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National energy strategy needed


Canada needs a national energy strategy — a real national energy strategy that moves Canada to a low carbon economy, with much greater focus on clean energy and energy efficiency.

The Obama administration, with its Clean Power Plan that seeks to reduce carbon from electric power generation 30 per cent by 2030 from 2005 levels, has put Canada on the spot.

But so far, the opportunity from a low-carbon economy has attracted little political or industry attention.

That has to change.

The urgent and expensive challenge the world faces is set out in a new report from the International Energy Agency, its World Energy Investment Outlook. Its 450 Scenario spells out the investments the world needs to make between now and 2035 to help limit the increase in the average world surface temperature to no more than two degrees Celsius above the level in 1870, the era of the First Industrial Revolution.

This is essential if the world is to avoid catastrophic climate change later this century, scientific experts have warned.

Canada has signed on to this target but is not doing much to help achieve it.

The IEA estimates that the world would need to invest US$53 trillion in non-carbon forms of energy and in energy efficiency, as well as much cleaner uses of fossil fuels and increased overall energy supply, between now and 2035 if this climate change target is to be met.

By pushing so hard for oilsands development, however, Canada risks stranded investments in oilsands plants.

The IEA estimates there could be $300 billion of stranded energy assets worldwide, with the highest cost producers the most vulnerable. Recently, Total E&P Canada announced it was putting on hold its planned $11 billion oilsands project because of high costs.

The climate challenge is compounded by the fact that between 2010 and 2035, the world will add 1.7 billion people, while the forecast average economic growth of 3.5 per cent a year will mean the world economy will double in size by 2035.

Absent major gains in clean energy and energy efficiency, global demand for conventional oil, gas and coal energy would soar, putting the world on the path to a climate catastrophe.

The issue will come to a head next year when the UN summit on climate change takes place in Paris.

Participating countries, including Canada, are committed to achieving a binding agreement, taking effect in 2020, that would put the world on the path to a low-carbon economy.

The IEA says this will require a global price on carbon for power generation and industry “at a level sufficiently high to make investment in low-carbon technologies attractive.”

Yet with a new national energy strategy that focussed on the shift to a low-carbon economy, there could be major opportunities for Canada for a huge global market in the decade ahead.

But that would require an aggressive effort in Canada to build up companies with global potential by ensuring they can develop technologies and gain experience in a growing Canadian market.

A key ingredient would be a price on carbon, since this would lead to greater demand for low-carbon technologies and provide an incentive for entrepreneurs to pursue new technologies and investors to back them.

In a new report, Ottawa-based Analytica Advisors finds that clean technology sectors most closely linked to clean energy and energy efficiency — the biorefinery, power generation, energy infrastructure/smart grid, energy efficiency/green buildings and transportation sectors — had $6 billion in sales in 2012, with most companies also exporting.

The 390 companies had a total of 23,700 employees and spent $727 million on research and development. With an aggressive strategy to develop the sector, the report said, Canada could turn this into a $17 billion industry within a decade.

But as the Analytica Advisors report also showed, Canadian companies on average are small, with average revenues of $15.4 million.

It urges greater efforts to achieve at least 20 Canadian companies with revenues of $100 million or more by 2022, developing the scale and scope to be real global players.

It’s time for Canada to seize the opportunity — and the jobs and companies that will be created or grow as a consequence — to become a leader in helping to meet the world’s urgent need for a low-carbon economy. It’s time for us to seize the opportunity and to combine good economic policy and good environmental policy.

Economist David Crane is a syndicated Toronto Star columnist. He can be reached at crane@interlog.com.

 
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