The acceleration of growth and big increases in living standards only really began with the industrial revolution; they would not have happened without the exploitation of fossil fuels. Burning fossil fuels puts carbon into the atmosphere, and the overwhelming view of scientists is that this leads to a buildup of greenhouse gases that results in global warming. The market model spread quickly to parts of the world that previously it could not touch: to China, where the reforms begun by Deng Xiaoping were accelerated; to India, where the idea that the world’s biggest democracy could go it alone was abandoned; to the Soviet Union and its former satellites, which received a strong dose of economic shock treatment. In order to avoid ecological suicide, they argue, we must first recognise that capitalism is an insuperable obstacle to any reduction in our fossil fuel consumption. And there's always the risk of a truly hostile policy. Tracy: Hello and welcome to the Energy Examined podcast. Life expectancy was 40 at best, the working week was long, disease was rife and diets were poor. Mac: Yeah, I mean, my background is very much about vision and strategy and governance. So, I answered your question by referring generally to, in a sense, the process, the decision-making process relating to like, what is it we can do to support recovery? But the collapsing cost of crude oil is the equivalent of a tax cut for energy consumers; governments could remove subsidies painlessly in the current climate. Either way, it would suggest that governments had started to take seriously what Stern calls one of the greatest market failures in history: the failure to take account of the damage caused by burning fossil fuels. Norway opted out of the EU during a referendum in November 1994. It's not like a corporation that borrows a whole bunch of money and goes out and builds a new plant or new facility or makes an acquisition. Businesses that did not expand were viewed as failures. Oil, coal and gas currently account for 86% of primary energy, and BP is forecasting only a small decrease, to 81%, by 2035. You look at Norway. But there is little evidence so far that the public is wildly keen on the idea that they are becoming worse off. Mac: And so, there's no question that's been a factor. Who is going to supply that 70 million barrels a day and there are still going to be declines, natural reservoir declines. It's not negative, it's not hostile, it's not tearing it down. You know, why isn't our ESG enhancing those advantages? To sign up for our newsletter you will need to temporarily disable the ad-blocker and refresh this page. The bad news is that renewables will still only meet around 20% of energy demand by 2035, even using optimistic assumptions about future growth rates. And so, we do have many problems, but we're making progress. It has abundant reserves of coal – the most damaging of the fossil fuels – and nations such as Angola and Nigeria are significant oil exporters. Politicians move when they know votes are at risk. There is no evidence that we want fewer of them. And if you look at it relative to the automobile sector, automobile parts and so forth, and in southern Ontario or manufacturing, other subsectors, it is multiples greater. The Islamic Republic is in the midst of a non-oil export boom -- it has the potential to remain a middle-income country even … The current coalition government in the UK has come under attack for allowing the economy to flatline for a couple of years, but incomes per head barely rose in the 1,300 years between the sacking of Rome and the mid‑18th century. Mac: And the usual response is just a smile, a smirk and, 'oh, of course, it would be different,' that kind of thing. We want technical change, for example, to build new solar technologies. The talk at meetings of the International Monetary Fund and the G20 is whether the next financial crash will be caused by the pricking of the carbon bubble – the idea that the stock-market valuation of fossil fuel companies has been inflated by overestimating the worth of reserves of oil, coal and gas that could only be exploited by putting the climate at risk. The final chapters of The Bone Clocks, David Mitchell’s 2014 novel, describe a future in which progress has gone into reverse. The economy of the State of Texas is the second largest by GDP in the United States after that of California.It has a gross state product of $1.887 trillion as of 2019. One option would be to skip fossil fuels entirely and move straight to renewables, especially solar energy, but Watkins says that this is too expensive for most countries to contemplate. Mac founded ARC Resources and ARC Financial, which is Canada's largest energy focused private equity firm. There are those who might argue otherwise, but life in the world before the industrial revolution really was nasty, brutish and short. And even then, what most people are failing to appreciate is that the energy transition to decarbonize is going to occur over multiple decades and even multi-generational. But Barack Obama does not think that way, and nor does China’s president, Xi Jinping, which is why they signed a deal in November 2014 setting targets for CO2 emissions up to 2030. It’s as you know, it's a huge employer. Thank you so much for your time today. Slowly, those in power are beginning to understand what is at stake: that if we carry on growing the global economy at its current rate, and continue to rely on fossil fuels to power that growth, the planet is going to cook. In part, that is because investors will probably move slowly. It's about the same size, interestingly, as the entire banking and financial services business in Canada, which is always a surprise for people to hear. Do the deep greens say, ‘Tell you what, we want to stop the boat now, we don’t want to bother with any more technical change, let’s go back to a more simple society, a more decentralised society, and one that has a smaller footprint on the planet’? But do you think that industry is responsive enough and able to adapt quickly enough? This is not just about carbon taxes. The rest of the world can help poor African countries with the cost of developing renewable energy; the rest of the world can provide Africa with expensive carbon capture and storage for coal-fired power stations; or the rest of the world can do nothing and watch Africa’s carbon footprint rise rapidly as it burns dirty fossil fuels. And that's the way we have to think. Governments are thinking about climate change, but they have other more immediate priorities: reducing unemployment, increasing living standards and, in the case of politicians rather than the technocrats running central banks, getting re-elected. It's kind of -- it's right across the country. The country is richly endowed with natural resources such as oil and gas, fish, forests, and minerals. Would it surprise you that Canadian oil and gas benefits virtually every region and community in Canada? If oil is no longer in demand, these countries would face a rapid period of readjustment; they are likely to face a fall in wealth, unless they could create growth in other sectors. Nigeria can plan economy without oil, says Agusto. Without question, Africa’s energy consumption is going to rise. We create jobs across a wide range of other sectors to support our activities. There's no question that markets’ supply and demand, certainly with the COVID impact, has really impacted the prices of oil and natural gas. It gets much worse still, of course, because a world without oil would quickly become a world without all of the products made from petroleum that we have come to know, love and depend upon. There is instead an emphasis on … However that unfolds, there's an offsetting asset. March 15, 2020. in Business. Thatcher was no climate change denier. The answer is that it will be hellishly difficult, but it is just about feasible if we make the right choices – and start making them now. All of this may be true, but it leaves unanswered the question of how we get from where we are now to the kind of world the deep greens want to see. And so, it begs the question and people are all asking. His visionary, yet unconventional corporate idealism has been developed through extensive experience in building and directing businesses and by his knowledge as a self-described “student of business leadership.”  As the Founder and Chair of Viewpoint Group, his role is to oversee the entire team, and offer support, guidance, and thought leadership. Energy executive, investor and philanthropist Mac Van Wielingen says he can't imagine a recovery without Canada's largest industrial sector and export commodity. And many of them have said to us, you know, 'we can't even really justify dedicating the resources to trying to figure out Canada, to understand, you know, what in fact might unfold.'. We’re going to have to look more closely at carbon capture and storage, because that’s a way of using your fossil fuels without emitting. I'm Tracy Larsson, and today we're going to delve into Canada's economic recovery, what it could look like and the unique role of Canada's natural gas and oil industry. They should be, but it needs to be presented that way. What do you see as the role of Canada's energy sector and of the resource sector? “What matters is the sort of growth we choose. Rising sea levels have caused floods on the New York City subway, killing thousands. Gas is, of course, a fossil fuel, but it has half the emissions of coal, and we could make substantive cuts – as indeed the US has done – by making the switch. It's not just the industry marketing. But is there anything else that you would like to add at this point before we wrap up the podcast today? “We absolutely can have growth and protection of the climate at the same time, and in doing so we will construct a much better form of economic activity and growth in terms of clean air, less-congested cities and so on,” Stern says. We could be living through the green technological revolution, in which energy has been decarbonised. And so, I look at these dilemmas really through that kind of lens. Oil and the economy The oil conundrum. And so, is that not, does that not give Canada some competitive advantage to attract investment? It's how can you be the best barrel? It is hard to explain the consumer-led recovery in the euro area without assuming a positive impact from lower oil prices. Global temperatures have risen by almost 1C above pre-industrial levels, and the number of weather-related natural disasters has increased. Unilever wants to sell more soap and deodorant. It's a competitive strategy and it's a challenging strategy that's positive for the industry. Let's start with ourselves. And why shouldn't Canada be an active participant in offering our products into that market long term? Enbridge Inc’s Line 3 replacement project is in the process of doubling its capacity, which will allow it to deliver about 760,000 bpd of crude from Alberta to Superior, Wisconsin, by the end … The oil price boom from 2003 to 2013 fueled rising prosperity in Saudi Arabia, which became the world’s 19th-largest economy. > Proved oil reserves: 560 million barrels. Investment in clean energy is growing at a double-digit rate. “There have been two terrible realisations,” says Michael Jacobs, who used to advise Gordon Brown on the issue. Mac: You know, it should, Tracy. 0. Ever since oil prices began collapsing in the second half of last year, many in Canada have been asking: Can our economy survive without oil? Mac: Well, it's certainly right across Canada in terms of suppliers to the industry and services to the industry, employment levels. Burning much of what’s left will lead to environmental and economic catastrophe. Tim Jackson of the University of Surrey, author of Prosperity Without Growth, says we need fewer resource-intensive activities that damage the climate, but more of the services that improve the quality of people’s lives. The U.S. is now starting to go in that direction somewhat. The second is the transitionary bit: the only serious way in the next 15-20 years to bear down on coal is to switch from coal to gas. In a conversation with Energy Examined host Tracy Larsson, energy thought leader Van Wielingen discusses why productive assets from a strong oil and gas industry are vital to counterbalance growing deficits, and why Canada needs to better support its homegrown industry in a global competition for investment capital, focusing on its strong  environmental, social and governance standards. Tracy: Mac, is there anything before we wrap up our discussion that you would like to add? I mean, I don't like to see political leaders, political leaders -- and I've said this many times in Ottawa --I say this all the time, actually, that, you know, what we want and need is for you to stand facing outward to the Canadian public with your back to the industry and facing outward and to kind-of speak with clarity and conviction and evidence and facts about the strengths and the achievements of our resource industries. So, there is a choice. BP admits that, on its current projections, emissions will “remain well above the path recommended by scientists”. And if it's not Canada producing these resources, the resources will get produced in other jurisdictions and these other jurisdictions do not have the same quality of governance oversight that Canada has and ESG standards. And that's a great lead in to kind-of the next topic that I wanted to look at, which is, Canada actually has world leading ESG [environmental, social and corporate governance] standards and performance. Parents expected their children to be better off than they were. And I think we should actually, that should be part of our strategy or our climate action strategy. The natural advantages that you were asking earlier. The grow-your-own drive has only been partially successful: a quarter of a century later, food is still rationed in Cuba. And they're basically saying that they believe Canada is a poorer destination for capital and one of their key perspectives is, 'why should we take the additional risk when we can buy into our own companies in the United States and we have a positive, supportive policy environment whereas in Canada you're forever fighting with each other and you can't get infrastructure built? And so, I'm very partial to the advantage, the natural competitive advantages that Canada has as a small population and a very, very large country and vast resources. Tracy: Right. Washington could then invite other nations to sign on to the same commitment. We spur economic growth through hundreds of billions of dollars investing right here at home every year. We want other people to do stuff, we want to divest from companies – but what about us? And then, further out, what we need are new technologies.”. Growth rates in the developed world, however, were dwarfed by those in some of the bigger emerging economies. Tracy: When you ask that question Mac, what kind of answer do you get? Let's talk about that. And that's, in a sense, is a competitive vision. Tracy: Right. The Bank of England is sufficiently concerned to have launched an investigation into the risks of this happening. “We’re seeing very rapid change”, says Stern, “but we’re going to have to accelerate the arrival and installation and use of renewables, from hydroelectricity and wave power through to the various types of solar. The average sub-Saharan African consumes the same amount of energy in a month as the average Briton does in a day. We are ultimately the consumers of those carbon-based products, and when we elect politicians, what’s worrying is that we’re not prepared to say: ‘Make us pay for the damage and the pollution we cause.’”. And, you know, I'll tell you, Tracy, when we look around the world, that other resource developing countries and specifically energy producers around the world, we're hard pressed to find the level of polarization and hostility that exists in Canada. Joining the podcast today is Mac Van Wielingen. Unless it is, there will be little point in saying that someone in sub-Saharan Africa can get all the power he or she needs via a solar panel costing as little as $200. Well, before I ask this question. Mac: Well, you know, at first, let's start marketing at home. Natural gas and oil crucial to Canada’s economic recovery, PODCAST: How Canada's resource sector can drive real jobs and recovery. John Lewis commissions expensive ads to encourages us all to spend more at Christmas. “We know what works,” US president George HW Bush said at the time. Bahrain stands as a model for other countries, as they’ve never had much oil to boost the economy. That is incompatible with the climate change projections made by the International Energy Agency, which thinks fossil fuels should make up no more than two-thirds of the energy mix. Mac, you're also involved in the Real Jobs Real Recovery Task Force. Because I expect the amount that has to get replaced is going to be much larger than the reduction in demand, even in an aggressive transition scenario. And quite frankly, I have a lot of trouble imagining recovery in Canada, the post-COVID recovery without an oil and gas and resource-based recovery in Canada. “Free markets work.”. That is going to require some tough decisions and some compromises. Mac: Well, the record spending that you're talking about is government spending. But there's no long-term strategic, competitive value creation being created in doing that. In 2043, the fossil fuel age is over: nuclear power stations ar e melting down, there is no access to the electricity grid and solar panels are so prized that they are looted. They don't really want that closeness. You know, we expect oil demand in the 2050s is going to fall by 30 million barrels a day from one hundred to seventy.' Even if the world called a halt to economic expansion now, he adds, carbon emissions would continue rising and the world would be looking at an increase in global temperatures of 3-4C. Same is true in agriculture and in mining and forest products and the way technology is, is being utilized. And the governance record in the industry is excellent. And that's, you would have heard me use the expression before, in a long-term transition, the last barrel should be the best barrel and Canada should be offering the best barrel. Countries in sub-Saharan Africa are home to around 630 million people with no electricity. And so, it's developing its resource and it has in a sense, you don't have the same splits within a country like Norway as you do in Canada with the regional split. It's very possible. The image of Iran's economy as oil, carpets, and pistachios was always flawed, but has now become badly dated. This could be achieved in one of two ways: through a carbon tax, or through a cap-and-trade scheme. This is one of the reasons why the deep-green approach to climate change is fraught with difficulty. Well, from Canada's point of view, the question is, and maybe we can just finish on this, the question is, what is our strategy and what's in the best interests of Canada and what's in the best interests of the world? 2100, 350 7 Ave. SW We pay high wages and help American families work … The business-as-usual camp says that the scientific consensus is wrong about climate change, or that climate scientists have exaggerated the risks, which can be tackled if and when they become apparent. But the critical point is that there's no offsetting productive asset relative to that debt that is now on the public balance sheet. Receive our free newsletter with energy stories and news that matter to Canadians. There are basically three steps toward getting out of fossil fuels. The question, therefore, is whether it is possible to marry two seemingly contradictory objectives. What one has to appreciate at the end of the day, what we will have, even if the economy comes back 100 per cent, is what we will have is an extraordinarily high level of debt and new debt that was created to deal with the COVID problem and the loss of income. The lessons from the anti-apartheid and debt-relief campaigns is that divestment can be used to put pressure on governments to act. There are more climate change sceptics than we might like to think. Norway's a sovereign country. But what I am saying is that you have the whole entire private sector in a form of deleveraging to some extent, and then the government sector has added all this debt. Mac: Well, I think the most important thing that Canada could do right now is apply criteria of economic value and productivity to the post-COVID recovery plan. : $2.13 trillion. The oil price crisis that began with the crash of 2014 is just a taste of what can happen when huge portions of the international economy’s oil wealth dissipate. And it's the highest in Canada of all subsectors. And then naturally, that moves out publicly and globally. And so, my point is that we need to think synergistically across a number of fundamentals and the economic fundamentals should always be there. Fossil fuels are used to make and power mobile phones, tablets and laptops. Canadian Association of Petroleum Producers It does not have to be that way. But despite the region’s oil heavy focus, the country of Bahrain has already become their first post-oil economy. That problem is us. Mac, thank you for being on the podcast today. The IEA is right: further delay will be costly. ECONOMIC GROWTH AND FOSSIL FUELS Imagine agriculture without oil! And it's my opinion and people disagree with me on this, that we won't have a shift in the investment climate until we have a shift from our political leaders. The size of the global middle class has increased, and consumers in Shanghai and Mumbai have been able to afford cars and fridge-freezers. On past form, governments will be slower to act than they should be. The next wave looks like it will be dominated by digital technology, robotics, biotech, lighter materials and renewable energy. But there is going to be a lag, even on the most optimistic assumptions, before renewables can take the place of coal. It's multiples greater than a lot of other sectors in the economy. That's the thing about innovation is, it's generally, major innovation's unpredictable. After decades of relying on Moscow for oil, chemical fertilisers, pesticides and a large chunk of its food, Fidel Castro’s government faced a crisis. And it is my opinion that Canada really, on the policy side and political and policy side has really, has not been strategic. And as a strategy, as a government strategy and governments all over the world are doing this, I can see that it made sense for them. Mac: I have not had one person say to me, 'oh, no, it would be the same.'. That is the good news. I mean, I feel like we could talk a lot longer about this. In reality, only the deepest greens are opposed to all forms of growth. And depending on how you slice and dice it, it's order of magnitude about 10 per cent of our total economy. It does cut across the whole economy and it's a very important part of the sector. We do have unique problems because we have some unique assets, notably the oil sands and the tailings ponds, for example, and then we have all these abandonment liability issues, which is a policy and governance issue. There is no status quo option. Thirty years ago the UAE was one of the least developed countries of the world. Food production became less oil-intensive, as every possible scrap of land was exploited. All rights reserved. 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