Today’s Key Takeaways: If you succeed in blocking your local LNG plant, it doesn’t mean the emissions don’t happen. Saudi ends “cliffhanger” over oil production. Europe: solar beats coal, with a glitch. New survey with same results: voters prefer affordability over climate agenda.
NEWS OF THE DAY:
Canada’s GHG Cap on the Oil and Gas Industry Is All Pain With No Gain
Fraser Institute, June 1, 2023
In 2021, the Government of Canada enacted the Canadian Net-Zero Emissions Accountability Act, more commonly discussed as “Net-Zero Emissions 2050.” The goal of this Act is to ensure that in the year 2050, Canada’s emissions of greenhouse gases to the atmosphere are balanced by actions within Canada that pull greenhouse gases back out of the atmosphere, or at least, prevent some from entering that would otherwise have done so.
Pursuant to that, Canada enacted an interim plan, the 2030 Emissions Reduction Plan, which has a specific sub-component dealing with the greenhouse gas emissions that come from Canada’s oil and gas sector, a sector mostly found in Western Canada. This subcomponent would require “emission reductions [from the oil and gas sector] to 31% below 2005 levels in 2030 (or to 42% below 2019 levels)”, which would build a pathway to net-zero emissions by 2050.
This essay provides a rough estimate of the environmental benefits associated with imposing the GHG cap on the oil and gas industry. We show that eliminating all GHG emissions from the oil and gas sector in 2030 would reduce Canada’s projected GHG emissions by 29 percent. This is not a trivial number, as an absolute value, even for a single sector of Canada’s emitting industries.
However, when seen in a global context, even if Canada eliminated all of its GHG emissions expected in the year 2030 as a result of the new greenhouse gas caps implemented by the current government (187 Mt), the emission reduction would equal four-tenths of one percent of global emissions, a reduction unlikely to have any impact on the trajectory of the climate in any detectable manner, and hence, to offer only equally undetectable environmental, health, or safety benefits.
The calculated environmental benefits in this essay are even overestimated due to the risk of carbon leakage: studies have shown that greenhouse gas emissions are quite fungible meaning that they move from place to place where regulations allow. A recent study of the issue suggests that nearly 30 percent of any reductions made in Canada with regard to greenhouse gas emissions would simply be emitted elsewhere, as the emitting activity moved to more permissive jurisdictions.
In addition, the essay shows that the GHG cap imposed on the sector will inevitably curtail the production of oil and gas in the coming years and thereby result in negative economic impacts due to reduced production and exports. Recent estimates suggest the GHG cap will result in at least $45 billion in revenue losses for the industry in 2030 alone, which would imply a significant drop in government resource royalty and tax revenue.
OIL:
Saudi Arabia keeps oil markets guessing — again
Ben Geman, Axios, June 5, 2023
Saudi Arabia helped end a cliffhanger over OPEC+ oil production levels but created fresh suspense — and potentially higher energy prices — in the process.
Driving the news: The kingdom will cut output by 1 million barrels per day in July, and then decide whether to continue with the lower output.
- That reduction was a key result of Sunday’s OPEC+ meeting as the group looks to stem price declines.
- The end result could translate into higher prices at the pump as the U.S. summer driving season kicks into gear.
Catch up fast: OPEC+ also extended 2023 production cuts announced in April through 2024, while altering some nations’ allotments.
- The intricate outcome followed long and reportedly contentious talks in Vienna.
Why it matters: The Saudi move quickly started reversing the general slide in oil prices in recent weeks, though prices already got a bump last week on the U.S. debt ceiling deal.
- The global benchmark Brent crude rallied above $75 per barrel early Monday, up nearly 3% from Friday’s close.
What we’re watching: Prices as well as whether the Saudis, OPEC’s most powerful member, will further tighten markets by continuing the reductions.
- “The pure possibility of the Saudi production cut extending beyond July will limit downside price pressure for the rest of 2023,” Rystad Energy analyst Jorge Leon said in a note.
GAS:
Yukonomist: Alaska LNG aims for Asia
Keith Halladay, Yukonomist, June 4, 2023
First came interest in our critical minerals, as Canada’s American, Asian, and European allies formed the Mineral Security Partnership. Then President Biden approved Alaska’s giant Willow oil project. Now another commodity has put our part of the world on global security and climate agendas: liquefied natural gas (LNG).
The Biden administration recently approved Alaska LNG, a US$39 billion project aiming to move up to 20 million tonnes per year (MTPA) of gas from existing wells on the North Slope via a new 1,300-kilometre pipeline to Kenai. From there, the gas will be liquefied and sent on tankers to Asian markets.
This is about the same amount of gas the Alaskans hoped — back in the 1970s and again in the early 2000s — to move to the Lower 48 via Whitehorse and the Alaska Highway Gas Pipeline.
This time the Biden administration has applied climate conditions, requiring carbon emitted from the project to be captured and put back underground. Combined with regulations on methane leaks, this should make Alaskan gas — like Canada’s — among the lowest carbon in the world. (This applies to the production and pipelining of the gas; it still emits as much gas from other places when burned by the end user.)
As with Willow, the project has widespread but not universal support in Alaska. The state’s Republican senators made sure the project would be eligible for low-cost federal financing in the bipartisan infrastructure bill.
The tax credits for carbon capture pushed by Democrats will help out with the costs for that part of the project. Environmentalists who hoped Alaska’s new Indigenous congressperson, democrat Mary Peltola, would oppose the project ended up disappointed. She is also in favour of the Willow oil project.
The size of the project is of global significance. Since the Russian invasion of Ukraine, the world has faced a major shortage of LNG. As Europe attempted to replace gas it bought from Russian pipelines with LNG, prices around the world soared.
MINING:
Solar beats coal in Europe for first time – but there’s a glitch
Bloomberg News, June 3, 2023
The European Union’s transition to clean energy marked a milestone in May, when solar panels generated more electricity than all of the bloc’s coal plants for the first time — and that’s before summer sun boosts production even further.
While the furious expansion of solar generation bodes well for efforts to replace fossil fuels, the breakthrough also exposed flaws in the energy system. Power prices turned negative during some of May’s sunniest days as grid operators struggled to handle the surge.
“This summer will be something we’ll have to look at like it’s a postcard from the future,” said Kesavarthiniy Savarimuthu, analyst at BloombergNEF. “The biggest message will be: we’re not ready.”
POLITICS:
New Survey, Same Results: Voters Prefer Affordable Energy over Climate Agenda
American Energy Alliance, June 2, 2023
Summary:
The American Energy Alliance (IER’s sister organization) and the Committee to Unleash Prosperity recently completed a nationwide survey of 1000 likely voters (3.1% margin of error) executed in the first two weeks of May. A full slide deck of the results can be found here.
Notable Findings:
- Republicans continue to be on solid ground with respect to who should make decisions about (and who should pay for) car and truck purchases, on carbon dioxide taxes, on willingness to pay to address climate change, on issue prioritization, and even on the fundamentals of the science (by a margin of 19 points respondents identified carbon dioxide as “needed for plant life” rather than a “pollutant”).
- Voter sentiment and attitudes on energy and climate change seem to be characterized by stasis; despite what you may have read in the media, there has been little change in voter sentiments and attitudes with respect to energy and climate change.
- Voters don’t seem to care much about climate change and their willingness to pay anything to address has dissolved in the last year.
- When asked what they would be willing to pay each year to address climate change, the median response was 20 dollars, and 35% (including 15% of self-identified Democrats) said they are unwilling to pay anything. There has been some rapid erosion in these responses: last year, the median response was 55 dollars.
- Voters don’t trust government very much. More than two-thirds (70%) said that they did not trust the federal government to decide what kind of cars should be subsidized or mandated. An even greater percentage (80% this year, up from 70% last year) said they wanted to make the decision about the cars and fuels they buy, rather than the government.