The Oil Sands Pathways to Net Zero Initiative, announced June 9, may well lower greenhouse gas emissions from bitumen extraction and help Canada meet its own net-zero-by-2050 goal. Unfortunately, that is not enough. Climate change is only one of three significant risks facing the industry. The others are peak oil demand and at least $31 billion of environmental liabilities for 37 toxic northern Alberta tailings ponds. CEOs coming to Ottawa cap in hand for $50 billion of subsidies may be Canada’s last chance to address all three issues and put the oil sands on a path to long-term environmental and financial sustainability. The opportunity must not be missed.
My 2019 book, The New Alberta Advantage: Technology, policy and the future of the oil sands, also focused on emissions’ reduction. The energy transition was in a lower gear then, and transformative change seemed another decade or two away. Lowering emissions in anticipation of global carbon pricing policies seemed smart: address climate change and gain a competitive advantage over high-carbon heavy crudes from competitors like Venezuela and Mexico. Arguing that “when the energy transition is complete and the last drop of heavy crude oil is refined or processed sometime this century, it will be an Alberta drop” seemed reasonable.
But just as the book was hitting the presses, the energy transition grabbed a higher gear and accelerated. Even experts who lived and breathed the transition were caught off-guard as technology milestones expected in 2030 arrived a decade early.
Electric transportation in particular — cars and trucks, buses, delivery vans, commercial vehicles, bicycles, robo-taxis, automated shuttles and much more — has experienced dramatic advances. The signs are all around us. Automakers are all in on electric. Transit authorities are ditching diesel buses. Battery costs are plummeting while new technologies like solid-state (uses a solid electrolyte instead of liquid, which enables longer range and greater safety) promise a major improvement only a few years from now. And every new EV sales forecast from BloombergNEF features a steeper curve than the last one.
Since ground transportation consumes just under half of global oil supply, the electrification of transportation is the biggest determinant of peak oil demand. The International Energy Agency (IEA) thinks peak oil will arrive in the late 2020s or early 2030s, while other forecasters think it will happen earlier. The next question is the shape of the decline curve: Will it be steep or shallow? Speedier electrification suggests peak oil demand will arrive sooner than the IEA predicts and the decline will be more rapid.
But we don’t really know. The 2020s are shaping up to be the disruptive decade of this energy transition. A good bet is that when 2030 arrives, most of our current assumptions about the future of oil will prove to be quite conservative.