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UN targets require 40-per-cent drop in oil demand: IEA report

Canada currently has one of the cleanest electricity systems in the G20, John Gorman, president of the Canadian Solar Industries Association, said Monday.

CHRIS WATTIE/REUTERS

Globe crude demand will have to decline by 40 per cent over the next 25 years if the world is going to succeed in keeping average temperatures from increasing by more than two degrees C above preindustrial levels, the International Energy Agency said in a report released Monday.

The Paris-based IEA and the International Renewable Energy Agency (IRENA) prepared the report for the German government in advance of the Group of 20 meeting to be held in Hamburg in July.

The joint report conveys the enormous effort that is required to limit the increase in global temperatures to below the two-degree target that was set at the 2015 United Nations Climate Change Conference in Paris. U.S. President Donald Trump has signalled his administration has no intention of putting in place policies needed to meet the commitments to greenhouse-gas reductions made by his predecessor Barack Obama.

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Meeting that Paris commitment "would require an unparalleled ramp up of all low-carbon technologies in all countries," the joint report said. "An ambitious set of policy measures, including the rapid phase out of fossil fuel subsidies; [carbon] prices rising to unprecedented levels; extensive energy market reforms, and stringent low-carbon and energy-efficiency mandates would be needed to achieve this transition."

However, failure to take timely action to limit global temperature increases would result in far more expensive investments later, and potentially devastating impacts from a changing climate, it said.

The agencies said Canada and some other G20 countries, including the United States, have "rather conservative policy ambitions" when it comes to supporting renewable-energy deployment.

The Liberal government says it wants 90 per cent of Canada's electricity to come from non-emitting sources by 2030, but it has not laid out a plan to achieve that goal. The wind and solar industries have urged Ottawa to use this week's budget to announce tax credits to spur renewable-power investment, but they are not expecting to see such a policy. Instead, the budget will likely reiterate a commitment to spend on green infrastructure, but with little detail.

Canada currently has one of the cleanest electricity systems in the G20, John Gorman, president of the Canadian Solar Industries Association, said Monday. "However, the electricity system of the 21st century is [going to be] cleaner, smarter and more distributed than what we have today," he said. "It will not manifest on its own without targeted and strategic policy and investment from our federal government."

To have a reasonable chance of achieving the two-degree goal, the joint report says energy-related carbon dioxide emissions would need to peak by 2020 and fall by more than 70 per cent from today's levels by 2050. Coal demand would be hit hardest, with one million coal mining jobs lost over the next 35 years.

Oil demand would also fall dramatically, as countries moved to replace fossil fuels in their electricity systems, and then electrify their transportation systems and replace oil with natural gas in other applications.

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The prospect of "peak demand" is the matter of great debate in the oil industry, and is particularly worrisome in Alberta where long-term investments are required for new oil sands projects and for the pipelines needed to reach markets. Some of those long-term assets could end up "stranded" in a two-degree scenario, the IEA/IRENA report said.

Royal Dutch Shell PLC chief executive Ben van Beurden told an energy conference recently that his company believes the world could see peak oil demand in the next decade, and is shifting its investment to natural gas to prepare for the transition to a lower carbon world. Many oil companies are still counting on rising oil demand well beyond 2040, a scenario which would include devastating – and costly – environmental impacts, according to climate scientists.

However, while the IEA projects crude demand would fall in a two-degree scenario, it notes companies will have to continue to invest in new oil production, as the rate of decline from existing fields will outpace even the drop in demand.

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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