What we need to know about Canada’s energy riches

In a series of posts leading up to the World Economic Forum’s New Energy Architecture report launched on Monday 23rd April 2012, Bob Elton, former CEO of BC Hydro, explains Canada’s place in the increasingly complex energy world.

Making the most of Canada’s energy riches has been tough work of late: the US recently denied permits for the Keystone pipeline which is planned to bring oil from Alberta to the United States; there are multiple permitting processes in place to decide on pipelines that would bring oil from Alberta through British Columbia to the West Coast and on to Asia; and competing proposals are being developed for liquefied natural gas (LNG) terminals which would enable the export of shale gas to Asia. These processes can divide us more than we would like.

Canada is the 5th largest energy producer in the world. Energy decisions are needed all the time. Accordingly, you would expect a coherent energy policy to be in place – but you would be disappointed. One reason for that is shared energy jurisdiction between the Federal and Provincial governments, and the Provinces face such varied energy circumstances that it is difficult to develop a bold national policy.

On the supply side, Canada has great energy resources beyond our current production, so we have stark choices about the extent, speed and nature of development. On the demand side, we are like many countries rich in energy resources. We use energy inefficiently and unsustainably by world standards. Although our self image is probably one of being at one with nature, modern Canada is a very urban country with energy usage habits that rival those of the United States and greatly exceed those of Europe.

Compared with other energy exporting nations, we have the ability to diversify our economy. We have a well educated work-force, healthy immigration levels and well developed infrastructure. The question we should ask is: How can our energy resources best help us to build a competitive economy and a great society for generations to come? How can we apply our values to energy policy? These are questions that we have to address before we decide on each incremental energy investment.

The economic benefits of developing energy reserves are clear. But who benefits and to what extent?

If resource rich provinces earn royalties and the benefits of the jobs involved in construction, and if this tends to drive the dollar up over time, what does this do to Provinces that are relatively resource poor, and whose manufacturing base is hard hit by higher energy prices and a higher Canadian dollar? What is the best way to deal with the economic benefits: should Provinces set up funds as was done by Norway, so that surpluses can be invested rather than just spent? If countries based on petrodollars have often struggled to deal with the effects of rich energy resources, why do we think Canada will be different?

How can we best talk about the environmental effects of developing energy resources for export? If we are in favor of aggressively developing energy resources, especially fossil fuel based resources, then what exactly is our position on climate change? Is it, for example:

• We deny that climate change is a problem that can be alleviated by restricting greenhouse gases (GHGs); or
• We agree that it is a problem that can be alleviated by restricting GHGs, but because today there is no worldwide way of restricting GHGs, it follows that if we do exploit our resources someone else will; or
• We agree that climate change is a problem than can be alleviated by restricting GHGs, and therefore we need to manage the risks of basing our economy too much on fossil fuel extraction, both financially and environmentally?

The “New Energy Architecture” Report by the World Economic Forum offers a great opportunity for us to develop that framework, using lessons learned from other countries around the world, especially those that most resemble us.

Canadians need to strike a balance between energy security, economic benefit and environmental value. In order to do that we have to understand the many specific energy development decisions that need to be made.

Author: Bob Elton, former CEO of BC Hydro, Chair of the World Economic Forum’s Global Agenda Council on the New Energy Architecture.

Picture: A Canadian flag is reflected in a window decorated with maple leaves and functional photovoltaic cells, which is part of Team Canada’s solar-powered home, at the National Mall in Washington, D.C., in preparation for the start of the Solar Decathlon October 5, 2005. ( CREDITS : Stefano Paltera/Solar Decathlon)