If Saudi Arabia’s oil minister’s dire warning about high-cost energy producers didn’t effectively get the message across that Canada needs to adjust to a new market reality, perhaps a new warning by the International Energy Agency (IEA) might.   “We are likely to see continued capacity increases (in) the near term, with growth slowing considerably, if not coming to a complete standstill, after the projects under construction are completed,” the IEA said in an oil market overview published Monday.   According to the IEA, Canada’s oil era may be coming to an end due to dramatically low prices, increasing environmental concerns, a lack of public support for pipelines and evolving climate policies.   In an in-depth review of Canada’s energy portfolio and policies released Thursday, the agency urged Canada to adopt strong climate goals as it considers future energy production.   “As a leading exporter of oil, coal, natural gas, uranium and hydropower, Canada is a cornerstone of global energy markets and energy security,” IEA Executive Director Fatih Birol said as he presented the report, Energy Policies of IEA Countries – Canada 2015.

At the COP21 climate summit Canada committed to the Paris Agreement, which seeks to limit global temperature increases to two degrees Celsius. The treaty, signed by nearly 200 nations, also aims for a major decarbonization of the world’s economy by 2050.

Under the previous federal government Canada pledged to cut emissions by 30 per cent below 2005 levels by 2030 although a recent Environment and Climate Change Canada report revealed Canada is not on track to meet that target in large part due to rising emissions from the oil and gas sector.   “We very much welcome that the new federal government is collaborating closely with provinces and territories to turn Canada’s COP21 climate pledges into concrete energy policies,” Birol said Thursday.   Federal-Provincial Climate Collaboration Still in Question 

Since the agency last reviewed Canada’s energy policy in 2009, Canada has made some climate-friendly changes, most notably through the shuttering of major coal-fired power plants.   However, Canada’s long-running lack of federal greenhouse gas regulations has negatively influenced the oil and gas industry, the report notes. The agency recommends Canada “reduce uncertainty for investors and project developers by setting a clear timeline for the implementation of federal GHG regulations.”   The report also noted Canada has yet to put in place a mechanism for working with the provinces to align climate goals.   The federal government will meet with provincial environment ministers early next month to discuss how Canada will collectively work towards its climate targets.   According to Erin Flanagan, policy expert with the Pembina Institute, how Canada will craft a national energy framework remains a question.

“One of the things the federal government talked about is using Canada's climate target as a floor instead of a ceiling,” Flanagan said in an interview at the COP21 climate talks. Canada's climate target requires reducing emissions 30 per cent relative to 2005 levels by 2030.

But, she added, what that means on a provincial level remains unclear. This could lead to complications with provinces like Alberta that have just unveiled new climate leadership plans.

In November Alberta promised to phase out its 18 coal-fired power plants, introduce a carbon tax to match B.C.’s $30/tonne price and to put a cap on oilsand’s emissions. The province’s plan did not guarantee absolute emissions reductions by 2030 or acknowledge how the provincial plan will fit within federal targets.

The provincial government's climate panel “provided a pathway to reach emissions stabilization 2030,” Flanagan said. “So there will need to be additional conversations now about what Alberta’s contribution to a national target will be.”

Low Oil Prices Won’t Last Forever

Canada’s oil-dependent economy has been significantly impacted by a major downturn in oil prices. As Canadian crude prices have fallen to record lows, Alberta has lost 63,000 jobs, according to Natural Resources Minister Jim Carr.   Today’s report notes that although the Canadian economy is heavily reliant on the energy industry — about 10 per cent of the national GDP is due to oil and gas production — the country has the opportunity to diversify its energy mix by investing in clean energy.   “Canada is in a strong position to foster innovation and become a leader in clean energy technologies,” the report states. “This will contribute to reducing the environmental impact of energy use and production, as well as the cost of natural resource development, notably for oil-sands operations.”   The agency states that Canada needs to shift investment and policy to support clean energy technologies.   A September report by Clean Energy Canada found that the value of clean energy projects in Canada approached $11 billion in 2014, although suffered from a lack of government investment and policy support.   “The news on clean energy is good, but with federal leadership, it could be terrific,” Clean Energy Canada executive director Merran Smith told DeSmog Canada at the time of publication.   “Unlike Washington, Ottawa’s pretty much been ignoring this sector. We hope and expect this report will serve as a flashing neon sign for federal parties: There’s a huge opportunity here; get on board and show us what you can do.”   The IEA report acknowledges that current oil market conditions provide an opportunity to turn investment interest towards alternative energy.   “While today’s low oil prices may drag down returns and pressure future investment, these conditions will not last forever,” Birol said.   “By ensuring responsible energy production and use, Canada can continue to develop its resources while balancing economic and sustainability goals.”

Image: Kris Krug, DeSmog Canada

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The shift away from coal and towards renewable sources of energy is slowly beginning to gain traction, two recently-released reports from American and global energy agencies show.

“The biggest story is in the case of renewables,” International Energy Agency executive director, Fatih Birol, told the Guardian as this year's World Energy Outlook was released. “It is no longer a niche. Renewable energy has become a mainstream fuel, as of now.”

Almost half of the new power generation added in 2014 came from wind, solar, wave or tidal energy, the report found, and renewables now represent the world's second largest source of electricity after coal. Coal, whose share of the world's energy mix has been rising since 2000, has peaked, the agency indicated, predicting that within two decades, renewable energy sources will replace coal as the backbone of the world's electricity source.

Domestically, the growth of renewable energy has been especially pronounced in Texas and other states long famous for their drilling and mining histories, data released by the U.S.-based Energy Information Administration shows.

Texas has become the largest wind-power supplier in the country, helping to slash as much carbon from the state's emissions in 2013 as both Vermont and New Hampshire combined produced that year, if Texas had gotten that power through burning an equal mix of coal and natural gas instead of wind.

Still, the transition away from fossil fuels is coming too slowly to prevent catastrophic climate change, the IEA warned.

"There are unmistakeable signs that the much-needed global energy transition is underway," the agency wrote in its report, "but not yet at a pace that leads to a lasting reversal of the trend of rising CO2 emissions."

For the world to have a shot at keeping emissions below the 2 degree of warming threshold, the agency identified five key steps: the least-efficient coal plants must be banned, many fossil fuel subsidies must be ended, infrastructure like buildings and transportation need efficiency improvements, investment in renewable power must rise from $270 billion in 2014 to $400 billion by 2030, and methane leaks from oil and gas companies must be slashed.

The good news? Those measures could be taken at "no net economic cost," the agency concluded.

All told, this year, renewable energy sources represented over 17 percent of the U.S. electrical generating capacity — an unprecedentedly high number, but still far less than fossil fuels.

Remaining dependent on fossil fuels brings economic as well as environmental risks. The IEA warned that while oil prices remain low currently, the cost of a barrel is expected to roughly double over time, and that in some situations, the world's oil industry would be vulnerable to shocks that cause oil prices to spike.

But many policy makers have yet to absorb this message. Despite concerns about the environmental and economic prospects for fossil fuels, the oil, gas, and coal industries continue to benefit from roughly four times the amount of government subsidies as the renewable energy sector, the IEA said.

"[W]e estimate this global subsidy bill [for fossil fuel consumption] at around $490 billion in 2014, although it would have been around $610 billion without reforms enacted since 2009," the agency wrote. "Subsidies to aid the deployment of renewable energy technologies in the power sector were $112 billion in 2014 (plus $23 billion for biofuels)."

Not Just CO2

While energy agencies are primarily focused on carbon emissions, evidence is growing that methane leaks from oil and gas drilling, fracking, pipelines, and other infrastructure pose a grave climate threat that the U.S. government has underestimated.

"Because of the increase in shale gas development over recent years, the total greenhouse gas emissions from fossil fuel use in the USA rose between 2009 and 2013, despite the decrease in carbon dioxide emissions," Prof. Robert Howarth, a scientist whose pioneering work on methane emissions suggests that burning natural gas — which the IEA predicts will be the only fossil fuel to gain market share — may be even worse for the climate than burning coal, wrote in a peer-reviewed paper published in the journal Energy and Emission Control Technologies. 

Methane, especially from shale gas sites, is leaking from the gas industry at a far higher rate than previously believed, Howarth said, writing that while the Environmental Protection Agency estimates that leak rates are just 1.8 percent, those conclusions are based in part on flawed data collection.

The true methane leak rate, Howarth concluded after reviewing the available research, may in fact be more than 10 times that rate in some cases — and on average,12 percent.*

There are some signs that energy experts worldwide are increasingly taking note of the hazards of methane leaks.

"Emissions of methane, a powerful greenhouse gas, along the supply chain will dent the environmental credentials of gas if there is no concerted policy action to tackle these leaks," the IEA noted in its report, though it also labeled the fuel "a good fit for a gradually decarbonising energy system."

But the carbon emissions from burning natural gas are significant as well. In 2013, the U.S. produced roughly 2.17 billion tons of carbon from burning oil and 1.7 billion tons from burning coal — and another 1.4 billion tons came from burning natural gas, the EIA reported, making natural gas responsible for 26.7 percent of America's CO2 pollution.

A Shift to Pure Renewables?

The Obama administration has made its support for an "all of the above" energy strategy that envisions increasing reliance on natural gas in the short term as a "bridge" to the eventual shift to renewable energy.

But even without subsidies, there are already some markets where renewable energy remains competitive against fossil fuels, even as oil and gas prices have nose-dived this year.

In Houston, TX a newly built solar plant is expected to provide electricity for an average of 4.8 cents per kilowatt hour for 20 years.  That's roughly half a cent more than Houston's fossil-fuel based power plants in today's over-supplied market — but two cents per hour cheaper than the 5-year average cost of conventional fuels, highlighting the unpredictability of the market for those fuels.

And wind power in that state has become so abundant that the New York Times is reporting it is literally too cheap to meter at night.

Meanwhile, keeping oil and gas flowing is expected to become increasingly costly. The IEA estimates that “just to compensate for declining production at existing fields and to keep future output flat at today’s levels,” the oil industry will require $630 billion in investments.

And building new pipelines to deliver oil and gas from areas like shale drilling regions adds to the expected costs.

“Keeping these project costs under control (contrary to numerous recent examples of overruns) will be vital to the future competitive positioning of gas,” the IEA said.

Crunching numbers like these has some environmentalists targeting a near-term transition away from all fossil fuels, not just oil and coal.

“The impossible is becoming possible. The global breakthrough of renewable energy has happened much faster than anticipated,” Emily Rochon, global energy strategist at Greenpeace International, told EcoWatch. “We believe that with the right level of policy support, the world can deliver 100 percent renewable energy for all by 2050.”  

*Ed note: This sentence was clarified following a reader's suggestion.

Photo Credit: Arial view of a solar farm under construction in the UK, via Shutterstock  

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By Josha MacNab, regional director for British Columbia at the Pembina Institute.

When world leaders gathered in Lima, Peru, for global climate change talks, British Columbia’s environment minister, Mary Polak, was among them. She shared the province’s successful experience in implementing commendable climate policies, like B.C.’s carbon tax — a policy that the president of the World Bank hailed as a “powerful example” of carbon pricing.

However, Minister Polak also included the province’s liquefied natural gas (LNG) export aspirations as part of B.C.’s climate success story, arguing that LNG will displace coal in Asia. Unfortunately, the evidence doesn’t support this claim.

LNG versus coal

Compared against each other, a coal-fired electricity plant will produce more carbon pollution than a gas-fired electricity plant on a life-cycle basis if methane emissions from natural gas extraction are well managed. But research from the Pembina Institute and the Pacific Institute for Climate Solutions shows that, without strong climate policies, increasing the supply of gas in the global market does not lead to the displacement of more polluting energy sources like coal. It simply feeds an increasing energy demand with additional fossil fuels, putting the world squarely on track for dangerous climate change.

A study published recently in Nature supports this conclusion. For natural gas to displace carbon-intensive forms of energy like coal there need to be climate policies in place that shift investment decision-making. A strong carbon price, for example, would provide an incentive to replace coal plants with lower-carbon energy alternatives.

Click image for larger version.

The recent China-U.S. climate agreement is an example of a step in the right direction towards what is needed to encourage the development of climate policies that could result in LNG replacing coal in China. However, the same climate policies that shift investments towards lower-carbon choices ultimately result in a decrease in the demand for all fossil fuels, including natural gas. In fact, as part of that agreement, China plans to increase the share of non-fossil fuels in its primary energy consumption to around 20 per cent by 2030.

Gas as a “bridge fuel”

Our research shows that less natural gas will be used in a world with strong climate policies. In the short term, and in the context of strong climate policy, natural gas can act as a “bridge fuel” that helps the transition from fossil fuels to renewable energy and more energy efficiency. To keep the planet below an average of 2°C of global warming (the internationally recognized limit to avoid dangerous climate change) that bridge must be very short: by 2030 natural gas demand would peak, and by mid-century it would fall below current levels.

Governments and industry also need to get better at measuring methane emissions that result from the extraction of natural gas. Recent studies have concluded that this carbon pollution is higher than previously estimated. This means that the role for natural gas as a bridge fuel in a carbon-constrained world could be even shorter, unless methane management practices improve significantly.

An economic risk

Not only is it inaccurate to claim that LNG is a “climate solution”, it’s also economically unwise. Tying B.C.’s economic engine to a resource that will decline in 15 years if governments around the world implement strong climate policy is a recipe for a major boom and bust — something many B.C. communities are unfortunately all too familiar with.

Instead of focusing so intently on LNG, B.C. should look at what types of energy solutions will be needed with strong climate policies in place, and figure out how to supply those needs. In such a world, the International Energy Agency predicts that by 2035 demand for renewable energy would increase by 127 per cent over 2011 levels. Meanwhile, total energy demand is predicted to go down globally by 20 per cent relative to a world without strong climate policies, thanks to the rise of energy efficiency and conservation.

This represents a massively growing global market for clean energy technology and services, one in which B.C. already has an advantage. For example, analysis from consulting firm KPMG found 200 clean technology companies operating in the province, employing over 8,000 people and generating $2.5 billion in annual revenue, primarily from exports. Many of these companies are well positioned to take advantage of a growing market for clean energy.

There are many ways B.C. can and should play a productive role in global climate change initiatives. Fortunately, with its track record of implementing credible climate policies, a global reputation for climate leadership and a growing clean energy sector, B.C. has a lot more to offer the world than more fossil fuels.

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At least $83 billion USD in financing was provided to 65 coal mining and energy companies last year by 92 of the world’s leading commercial banks, according to a Dutch report published Wednesday.

Leading banks provided $500 billion in financing for the coal industry through 2,283 lending and underwriting transactions between 2005 and April 2014, said the report Banking on Coal 2014, which was released by BankTrack in Nijmegen.

The top 20 financiers provided 73 per cent of this amount alone, added the report, released just days ahead of the publication of the fifth United Nations Intergovernmental Panel on Climate Change (IPCC) assessment.

The report said JPMorgan Chase was the top financier between 2005 and this year, lending more than $27 billion, while Citi, in second place, lent $25.8 billion and third-place RBS provided $22.9 billion to coal-related borrowing.

Bank finance for coal is increasing rapidly, the report said, adding 2013 was a record year for coal finance, with commercial banks providing more than $88 billion to the main 65 coal companies – over four times the amount provided in 2005.

Yann Louvel, BankTrack’s climate and energy campaign coordinator, said the new data shows that rising coal financing continues to provide a vital lifeline to the increasingly beleaguered coal industry, while at the same time placing the planet in climate jeopardy.

“This is the most extensive data ever compiled on commercial bank financing of both coal mining and coal power, and even though we’re probably only covering little more than half of the global banking sector’s true financial support for the sector, the conclusion is stark: the lending figures have been rising steadily since 2005, and last year was a record year,” Louvel said.

The report said JPMorgan Chase remains the world’s biggest ‘coal bank’ over the period 2005 to April 2014, in spite of its oft-stated claims to be “transitioning to a low-carbon economy” and its commitments to initiatives such as the Carbon Principles.

It also said a major trend recently has been the growing role of Chinese banks in coal financing.

Between 2011 and 2014, six of the top 20 coal banks are Chinese, including the top three, the report states.

By comparison, between 2005 and 2014, only four Chinese banks are in the top 20, and none in the top three.

Banks headquartered in just three countries — China, U.S. and U.K. — were responsible for the majority (62 per cent) of coal financing between 2011 and 2013, the 28-page report added.

It also noted that coal is the single greatest source of man-made carbon dioxide (CO2) emissions heating up our planet.

“According to the [International Energy Agency], 44 per cent of global emissions from fossil fuels come from coal. Since the year 2000, global coal production has grown by over 69 per cent and now amounts to a staggering 7.9 billion tons annually.”

The report said commercial banks must stop bankrolling climate change by ending support for new coal extraction and delivery projects, as well as for new coal-fired power plants.

“Banks must also start becoming responsible asset managers and divest from the coal companies in their portfolios,” the report said. “Banks must finally stop trading coal – both ‘physical coal’ and coal derivatives.”

It also said banks must finally calculate and disclose the financed emissions associated with their loans, investments and other financial services.

“The next step must be to rapidly decrease these financed emissions, in line with global and national climate targets, and shift their energy finance from fossil fuels to energy efficiency and renewables.”

BankTrack is a global network of civil society groups tracking the operations and investments of private sector banks and their effect on people and the planet. It has also published Bankrolling Climate Change and Banking on Coal 2013.

Alex Scrivener, policy officer at the UK-based World Development Movement, which works with BankTrack, said banks all over the world are fuelling a whole new round of coal mines and coal-fired power plants when humankind needs to be rapidly pulling back from coal in order to avoid the worst impacts of climate change.

“Any notion of ‘ethical banking' is incompatible with financing an energy source like coal,” Scrivener said. “It’s not only a disaster for the climate, it’s also responsible for all manner of injustice inflicted on communities in the global south who have been devastated by the impacts of coal mining.”

Image Credit: Scholven coal fired power plant by Guy Gorek via Flickr.

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The B.C. government’s claim that LNG exports offer the “greatest single step British Columbia can take to fight climate change” is inaccurate in the absence of stronger global climate policies according to a new report released today by the Pembina Institute and the Pacific Institute for Climate Solutions.

Natural gas does have a role to play in a world that avoids two degrees Celsius in global warming, but only if strong emissions reduction policies are put in place in the jurisdictions that produce and consume the gas, says the report, LNG and Climate Change: The Global Context authored by Matt Horne and Josha MacNab.

“Natural gas is often described as a bridge fuel. The question is, how long should that bridge be?” says MacNab, B.C. regional director for the Pembina Institute, a national non-profit focused on transitioning Canada to a clean energy future.

“Our research suggests it must be very short if we’re going to be able to get off the bridge in time to avoid the worst impacts of climate change.”

If strong climate policies were put in place to avoid reaching more than two degrees of warming, the burning of natural gas would peak by 2030 and drop below current levels by mid century, according to the report.

Under that scenario, energy efficiency, renewables and nuclear would increase significantly while the use of fossil fuels drops.

“It’s climate policy that will determine coal use, not the availability of natural gas,” MacNab says. “It’s not simply a question of LNG and coal swapping out for each other.”

The B.C. government’s claim, which was made during the February 2014 throne speech, is premised on two assumptions.

The first is that natural gas is cleaner than coal. On that point, MacNab said that in most cases natural gas is 10 to 40 per cent cleaner than coal assuming that methane is safely managed. However, the Pembina Institute report also notes that there “remains material uncertainty” about the life cycle emissions of natural gas that requires additional research.

The second assumption the B.C. government makes is that LNG will replace coal.

“In a world with weak climate policy, natural gas will not reduce coal use,” says Horne, B.C. associate regional director for the Pembina Institute. “Without a global push for low carbon energy sources and efficiency, LNG will likely worsen rather than ease global warming.”

The institute’s findings are in line with a report published last week in Nature, which found that cheap abundant natural gas will actually delay any efforts to reduce carbon emissions.

B.C. Needs to Put Emissions Reduction Policies Before LNG Strategy

To draw its conclusions, the Pembina Institute report compares the role of natural gas under two different scenarios: one in which global warming is limited to two degrees Celsius and one that stays on the business as usual path. The comparison yields two very different roles for natural gas — either as part of an energy mix that helps avoid dangerous climate change or as part of an energy mix that accelerates the world down the path to dangerous climate change.

“Instead of leading with LNG and natural gas strategies, jurisdictions — B.C. included — need to lead with emissions reduction policies,” the report says.

To avoid more than two degrees of warming and keep atmospheric concentrations of greenhouse gases below 450 parts per million, the International Energy Agency says policies need to include economy-wide carbon pricing, the phase out of fossil fuel subsidies, emissions standards on power plants and a renewable transportation fuel standard.

The Pembina Institute makes three recommendations to the B.C. government to increase the chances that B.C.’s LNG industry can be part of the solution, rather than part of the problem, including applying an evidence-based approach in assessing energy exports, strengthening domestic efforts to reduce emissions from natural gas and LNG development and playing a more proactive role on climate change and methane management globally.

If strong climate change policy was enacted on a global level, natural gas use would peak by 2030 — just 15 years from now. What does that mean in terms of B.C.’s plans to build an LNG industry?

“We would encourage the B.C. government to be thinking about that in terms of the long-term sustainability of the industry,” MacNab says. “B.C. ought to be careful in hitching its economic wagon to a resource that will decline in a carbon-constrained world."

Photo: Christy Clark at LNG Canada announcement via Province of British Columbia on Flickr

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Wind power has become so successful that it could provide 25 to 30 per cent of global electricity supply by mid-century if vested interests don’t get in the way, according to a new report published Tuesday.

The report — Global Wind Energy Outlook 2014 — said that commercial wind power installations in more than 90 countries had a total installed capacity of 318 gigawatts (GW) at the end of 2013, providing about three per cent of global electricity supply.

By 2030, the report said, wind power could reach 2,000 GW, supply up to 17 to 19 per cent of global electricity, create over two million new jobs and reduce CO2 emissions by more than three billion tonnes per year.

The report published by the Global Wind Energy Council and Greenpeace International noted that while emissions-free wind power continues to play a growing role in international electricity supply, political, economic and institutional inertia is hampering attempts to deal with the consequences of climate change.

“The fossil fuel industry, the most powerful vested interest in the world today, continues to do everything it can to obfuscate the science and slow down political progress,” the report said.

“Not their least pernicious influence is on the politicians they own, particularly those in the U.S. Congress – and in the places where the fossil fuel industry is a family business masquerading as a national government in the Persian Gulf – and in the places where fossil fuel exports have become a blunt political and military instrument to bludgeon recalcitrant neighbours into submission.”

Using the International Energy Agency’s New Policies scenario from the World Energy Outlook as a baseline, the 58-page Global Wind Energy Outlook (GWEO) report developed both a moderate and an advanced scenario to explore the future of the wind energy industry from 2020 to 2050.

Under the moderate scenario, which takes into account all policy measures to support renewable energy either already enacted or in the planning stages around the world, wind energy potential will quadruple between 2020 and 2050 from 712 to 2,672 GW.

(For detail junkies, the projected increases are as follows: 712 GW of cumulative wind power capacity by 2020, 1,479 GW by 2030, 2,089 GW by 2040 and 2,672 GW by 2050.)

The advanced scenario outlines the extent to which the wind industry could grow in a best case ‘wind energy vision,’ but still well within the capacity of the industry as it exists today and is likely to grow in the future, assuming an unambiguous commitment to renewable energy. Under this advanced scenario, cumulative wind energy capacity could increase by nearly five times, from 800 GW in 2012 up to 4,042 GW in 2050.

(The details: It would see 800 GW by 2020, 1,933 GW by 2030, 3,024 GW by 2040 and 4,042 GW by 2050.)

Wind power has a potentially massive role to play in the elimination of fossil fuel emissions. Swapping one month’s use of fossil fuels for 100 kWhs of wind power is the equivalent of taking one car off the road for 2,400 miles or 3,862 kilometres according to How Stuff Works.

In a media release accompanying the report, Steve Sawyer, CEO of GWEC, said wind power has become the cheapest cost option when adding new capacity to electricity grids in an increasing number of markets.

“Given the urgency to cut down CO2 emissions and continued reliance on imported fossil fuels, wind power’s pivotal role in the world's future energy supply is assured,” Sawyer said.

In a related Greenpeace International blog posting, Sven Teske, the organization’s senior energy expert, said that by 2020, wind power could prevent more than one billion tonnes of carbon dioxide from being emitted each year by dirty energy.

“That’s equivalent to Germany’s and Italy’s emissions combined, or Africa’s total CO2 emissions, or those of Japan, or two-thirds of what India pumps out,” Teske said.

The report noted that science indicates global greenhouse gas emissions need to peak in the next five years if humankind is to have any reasonable chance of avoiding the worst ravages of man-made climate change — i.e. keeping global mean temperature rise below 2°C above pre-industrial levels.

The power sector is the largest single contributor to global greenhouse gas emissions – about 40 per cent of energy-related CO2 emissions, and about 25 per cent of overall greenhouse gas emissions — the report said.

Massive implementation of existing energy-efficiency and energy-saving technologies is needed in the next five to 10 years, no new coal plants should be built, and natural gas should be used wherever possible, it added.

In addition, the report predicted that while solar power may be the largest power source by mid-century, the biggest contribution to emission-reductions in the next decade will come from hydro and wind.

Image Credit: Lillgrund wind farm by Vattenfall via Flickr.

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Coal, the fossil fuel that largely sparked the industrial revolution, may be facing the beginning of the end — at least in terms of generating electricity.

There are increasing signs of the demise of the world’s dirtiest fossil fuel, from a global oversupply to plummeting prices to China starting to clean up its polluted air.

Last week, the Carbon Tracker Initiative published an analysis — Carbon Supply Cost Curves: Evaluating Financial Risk to Coal Capital Expenditures — identifying major financial risks for investors in coal producers around the world.

Saying the demand for thermal coal in China, the world’s largest emitter of toxic greenhouse gases, could peak as early as 2016, the analysis also highlights $112 billion of future coal mine expansion and development that is excess to requirements under lower demand forecasts.

“In particular it shows that high cost new mines are not economic at today’s prices and are unlikely to generate returns for investors in the future,” said an accompanying media release.

“Companies most exposed to low coal demand are those developing new projects, focused on the export market . . . With new measures to cap coal use and restrict imports of low quality coal in China, it appears the tide is turning against the coal exporters.”

The analysis added that China’s desire to reduce imports will impact prices and asset values for export mines in the U.S., Australia, Indonesia and South Africa.

“King Coal is becoming King Canute, as the industry struggles to turn back the tide of reducing demand, falling prices and lower earnings,” Anthony Hobley, CEO of Carbon Tracker Initiative, said.

A recent article in Mining Weekly also says the coal industry is indeed facing tough times.

The article noted Coal Association of Canada president Ann Marie Hann agreed that about half of the global coal output at current pricing was being produced at a loss.

“Until a global rebalance between demand and supply takes place and the global economy rebounds, the coal industry will unfortunately probably see some more bad news over the coming months,” Hann said.

The story added that the prices for thermal coal, which is used to generate electricity, had fallen in recent years from about $190 per tonne in mid-2008 to $75 per tonne this year, while metallurgical coal (used to make steel) had dropped from a high of more than $300 per tonne in late 2011 to less than $120 per tonne.

To perhaps make matters worse for the coal industry, it is being publicly attacked by the oil and gas sectors, which are trying to position themselves as cleaner fossil fuels.

According to the Responding to Climate Change website, a number of the world’s leading oil and gas companies voiced their concerns about climate change at last week’s UN Climate Summit, arguing they can offer a future coal cannot.

“One of our most important contributions is producing natural gas and replacing coal in electricity production,” Helge Lund, Statoil’s chief executive, was quoted as saying.

Kevin Washbrook, a director for Voters Taking Action on Climate Change, a Vancouver organization that has fought against a proposed new coal export facility at Fraser Surrey Docks, agrees the thermal coal sector is in decline.

“I think coal is in everyone’s sights these days because coal is climate change,” Washbrook told DeSmogBlog. “Coal has to be on the chopping block for sure.”

Washbrook added the UN, the International Energy Agency, big banks and insurance companies are acknowledging that the vast majority of coal must stay in the ground if humankind is to avoid catastrophic, runaway climate change.

“We need to see this current downturn [in the thermal coal sector] for what it really is — our last good opportunity to leave coal behind and start the transition to emission-free energy sources.”

Photo Credit: Arnold Paul, Wikimedia Commons

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Recent forecasts from the International Energy Agency (IEA) and British Petroleum (BP) have cast new doubts on the long-term economic viability of exploiting the Albertan tar sands.

In a November report, the IEA predicted that demand for tar sands production in 2035 will be 3.3 million barrels a day, lower than the Canadian Association of Petroleum Producers’ (CAPP) more optimistic estimate of 5 million barrels a day. BP’s Energy Outlook 2030, published in January, also forecasts that US oil imports will fall 70 percent by 2030 from 11 million barrels a day in 2011.

Citing the BP and IEA forecasts, author and former Oilweek editor Earle Gray writes in the Toronto Star, that “a host of factors dims the prospects for the oilsands.” Gray lists “slower growth in world oil demand, increasing energy efficiency, alternative fuels and possible caps on global warming emissions of carbon dioxide” as reasons the Harper government should be weaning the Canadian economy off the tar sands.

Gray also questions the wisdom of the United States trying to cash in on Canada’s risky golden goose via the Keystone XL pipeline. According to the IEA, the US, which currently imports about 20 per cent of its energy needs, is projected to become the largest producer of oil in the world by 2020. This would result in it becoming “all but self-sufficient in net terms” by 2030. The reasons for this trend include the shale gas revolution, which is seeing the country opening up new energy reserves through the extraction of natural gas from shale rocks by drilling, or “fracking,” in itself a controversial practice.

The increased gas and oil output has lowered the price of natural gas in the US. As Gray writes, the shale revolution “promises a fivefold increase in the world’s known recoverable oil, according to estimates by the International Energy Agency.” Which makes it doubtful that Canada should be banking on a sustainable demand for tar sands oil from its neighbour. None of these developments make the expensive Keystone pipeline sound like a good investment for the US to embrace. Whether or not the Obama administration will approve the pipeline is yet to be seen, but the chances seem to be lowering.

International increases in energy efficiency could further contribute to falling demand for oil, alongside rising demand for alternate fuels. The IEA notes that China wants a 16 per cent reduction in energy intensity by 2015, Japan a 10 per cent cut in electricity consumption by 2030, and the European Union a 20 per cent reduction in its energy demand by 2020. Not the most ambitious goals, perhaps, but indicative of the risks to be expected by a country aiming to become a major oil exporter.

Gray also observes that plans to increase domestic sales of oil from Alberta to Ontario, Quebec and the Atlantic would likely require a resuscitation of the 1961 National Oil Policy. The Policy mandated that the use of imported oil be restricted to areas east of the Ottawa, giving the Alberta oil market an exclusive domestic market in the west. As a result, the west paid higher prices for Albertan oil, while the east paid the lower global price. By 1973, the Policy was gone. Gray deems a revival of such a policy unlikely.

Even putting aside environmental concerns, it’s becoming clear that the Harper government’s continued reliance on the tar sands and the Keystone pipeline as the source of a bright economic future for Canada seems myopic at best.

Image Credit: Dru Oja / Flickr

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Minimizing the worst effects of climate change seems like a goal we should all be able to agree on. If you ask them directly, very few people will come out in favour of increasingly frequent and severe storms, flooding in coastal cities or drought-induced famines. But as the evidence mounts that these things will come to pass unless we leave 80% of remaining proven fossil fuel reserves in the ground, why can’t we agree on the need to act?

The easiest answer is that opposition to transitioning to a low-carbon economy comes from those who stand to benefit the most from staying the course. The most obvious culprits here are oil and gas companies. While the International Energy Agency warns against exceeding an average global temperature increase of 2°, it also predicts that current policies will lead to a 35% increase in global demand for oil by 2035.

With Big Oil already posting record profits, the promise of substantial demand growth means those profits will balloon to unprecedented proportions. Faced with such alluring numbers, leaving oil reserves in the ground is not an attractive prospect for shareholders.

Although they make for easy targets, it’s not just ExxonMobil, Shell and co. that are standing in the way of meaningful action on climate change. As a key global commodity, oil is at the center of the business model not only for oil and gas companies, but also the automobile industry, logistics, plastics and pharmaceuticals, to name but a few.

The decrease in oil production needed to avert climate change’s worst effects would mean a significant cost increase for a basic factor of production across many sectors of the economy. This in turn would lead to serious reductions in profits—not to mention the additional costs for consumers.

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Since corporations are legal entities whose function is to maximize profits for their shareholders, they tend to oppose actions that limit profitability. While corporations depend on the state for their legitimacy and can therefore be compelled to accept reduced profits through regulation, government has its own reluctance about confronting climate change.

Just as corporations are constrained by quarterly profit requirements, governments are limited by the electoral cycle. Simply put, they need to maintain popularity with the electorate in order to stay in power. This leads to a bias in favour of policies with short-term benefits.

Although taking action on climate change is a platform that appeals to Canadians, the government knows it can’t be done without serious economic implications. If a governing party were to spearhead a massive industrial transformation away from fossil fuels, it would be blamed for any ensuing economic difficulties at the polls.

Beyond merely keeping voters happy, governments need to act in accordance with the multitude of rules and norms governing global capitalism. From G20 meetings to bilateral free trade agreements, the global economy rests on commitments from individual states to minimizing trade barriers, reducing regulation and maintaining fiscal discipline.

Charting a course away from fossil fuels within this framework is not impossible, but could encounter significant opposition at the international level. The ongoing financial crisis has already revived old fears of a return to protectionism and competitive currency devaluations. The overwhelming response from the IMF and other international financial institutions has been loud and clear: follow the rules to get back on track to oil-fueled global growth.

Taken together, all this means that the two most powerful institutions in modern society—the corporation and the state—lack the capacity to respond to the unfolding crisis of climate change. If the environmental movement is to be successful in spurring the immediate, drastic action necessary to reduce CO2 emissions, it needs to honestly assess these obstacles.

Institutional forms and economic relationships can be changed. But overcoming the path dependence of a global capitalism built on deeply entrenched principles of endless industrial growth and maximizing profits will take more than voting for the right party or investing in green growth.

The power of environmentalism rests on its ability to grow and sustain itself as a mass movement. In the second installment, we’ll look at some common criticisms of the environmental movement for ideas on how to increase its reach.  

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.