Canada is entering the 2020s without a clear strategy to manage our energy resources and our consumption. It’s a global conundrum, with developed and developing countries alike starting and stalling on their energy transition plans. China is winning the electric vehicle race, with more than two million EVs on the road and production set to rise by 53% this year. At the same time, it’s leading the world in emissions, up 100 million tonnes in 2017. In France, anti-carbon tax protesters continue to make noise in the very city that gave us the Paris Agreement.
What’s keeping us stuck in limbo? At this year’s World Economic Forum, the Davos crowd ranked extreme weather their top concern; yet serious conversations were in short supply. I left Davos with five big takeaways about the current state of energy, and the transition challenges ahead.
- The first thing to know is, the energy outlook remains strong.
- This growing demand for oil is at odds with a growing reluctance to finance it.
- Business is in a space race for carbon-reducing ideas.
- Governments are faltering on climate leadership.
- Exactly what the transition looks like is still unclear.
The respected energy analyst Daniel Yergin told the Forum he doesn’t see “peak oil” until at least 2040 – “and peak doesn’t mean plummet.” Here’s one of the many reasons for that growth: 83% of the world’s population has never been on an airplane…yet.
Price volatility has spooked investors —three times since 2015, you’ve had a 40% change in the price of oil in 60 days. Today, the result is a U.S. $140-billion dollar investment gap, fueling uncertainty in the industry. “We’re going to need long-cycle projects to go with short-cycle projects like shale to ensure we have enough oil,” according to John Hess, the CEO of Hess Corporation.
There’s a lot of enthusiasm around technology, and companies are eager to share their success stories. Boeing, for example, has successfully tested a cargo plane using only biofuels. But technology is only part of the play. Regulations have to evolve, and consumer choices need to change, to push this over the finish line.
Governments are faltering on climate leadership, from Emmanuel Macron’s blundered carbon tax messaging to the failed promise of Angela Merkel as the “climate chancellor.” It means there is still a deep disconnect in the public of the enormous challenge before us. The message at the Forum was that governments should tell people in blunt language about mounting costs and threats, and then set up programs to address the consequences.
As Daniel Yergin said, “There’s not agreement on what an energy transition is. Is it a more mixed system, is it a different system, and timing — you don’t really know what the technology is going to be how, and how they’ll interact.”
The most recent Intergovernmental Panel on Climate Change report says we only have 12 years left to avoid climate catastrophe. But Rachel Kyte, CEO of Sustainable Energy for All, highlighted some impressive progress: “Ten years ago, no one here in Davos would have confidently predicted the current low prices of renewable energy.”
A lot can still change in a relatively short time frame, when you pick a road and commit to it.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.