18 release were stark: the Paris-based agency foresaw global oil demand falling 75%, to 24 million barrels per day, between 2020 and 2050, gas demand dropping 55%, and remaining oil production “increasingly concentrated in a small number of low-cost producers.”
The takeaway quote from the IEA’s work: “Beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our pathway, and no new coal mines or mine extensions are required.”
Fossil Production Keeps Rising
By contrast, the main scenario in the CER’s 2020 Energy Futures report, called a “reference scenario”, projected oil and gas consumption falling just 12% by 2030 and 35% by 2050. The more ambitious, “evolving” pathway raised questions about the justification for completing the Trans Mountain pipeline expansion or the now-cancelled Keystone XL pipeline. But neither of the scenarios factored in the considerably faster, deeper emission cuts that will be needed to deliver Canada’s share of a global commitment to limit average global warming to 1.5°C under the 2015 Paris Agreement.
In both projections, “the CER anticipated that by 2050, Canada would be producing even more oil and gas than pre-COVID,” University of Waterloo political scientist Angela Carter, one of the signatories to the PM’s letter, told The Mix. Even under the “evolving” scenario, which assumed strengthened climate policies over time, “oil and gas production wouldn’t peak until 2039,” making the fossil fuel extraction projected by the CER “a major—perhaps the largest—impediment to Canada meeting its climate commitments.”
With the CER’s 2021 projections now taking shape and expert consultations under way, “the CER’s new ‘evolving’ scenario is still on a path of climate chaos,” Carter said. “If the CER keeps getting this wrong it is contributing to the lock-in of fossil fuel developments and, therefore, mounting climate stress,” along with heightened risk of stranded assets.
This week, the IEA is back with its latest warning that record levels of greenhouse gas emissions over the next two years will put a 1.5°C target for average global warming all but out of reach, as governments largely fail to invest pandemic stimulus funds in a green recovery. The letter to Trudeau points to the role the CER could play in charting a different course.
“By modelling scenarios that reflect the government’s 2050 net-zero objective in the annual Energy Futures reports and giving them the same the level of priority as the reference scenario, the CER can reduce the risk of stranded investments in oil, gas, and coal development, better inform policy design, and provide more relevant information for workers and communities grappling with an accelerating energy transition,” the letter stated.
Pretending Paris Didn’t Happen
Several of the signatories elaborated in interviews or email exchanges with The Mix.
University of British Columbia political scientist Kathryn Harrison called net-zero modelling an “essential first step” in clearing the “policy inconsistency” between Canada’s climate pronouncements and its policies on oil and gas production and export.
“On one hand, we adopt reasonably ambitious domestic emissions targets and commit to doing our part to achieve an even more ambitious global target to limit warming to 1.5°C,” she said in an email. “On the other hand, we continue to approve and build, even at taxpayers’ expense, new fossil fuel infrastructure based on CER scenarios that don’t consider the implications of meeting those obligations.” The original business case for Trans Mountain, she added, “was predicated on no policy change whatsoever, either within Canada or globally, over 25 years of operation.”
While “the CER’s mandate is to provide timely and relevant energy information and analysis,” Carter added, “it seems it is pretending the Paris Agreement didn’t happen or doesn’t matter. The working assumption of the CER appears to be that Canada will fail to act to confront the climate crisis. This must be corrected.”
Normand Mousseau, academic director at the Trottier Energy Institute, said he has no problem with the CER, which has “historically been very close to the oil and gas industry,” modelling assumptions that don’t reflect the Paris targets. Other signatories said that kind of analysis can be a useful window on gaps in federal policy.
“But when you have such big, ambitious goals, you also have to look at what that means for the energy sector,” he said. While it falls to the government, not the CER, to set national goals like 40 to 45% by 2030 and net-zero by 2050, the regulator should “offer a view of what that means.”
A regulator like the CER would take the position that it’s steering clear of politics when it makes business-as-usual assumptions about future fossil fuel or pipeline development, Mousseau added. “But they’re also making a political choice by not publishing projected GHG emissions. Because if I do a back-of-the-envelope calculation, the emissions in both of their scenarios don’t match up” with a 1.5°C target.
Simon Fraser University energy modeller Chris Bataille said the CER’s mandate collides with a “political-cultural lag in our oil and gas community that hasn’t quite caught up” with the reality of a rapid transition off carbon. “It’s been known for a decade or more that we have to get to net-zero,” he said. “We’ve known that for 15 years. It became a Paris goal in 2015. But it hasn’t really percolated down” to the Canadian fossil industry.
Managing the shift from today’s levels of fossil fuel consumption to 2050 will be tricky enough. “But if you don’t even accept that it’s coming, that (production) is not up, it’s not even flat, but it’s down (in a net-zero future), it’s really hard to manage your investment,” Bataille said. “They’re not denying climate change. They accept it. But they’re not accepting that their production has to come down.”
With “true direction from their board that they need to do a net-zero scenario,” he added, the CER might be able to identify some “easier pathways” for Canadian oil and gas. But none of that work can account for the pressure for emission reductions when those product reach their end users—which Bataille said will lead to falling fossil fuel demand in personal transportation, followed by freight and chemical feedstocks.
Government Must Set the Direction
Although the CER is meant to be an arm’s length tribunal, UBC’s Harrison and several others who signed the letter to Trudeau said the government has the legal right to set the regulator’s mandate—and it should.
“CER is acting on authority delegated by a democratically-elected government,” and “even ‘arm’s length’ regulatory agencies aren’t and should not become fully independent of democratically accountable governments,” Harrison said. Given the fossil industry’s significance to national emissions and regional economies, “I don’t see how that government can justify not ensuring that CER’s decisions are informed by Canada’s own national policies and international commitments.”
“In a time of national crisis,” agreed Corporate Knights Research Director Ralph Torrie, “we need our leaders to lead. The energy system is rife with mandates that are not aligned with governments’ declared emission reduction targets. These mandates are created by governments and cannot be changed from within the regulatory agencies; it requires political decisions and direction from the top to realign them with the current emergency priorities.”
While it’s “not in [the CER’s] DNA to explore policy scenarios for achieving government objectives,” Torrie added, “that is what we need them to do now. They are one of the few shops in the country with the technical expertise and modelling capability to do this, but it will require a shift in mindset.”
Simon Fraser University environmental economist Mark Jaccard said he’s understood the CER is working on a “Paris-compliant” 2030 scenario, and has been seeking advice on the relatively new expectation that it will extend its modelling out to 2050.
But “as a general rule in Canada,” Mousseau said, “the energy regulator has been extremely weak with regard to its mandate, and has not pushed that mandate to the limit of what it could do.”
Most signatories to the letter to Trudeau stopped short of declaring the CER a captured regulator. But “I can imagine the Canadian oil and gas industry would rather CER not model net-zero scenarios,” Harrison wrote. “We already know…that the pathway to net-zero that involves a healthy Canadian oil industry is a tenuous and high-risk one that turns on a lot of highly uncertain assumptions.”
“What is clear is that the CER continues to reflect the aspirations and interests of the oil and gas sector,” Carter added. “The CER continues to tout the (historical) economic value of the oil and gas sector, yet it does not acknowledge the growing economic risks of the sector or its unquestionable climate consequences. Our climate emergency continues to be treated as an aside.”
Elisabeth Besson, media relations advisor at the Canadian Association of Petroleum Producers (CAPP), declined to comment on whether the fossil industry would welcome a net-zero scenario from the CER, as a source of free strategic advice on what its likely future looks like. “At this time we would prefer continuing engaging directly with CER and are not prepared to provide public comment on this ongoing work,” she told The Mix in an email.
CER Communications Officer Karen Ryhorchuk said the Energy Futures scenarios have evolved over the years, with the regulator introducing a “towards net-zero” discussion for the first time last year. “Our 2021 report will include detailed modeling of Canada’s electricity system in a net-zero world, which will build capacity to fully model net-zero scenarios in the future,” she wrote in a Tuesday afternoon email.