For what it is worth. In the Globe&Mail today.
If governments around the world maintain the status quo in terms of energy policies, we’ll see peak global demand for coal, oil and gas before 2030 – and clean technologies will play a much stronger role. That’s according to the latest analysis from the International Energy Agency, which recently released its annual World Energy Outlook, or WEO, report.
For Canada, the IEA research confirms it’s time for governments to heed the signals and end public support to the fossil fuel industry. This includes eliminating subsidies for liquefied natural gas expansion across the country. LNG Canada, the only such facility under construction, has already received more than $6.5-billion in public support from federal and provincial governments.
Global demand outlook for natural gas (including LNG) has been progressively revised downward in the “stated policies” scenarios of each of the past four WEO editions. This year’s report is also the second to project an absolute decline in global natural gas demand by 2030.
In a current world scenario (with no additional changes to existing climate policies), last year’s outlook for natural gas demand in 2040 was cut by around 570 billion cubic metres (a 12-percent reduction relative to 2021 forecasts). This year, forecasted natural gas demand in 2040 has been adjusted down a further 140 bcm. Even without more ambitious climate policy, the market is changing quickly and revealing that the structural shift away from natural gas has begun in many economies. There is no evidence that Canada’s LNG will find demand in an oversupplied and shrinking market.
Industry often claims that Canada can be a major LNG exporter and even an LNG superpower. This has led to a sense of urgency and pressure to build infrastructure quickly. The pipeline for TC Energy’s Coastal Gaslink, which is supposed to feed LNG Canada, was recently completed despite significant opposition and environmental violations. LNG enthusiasm assumes strong demand going decades into the future with opportunities to support European and Asian energy needs.
But this urgency to build is misplaced: The forecasts and analysis just don’t support the hype. The IEA’s most recent report highlights the EU’s accelerated move toward renewable energy sources after feeling the sting of gas’s use as a geopolitical weapon. China’s economic growth is slowing as well, with the IEA projecting its total energy demand to peak middecade with a trend toward higher proportions of clean energy. Emerging Asian markets, with the highest LNG demand growth, are price-sensitive and will likely favour the lowest-cost producers.
This all means that developing LNG in Canada is an economically risky proposition. And propping up LNG as a “cleaner” energy export than some of Canada’s dirtier fuels is undermined by higherthan-expected methane emissions in LNG supply chains, not to mention the large energy needs of LNG infrastructure itself.
Like natural gas, the outlook for LNG demand has been revised down. Demand in 2050 under current policies, according the WEO’s most recent outlook, is nearly 15 per cent lower than projected two years ago. The WEO also makes clear that if the world successfully limits global warming to 1.5 C through more ambitious climate policies, there is no need for new LNG facilities. Even projects that are already under construction, such as LNG Canada, risk becoming uneconomic before the end of their lifetime.
The industry is attempting to launch into a weakening market. Globally, multiple new LNG projects are slated to come online starting in 2025, mostly in the U.S. and Middle East, and will flood the markets with more than 250 bcm a year of new capacity by 2030 – roughly 45 per cent of today’s global LNG supply. This will drive prices down and influence the economic viability of projects coming online after 2027.
Given the clear signals about the long-term prospects of the LNG industry, governments in Canada need to protect taxpayers from this risk. It is essential to end the subsidies, tax breaks, exemptions, discounts and deferrals that have been provided to the country’s LNG sector. This includes having the public pay for the cost of building transmission lines to electrify LNG facilities. The loopholes for LNG in the federal government’s policy to eliminate “inefficient” fossil fuel subsidies also need to be closed – permanently.
If the WEO makes anything clear, it is that the future is in renewables and electrification. Public support, both in Canada and abroad, should flow only to long-term clean energy solutions such as solar, wind and electric heat pumps