It’s common to hear an opinion on Canadian energy exports phrased something like this: “How can Canada in good conscience develop its natural resources for export when it should be leading the way in reducing emissions and developing renewable energy? Any project that increases Canada’s emissions should be halted!” The counter-argument usually rests on some variant of, “But we need the jobs!” With passions high on both sides, it’s unlikely the two groups will ever agree. Perhaps everyone could consider a different question: “What if development and export of Canada’s natural gas in the form of LNG could make the world a better place by offsetting emissions growth from coal-based energy development in emerging economies?” If this could be done, there’s a strong argument that Canada has a moral obligation to the rest of humanity to do so.
Energy demand is growing enormously in rapidly developing emerging countries. The Asia-Pacific region’s energy use in 2017 was equivalent to that of the entire world in 1975. And growth isn’t slowing. Between 2011 and 2013, China used approximately 1.5 times as much cement as the United States had used in the prior 100 years. In 2017, Canadians used about 20 times as much electricity per person as people in India. Yet just the growth of India’s electricity generation over the past decade – 76 percent of which is coal-fired – was equal to Canada’s current total electricity generation. If India and China consumed as much primary energy per capita as Canada, all else equal, it would triple global energy consumption. A scale this large is world-changing.
The factors driving what is likely to be massive demand growth in emerging countries are pervasive and highlight the benefits of access to plentiful, affordable energy. For example, India is five times hotter than the United States yet has just one-twentieth the level of air-conditioning ownership. Too, there is well-documented demand impact from the widespread use of new technology such as smartphones. In other regions, the disparity and potential for growth are even starker. Africa’s 1.2 billion people use, on average, a mere 1 percent of the energy consumed by the average Canadian. Statistics like these clearly illustrate the vast potential for energy demand growth and quality of life improvement.
In the past, such statistics and comparisons would have been largely academic, for Third World poverty seemed intractable due to exploding populations and stifling government policies. Over the past three decades, however, economic improvements in dozens of countries have been astounding. Often unmentioned is that this trend depends fundamentally on access to energy. There is an immutable relationship between energy use per capita and GDP per capita, as well as energy use per capita and the UN’s Human Development Index, which reflects lifespan and standard of living. Continuing growth in the production, distribution and consumption of affordable energy is inseparable from improving quality of life and escaping poverty.
The challenge lies in how this hunger will be met. Most likely it will be via the most cost-competitive or entrenched source. For the foreseeable future, this will continue to be predominantly coal, which is cheap and plentiful in numerous countries including India. Next in line would be fuels such as natural gas – but only once low-cost access is achieved. In terms of baseload renewable power, hydro-electricity continues to grow, but is less of a factor and its overall potential is finite, while the social obstacles to nuclear will likely stymie its medium-term development. As for solar, wind and other alternatives, beyond their unreliability, they remain expensive outside of ideal geographic conditions.
Energy economics and resource availability have driven the proliferation of coal, among other things resulting in India’s air quality today being even worse than China’s. And it is likely to get worse. By 2040, 80 percent of India’s coal-fired generation is expected to come from plants that have yet to be built. A new coal-fired plant built in Asia is estimated to generate approximately twice the full-cycle greenhouse gas (GHG) emissions of an LNG-fuelled plant, while coal-related pollution results in an estimated 10 times as many deaths per unit of power output as natural gas. Clearly there would be large benefits in meeting the need for high-volume, low-cost new energy supply using sources other than coal.
That brings us to Canada and its potential role. Thanks to the astounding technical and commercial success of formerly “unconventional” gas sources like shale and tight sands reservoirs, Canada today has the world’s fourth-largest natural gas reserves and produces 16 billion cubic feet per day of gas. These molecules are being sold at the lowest gas prices on Earth while being developed under industry-leading social and environmental standards. Of note, Canadian LNG could reach Asian markets in half the time as U.S.-sourced LNG travelling from the Gulf Coast and through the Panama Canal, reducing costs, transportation emissions and safety risks. As well, a B.C.-domiciled facility could be powered by hydroelectricity rather than drawing on piped-in gas supply as most LNG facilities do, which could make it one of the world’s most environmentally friendly LNG facilities.
Canadian LNG could assist the world’s transition away from coal. This shift is not going as well as many news reports suggest; in fact it’s going in the opposite direction. Although the U.K.-based Financial Times in 2017 proclaimed, “Coal’s days numbered as countries pledge to end use,” the article included an asterisk disclosing that the countries making this pledge represented just 2 percent of global coal consumption. In April 2018, HSBC announced it would “stop providing financing to new coal-fired power plants”. This policy, however, quietly excluded Vietnam and Indonesia, currently the world’s 9th and 15th-largest coal consumers.
Incredibly, Vietnam and Indonesia alone have 58 coal-fired plants of 30 MW or greater capacity under construction and another 142 in various pre-construction/permitting phases. That is more plants, and likely more capacity, than Canada ever had in total, and is in addition to the 611 plants announced or under construction in China and India. A few weeks after HSBC’s announcement, it financed half-a-dozen new coal-fired plants in Vietnam and Indonesia. The “global fight against coal”, in other words, is equal parts fantasy, hypocrisy and dishonest virtue signalling.
Given what is actually happening around the world, Canada has a real shot at improving the global environment while supporting the social and economic development of emerging countries. Unfortunately, too many Canadians seem oblivious to the realities of global energy economics and the role natural gas could play. Some evidently believe Canada operates in isolation, i.e., that cuts to GHG emissions must take place here. Consequently, we have chosen a path of increasing regulatory complexity and shifting rules, making it very challenging for pipelines and projects to be built. But this contradicts our national pride in advancing global human rights and health. Ambient air pollution is said to contribute to more than 10 percent of all deaths worldwide. That’s more than HIV, tuberculosis and malaria combined. In addition to an economic development imperative and a business opportunity, is there not a moral obligation as well?
Canada’s green lobby doesn’t think so. Consider Mike Sawyer, a Calgary native and long-time activist now living in B.C. who is greatly “concerned about the environmental, climate and social impacts of LNG development.” He previously challenged the now-cancelled Pacific Northwest LNG project and is currently focused on shifting regulatory oversight of the Coastal Gas Link pipeline, which would transport gas to Shell’s LNG Canada project, from the provincial to the federal level. That would almost certainly delay the project. Sawyer claims full-cycle LNG emissions are 2-27 percent higher than from a coal-fired facility. At time of publication, Sawyer had not responded to a two-month-old request for a source backing this claim. He also claims negative impacts to wildlife, water and Indigenous communities, yet numerous First Nations strongly support LNG development.
The LNG Canada project’s likely environmental impact can be viewed in different ways. The “for” camp might point out that the B.C. government estimates it to represent only 5 percent of B.C.’s GHG emissions. The “against” camp can just as plausibly state that this could mean an 80 percent increase to the province’s oil and gas-related CO2 emissions (B.C. gets much of its electricity from hydro). Both statistics are technically correct – and both sides are emotionally charged. For us, the critical question is, are we providing a net benefit to the world by allowing a currently coal-based economy to import Canadian gas, reducing overall global CO2emissions but, in doing so, effectively “exporting” the remaining CO2 to Canada? Or should we just say no and focus solely on our domestic environmental performance?
A common version of the no-LNG argument goes something like this: Canada is a global leader in renewable energy, with about 81 percent of its electricity generated from non-GHG-emitting sources. While projects like LNG Canada create jobs and could help developing countries reduce their reliance on coal, the environmental costs to the communities and environment around the LNG facility, in the gas-producing areas and along the pipeline corridor are simply too high. Far better that the country invest its resources, capital and time in leading-edge technology, true renewable energy, increased energy efficiency and conservation. The latter would include things like LED lights, discouraging air travel, promoting local tourism, or subsidizing e-bike penetration in cities.
While this argument seems seductive, it greatly sells short the benefits of exporting LNG and ignores its moral component. Focusing only on domestic energy policy surrenders Canada’s role in the world. And that world is refusing to stand still. Economies are developing, energy consumption is zooming and pollution is worsening in many countries. Canada can help. That help can have a moral dimension – but it must go beyond mere moralizing. It has to work. Canada must look beyond its borders and build for LNG export. While global energy transition is coming, that transition will take many decades. It needs to begin with the displacement of coal, which today fulfills approximately 27 percent of global energy demand. That ratio has barely moved in four decades, during which time overall energy consumption has risen dramatically.
The now decade-long denial of resource projects in Canada is turning away much-needed investment capital in our country at a time when the world needs all the energy molecules it can find. A recent study showed that annual foreign investment in Canada has declined by 55 percent since 2013 and shows no sign of an upturn.
There is a global opportunity cost to Canada’s energy policy choices. Our reluctance to develop and export our energy reduces the near-term alternatives to coal development. The opportunity cost for Canada is also enormous as we willfully restrict ourselves to just one foreign purchaser of our natural gas. This single-market system is incurring an estimated $15 million in lost revenue daily, industry-wide across B.C. and Alberta, or about $5 billion per year.
Canada has a chance to help the world environmentally, socially and economically via LNG export – while also greatly helping itself. We need to get there. Future generations indeed depend on it.