Will OPEC’s “slow energy transition” assumptions about weakening climate policies hold at COP28?
Much has been made of Danielle Smith heading to COP28, which starts in Dubai today, to promote investments in Alberta’s oil and gas sector. I’ll be watching another COP28 story that has important implications for Alberta: the world’s commitment to tougher climate policies.
As she demonstrated during the 24th World Petroleum Congress in Calgary this September, the Premier has aligned Alberta with OPEC and Middle Eastern oil producing countries pushing a slow energy transition narrative. OPEC expects oil demand to grow to 116 million barrels per day or higher from its current 103 million barrels per day by 2045. Global consumption will plateau for a while, then slowly decline well after 2050.
This view underpins Smith’s Reducing Emissions and Energy Development Plan, which she intends to tout at COP28 as Alberta’s “vision” for the future.
But there is a very important assumption in the World Oil Outlook 2045, the modelling that provides the rationale for the slow transition narrative, that will be tested at COP28: that citizens and their governments are growing tired of climate policies.
“Governments and political parties are reevaluating their sustainable energy pathways, taking into account the realities on the ground and the views of populations,” the OPEC oil report says. “There has been pushback against the opinion that the world should see the back of fossil fuels, as policies and targets for other energies falter due to costs and a more nuanced understanding of the scale of the energy challenges.”
That quote contains a second related assumption: that clean energy technologies are perhaps economic in some countries in some circumstances, but generally require subsidies and other policy support for rapid adoption. Should policy support falter, it follows, then adoption of wind, solar, but particularly electric transportation (critical to future oil demand) will slow.
This trend would be especially true in developing countries. The OPEC report makes a great deal of the desire for the emerging middle class of the global south to better its lot in life. From this vantage point, India, Africa, and many countries in Latin America stick with fossil fuels that provide low-cost and reliable energy. OECD (Organization for Economic Co-operation and Development) demand for oil falls, but is more than offset by rising consumption in non-OECD countries.
The slow energy transition narrative’s attraction for Smith is obvious. Why, the province’s clean and ethical (hardly) hydrocarbons can help decarbonize coal-dependent Asia while supporting the eradication of energy poverty in poorer nations. Smith, the former conservative radio jockey, sees herself not as marketer-in-chief for Alberta oil and gas but as a compassionate stateswoman bringing the gift of energy to the less fortunate.
“Energy security and affordability is the imperative of governments to make sure that they can maintain,” she said during her September 18 press conference at the World Petroleum Conference. She also lambasted the International Energy Agency (IEA) as a “political activist organization” for its net-zero scenario’s forecast of 25 million barrels per day of oil demand by mid-century.
The Premier is playing offence, not defence, on energy issues.
But so is the IEA. In October, the Paris-based organization forecast peak demand for coal, oil, and natural gas by 2030, then followed up last week with a report arguing that the global oil and gas industry “faces a moment of truth” as the energy transition accelerates faster than expected. Thus far, key IEA modelling assumptions are holding true. For example, the pace of the electrification of transportation, driven by China’s burgeoning EV industry, will cause road transport fuel consumption (about half of global oil demand) to peak in just a year or two.
Will the same be said for OPEC’s climate policy assumptions after COP28 concludes in two weeks?
Smith no doubt hopes they will. We’ll know soon enough.