World leaders, especially those controlling the global economy’s purse strings, have a message for those with ears to hear: Business as usual is over, the time for bold action is now
Mark Carney said yesterday at COP26 that the $100 trillion needed to finance the transition away from fossil fuels by 2050 is ready to go. If that’s true, then Canada’s oil producers should be huddling today in their boardrooms coming up with a post-combustion strategy. The message coming out of Glasgow is that business as usual is over.
Carney, former governor of the Bank of Canada and UN Special Envoy for Climate Action and Finance, assembled the Glasgow Financial Alliance for Net Zero, a group of bankers, insurers and investors representing $130 trillion of assets under management. The world’s financial community agreed to provide the needed $100 trillion to fund the switch from coal, oil, and natural gas to clean electricity and low-carbon fuels like hydrogen.
“The core message today is that the money is there, the money is there for the transition, and it’s not blah blah blah,” Carney told delegates during a COP26 climate finance event on Wednesday.
Thursday, Canada joined a group of 23 countries to sign the Statement on International Public Support for the Clean Energy Transition at the COP26. Commitments including ending “new direct public support for the international unabated fossil fuel sector by the end of 2022.” This spells trouble for Big Oil’s plan to have Ottawa foot $30 billion to $50 billion of its Oil Sands Pathway to Net-zero by 2050 Initiative, which relies heavily on carbon capture and storage. Given the speed at which global climate policy is changing, it can’t be long until Canada promises to stop subsidizing abated oil and gas development, too.
Canadian Big Oil’s vision of the energy future is not aligned with these trends. The Big 5 (Suncor, Cenovus, CNRL, Imperial Oil, MEG Energy) still think they can grow oil production almost 20 per cent by 2030. They regularly misrepresent the most conservative International Energy Agency scenario, Stated Policies, in which oil demand falls modestly, as a “forecast.”
Business as usual to the extent possible is their mantra. COP26 has driven home the message that business as usual is dead. Radical change isn’t coming, it’s here. That’s the bad news for Big Oil
The smart money, as evidenced by Carney’s financial alliance, has already moved on. If that wasn’t clear before, it’s clear now. The trajectory of Canadian public financial support for oil and gas is also now clear.
The good news is that the sector still has time to act. International consultancy Wood Mackenzie recently wrote that the global oil and gas sector will enjoy robust profits throughout the 2020s. Under-investment in exploration and production coupled with uncertainties created by the energy transition will keep prices – and profits – high. Hydrocarbon producers should take this last opportunity to develop low-carbon business models, Wood Mackenzie argued.
The bad news is that of the Canadian majors, only Suncor has invested in low-carbon businesses like renewable energy (wind and solar farms) and sustainable aviation fuel. The others, like the medium and small producers, are hoping that cutting emissions will be enough. It won’t.
Canada’s Big Oil is in big trouble.
The impediment to change is CEOs like Mark Little of Suncor and Alex Poubaix of Cenovus, both considered progressive, forward thinkers within the cozy confines of the Canadian oil patch. They may very well be progressive compared to Texas, the yardstick by which the Calgary-based industry measures itself. But they’re out of step with global trends and, after COP26, far behind the Canadian government.
If you want to know what Canadian Big Oil really thinks, read the climate slow walking, pro-expansion pronouncements of the Canadian Association of Petroleum Producers, like this attack on the Canadian government’s “just transition” consultation process. CAPP is the voice of Big Oil and it speaks with a Texas drawl.
COP26 should be a wakeup call for Canadian Big Oil, but it probably won’t be. That’s too bad because the oil sands producers, in particular, have the opportunities (bitumen to make carbon fibre, road asphalt binder) and the cash to successfully pivot to the low-carbon, post-combustion world that the global financial community is eager to fund.
World leaders, and especially those controlling the global economy’s purse strings, have a message for those with ears to hear: Business as usual is over, the time for bold action is now.