BC Business
B.C. has vowed an 80 percent cut on emissions
ZIP.
For a brief period in December 2021, that was the advertised name of the new Centre for Innovation and Clean Energy (CICE), an arm’s length not-for-profit that the provincial and federal governments have created in partnership with Shell Canada—each kicking in a handsome $35 million to spend on commercializing and scaling up new B.C.-based clean energy technologies. The name, ZIP, was the dreamchild of branding consultants who argued that the aspirational acronym for “zero is possible” would be more memorable than the bureaucratic-sounding CICE. But before anyone could print up zippy business cards, CICE executive director Dr. Ged McLean waved them off, countering that his organization doesn’t need an attention-seeking Twitter handle: it exists to give out no-strings grants to companies that promise to reduce B.C.’s carbon footprint while bolstering the provincial economy. Surely, McLean said, candidates for unconditional money can be relied upon to remember an uninteresting name.
But the corollary question that “ZIP” raises still hangs in the air: Is zero possible? Everyone from the B.C. and Canadian governments to Royal Dutch Shell and the United Nations Intergovernmental Panel on Climate Change (IPCC) is promising to reduce greenhouse gas emissions to net-zero by 2050. Is there any reason to take them seriously? Is the goal—which IPCC scientists say is necessary to save the world from an irreversible climate catastrophe—even achievable?
The optimistic answer is: yes! However, a report from McKinsey Global Institute, The Net Zero Transition, says the bill will be $275 trillion. That’s $9.2 trillion a year from 2021 to 2050—or about $3.2 trillion a year more than we are currently spending on energy and land-use systems. In 2021 dollars, McKinsey says, that amounts to half of all global corporate profits, one-quarter of tax revenues currently paid to all governments, or 7 percent of all household spending. So, even optimistically, the McKinsey answer to whether zero is possible seems to be: yes, but…
There is a more manageable calculation for Canada alone. The Canadian Climate Institute, a not-for-profit organization funded mostly by Environment and Climate Change Canada, produced a similar report in 2021, called Canada’s Net Zero Future. It concludes: “Net zero is achievable—if Canada plays its cards right.” Dale Beugin, CCI’s vice president, research and analysis, says the organization ran more than 60 modelling scenarios in the course of charting “many possible routes to net zero.” There was, he says, “no magical thinking.”
Again optimistically, CCI calculated that Canada could achieve two-thirds of its 2030 emission-reduction goals using “safe bets,” which CCI describes as “low-risk solutions that are available today”—ranging from energy efficiency and electric vehicles to “natural gas fuel switching.” Getting to 2050 is tougher, especially if you’re serious about reaching a state where the entire population has reduced its greenhouse gas emissions to a point that any overshoot can be balanced by “negative emission solutions,” everything from newly planted forests to carbon capture technologies that draw carbon dioxide (CO2) straight out of the atmosphere. To reach net zero by 2050, Beugin says, we will need the full effect of safe bets, plus a big contribution from “wild cards,” which CCI defines as “high-risk, high-reward solutions that are still in early stages of development.” These are the solutions we dream about, solutions that innovators like the direct-air-capture company Carbon Engineering in Squamish have already demonstrated, but that have not yet been proven at scale or shown to be affordable.
Returning to the part about Canada playing its cards right, Beugin says, none of this is “going to happen on its own. We are going to need aggressive, ambitious government policy.” So, the McKinsey answer of “yes, but…” now becomes “yes, if…”
Looking back on the record of Canadian governments’ historical level of climate ambition, that becomes an un-reassuring “if.” Canada has been making these distant GHG-reduction commitments for decades, and while none satisfied the David Suzuki Foundation on the day they were made, some seemed pretty ambitious. Unfortunately, the government hasn’t kept a single such promise. For example, at the Kyoto climate conference in 1997, Canada promised to reduce national GHG emissions 6 percent from 1990 levels—which were 602 mega-tonnes of CO equivalent (602Mt CO2 eq)—by 2012. Instead, national emissions rose to 717 Mt, an increase of more than 19 percent. In 2000, when it was already falling behind on the 1997 target, the federal government promised to reduce emissions by 65 Mt a year every year—from 2008 to 2012; that would have been a fabulous 325-Mt reduction. Alas, emissions fell slightly thanks to the 2008 recession, but that (very temporary) cut amounted to 19 Mt—less than 3 percent, rather than 45 percent, as promised.
The B.C. provincial government has been similarly enthusiastic in setting soon-to-be unrealized emissions targets. For example, in 2007, the government of the day brought in the first North American carbon tax, still the most progressive climate initiative on the continent, and it promised to reduce GHG emissions 33 percent from 2007 levels by 2020. Still no. B.C.’s emissions were up 7 percent by 2018, and they have continued to rise.
If you’re at risk of losing heart, this might be a great time to look more closely at the long-term promise of ZIP—or, rather, CICE (Ged McLean, who, by the time you’re reading this, will be on a 46-foot sailboat on a long-planned voyage through the Northwest Passage, pronounces it “sea ice”). The organization was conceived in 2021 as a hothouse for what the CCI call wild cards. The idea is to find and fund B.C.-based companies that have a capacity to: 1) reduce greenhouse gas emissions; and, 2) benefit the provincial economy.
And to be clear, McLean says, this is not a redundant program for supporting blue sky research. To qualify, CICE applicants must have a proven, market-ready technology or idea, preferably in one of the following categories:
You’ll notice nothing fossil fuel-ish in that list, which raises the question of why Shell would step up as an equal partner. Shell Canada president and country chair Susannah Pierce says it’s basically enlightened self-interest. The partnership gives Shell no insider status when it comes to analyzing or approving projects. Neither will CICE or Shell participate directly in any commercial successes resulting from CICE intervention. But Pierce says that Shell is “hoping the investment will generate significant value in profitable businesses.” That, by itself, would create a benefit for an energy company operating in B.C.
Perhaps more to the point, however, Shell is looking for good ideas. “We recognize that we don’t have all the insights,” Pierce admits when it comes to navigating the path to net-zero. In addition to the 2050 target, Shell is also committed to reducing its production-generated emissions by 50 percent before 2030. And, thanks to a court case brought by a consortium of environmental groups in the Netherlands, Royal Dutch Shell is facing a legal order from the Hague District Court that it must reduce its own emissions—and those of its consumers—by 45 percent, also by 2030. In pursuit of that difficult and—barring success on appeal, legally enforceable—goal, Pierce says, “We have peaked oil.” And yes, you read that correctly: one of the biggest oil companies in the world is now “enabling the natural decline of these assets,” shifting primarily to natural gas.
This brings us to the very British Columbian narrative that the optimal strategy for transitioning away from the climate changing effects of fossil fuels is to invest in a less carbon-intensive fossil fuel. That was certainly the consensus at the December 2021 Metro Vancouver Board of Trade Energy Forum, called “Finding Net Zero and Growing Our Economy, Together.” There, five of the nine presenters were from the natural gas industry, and moderator and Bennett Jones LLP partner Sharon Singh got no argument when she declared, “I don’t think there is anyone here who thinks that LNG is a barrier to net zero.”
If that logic seems twisty, Greg D’Avignon, president and CEO of the Business Council of British Columbia, is eager to straighten things out, although he admits, “it’s complicated.” In a global energy market, D’Avignon says it’s crucial that we consider the net effect of our energy resources. First, China is on track to quadruple its installed energy generation capacity in the next 30 years—reaching 392 gigawatts by 2050. (For scale, B.C.’s new Site C hydro-electric dam will generate 1 gigawatt.) So, D’Avignon says, whatever burden natural gas adds to B.C.’s emission budget, it’s still better to help China switch its new power sources from dirty coal to cleaner natural gas. And given that B.C.’s natural gas producers are reporting the lowest carbon intensity in the world, he says, it would be better still to be using B.C. natural gas. “We also need money to pay for our own energy transition,” D’Avignon says, adding that natural gas—liquified and exported—could be an important source of that revenue.
This, however, is an increasingly controversial view. The most recent report of the IPCC, released in April, said the slow transition away from fossil fuels is leading us to a global overshoot of the Paris target to keep global average temperature increase under 1.5 degrees Celsius. U.N. secretary-general António Guterres took it a step further, saying that the world’s governments and corporations are “adding fuel to the flames” by falling so short on their climate commitments. Guterres said: “Climate activists are sometimes portrayed as dangerous radicals. But the truly dangerous radicals are the countries that are increasing production of fossil fuels. Investing in new fossil fuel infrastructure is moral and economic madness.”
As if on cue, the Canadian government stepped up two days later to approve Bay du Nord, a deep-sea oil project off the Newfoundland coast that is expected to produce 40 Mt of CO2 over its 20- to 30-year life expectancy. It’s not clear whether Bay du Nord inflates the previous federal estimate that oil and gas production in Canada would increase by 21 percent by 2030—a rate of expansion second only to the United States. Neither is it known how this project will impact Canada’s national emissions performance as measured against the 2015 Paris commitments, which is already the worst among all nations in the G7.
“We’re on a very dangerous path,” says Ian Bruce, deputy executive director of the David Suzuki Foundation. “We’ve already felt the brunt of extreme weather in B.C. in the last year: the flooding that did so much damage in the valley and the heat dome that killed hundreds of British Columbians. We’ve seen how this may go.” Addressing D’Avignon’s argument that B.C. gas is low carbon-density and therefore worth trading into a global market, Bruce points to two scientific reports (one by the Suzuki Foundation in partnership with St. Francis Xavier University and the other by two Carleton University professors) that show B.C.’s fracked gas to be more than twice as carbon intensive as currently recorded. Rather than offsetting the carbon load from other sources, Bruce says, B.C. is just adding fuel to the problem…
…and may soon be adding more: Shell announced in April that it is considering building a second phase of B.C. LNG, doubling the capacity of the liquified natural gas facility under construction in Kitimat.
Beyond exceeding the carbon budget, the Canadian Climate Institute’s Dale Beugin says there’s another risk from all this fossil fuel enthusiasm: stranded assets. In a second 2021 report, called Sink or Swim, the CCI points out that “capital markets have awakened, and climate change is increasingly a factor in investment decisions. International investors with over US$43 trillion in assets under management have committed to supporting net-zero emissions goals.”
(Of course, depending on your position, this decline in investor enthusiasm might not be a “problem.” Another report released in March showed that Canadian banks had increased their fossil fuel financing by 70 per cent in 2021 and that all five big banks—RBC, Scotiabank, TD, BMO, and CIBC—were among the top 20 fossil fuel financiers in the world.) Still, Beugin says, Sink or Swim confirms that “wind, solar, and electric vehicle battery technology costs have fallen by 60 to 90 percent over the past decade,” presenting a heightened risk that a country that doubles down on last century’s energy solution might be left holding an empty bag.
Carbon Engineering Ltd. Carbon Engineering’s Innovation Centre in Squamish, B.C.
Perversely, the final risk when contemplating whether zero is possible is overconfidence—or, at least, over-reliance on a “wild card” that will save us by 2050, no matter how unseriously we respond in the short term.
One such solution might be the emerging technology that makes it possible to capture CO2 directly from the air and either sequester it in the ground or use it to create a net-zero alternative fuel source. The Squamish-based company Carbon Engineering is one of the world’s leading Direct Air Capture (DAC) developers, but as vice-president of business development Anna Stukas says, “It would be incredibly dangerous to think of negative emissions technology as a get-out-of-jail-free card.” But then she points to the jailhouse door.
First, Stukas says, “I take umbrage with the CCI characterization of DAC as a ‘wild card.’ It’s an early-stage technology that we are working diligently to de-risk.” CE has partnered with 1PointFive (a subsidiary of the old Occidental Petroleum) on its first full-scale DAC plant, which is designed to capture 1 Mt a year of CO2 for permanent sequestration underground. This is old hat for Oxy, which has more experience than anyone in the business of harvesting CO2 from industrial exhaust and pumping it into oily aquifers to enhance the recovery of fossil fuels. Now, Oxy is positioning itself to sequester for profit, a huge business opportunity if world governments get serious about levying carbon taxes and offering offsets on the way to net-zero. Oxy’s “base-line case”—a plan it announced in a March investor update—calls for the construction of 70 similar-sized DAC plants between now and 2035, with an “aspirational target” of 135 plants. Also in March, Oxy announced that European airplane giant Airbus had contracted to purchase carbon credits from the first plant at the rate of 100,000 tonnes a year for four years.
So, notwithstanding the expense, the years of missed targets and broken promises, and Canada’s unrelenting announcements of fossil fuel expansion—and notwithstanding that, as CCI says, “engineered forms of negative emissions are… best viewed as a complement to other solutions rather than a substitute”—CICE and the Carbon Engineering solutions seem to offer a rare bright spot.
On the road to net zero in 2050, Stukas says, “I am cautiously optimistic.”