perfect storm: updated July 7, 2023

Investments in clean tech deployment in 2022, US$1.1 trillion, were for the first time ever, equivalent to that spent on fossil fuel production.  The story behind these historic stats is that of a current perfect storm and circumstances leading up to the present.

The combination of the Ukraine war; high fuel prices; European Union energy independence and electric vehicle (EV) strategies; the U.S Inflation Reduction Act and Bipartisan Infrastructure Law; China’s new 5-year plan; and tectonic changes in other countries have created the perfect storm for:

  • Renewables to overtake coal by 2027;
  • Strong EV sales in China and Europe while the North American new “normal” EV wait times for delivery ranging from 6 months to 2 years or more; and
  • Intensified climate action plans around the globe.

Paradoxically, the same perfect storm has given rise to the oil and gas industry’s 195 fossil fuel carbon bombs underway and planned, many of them in Canada.

Canada’s climate actions do not counterbalance its carbon bombs and are weak.

The complexity of the perfect storm is further amplified by the German energy neurosis.  While Germany is tilting in favour of a green economy, it is simultaneously acquiescent to long-term reliance on gas imports.

All factors considered,

  • opportunities for the green economy and catalysts for new fossil fuels bombs seem to cancel one another out;
  • the U.S. legislative and financial packages skyrocket green economy advantages, resulting in a clean tech edge, over Canada; and
  • the perfect storm bottom line on the European green transition remains a mystery.

Renewables number 1 global electrical power source by 2027

New renewables capacity installed between 2022 and 2027 will double, leading to renewables overtaking coal for global power production, as per the International Energy Agency (IEA) report Renewables 2022.

Specifically, world-wide renewables capacity will increase by 2,400 gigawatts (GW) between 2022 and 2027, equivalent to the entire current power capacity of China.  This represents 90% of the new power capacity installed during this period.  More renewables capacity will be installed during these 5 years than in the previous 20.

China is projected to represent nearly half of the new global capacity in this time frame, an increase in clean energy capacity of 1,070 GW, about double what it was before 2022.  Solar and wind will account for 90% of this new capacity, with hydropower furnishing the remainder.  That’s equivalent to over 22 times the current power capacity of Hydro-Québec.  By 2025, renewables will hit 33% of China’s power pie, in line with China’s 14th Five-Year Plan on renewables.  That’s amazing, because coal stood at 81% of the pie in 2011.

For the U.S., the Inflation Reduction Act (IRA) objective for the power sector is 100% carbon free electricity by 2035.  According to the most current data from the American Clean Power Association, clean energy investments announcements since the passage of the IRA in August 2022 totals up to US$252 billion, including 25,030 jobs and 74 manufacturing facilities.

The IEA forecasts the IRA will boost clean energy capacity by 25%, compared last year’s IEA projection, before the IRA existed.  That makes for a 74% increase in renewables capacity, or 280 gigawatts, between 2022 and 2027.  Nearly all the new capacity will stem from solar and wind.  The IRA, combined with falling prices of renewables, means 99% of U.S. coal plants are more expensive to operate than if they were replaced by solar and wind sources.

These new IEA global projections constitute a 30% increase in the IEA projection of one year ago.

Looking further ahead, Bloomberg New Energy Finance (BNEF) predicts renewables will supply two-thirds of power demand by 2050.  Solar, wind and energy storage will be 85% of the two-thirds.  BNEF forecasts that renewables, combined with the electrification of end uses and improvements in energy efficiency, will result only in a 4% increase in energy demand by 2050.

Since one of the largest markets for natural gas is the electrical power sector, within the next few years gas demand will fall off the cliff.

True, the European Union is desperately turning to immediate alternative gas sources to substitute for Russian gas imports.   But the EU has accelerated their renewables agenda for the medium- and long-term.  The IEA forecast on European renewables capacity is that it will double between 2022 and 2027.

The EU aims for energy independence by 2027 via a rapid migration to a green economy, though the German chaotic energy plans suggest the country may experience trouble in meeting that target.  The danger is that the short-term gas solutions risk becoming long-term, as described in this article’s segment on Germany.

The gas exporters perceive the short-term European energy emergency scenarios as long-term gravy trains.

Global electric vehicles portrait

Since the road transportation sector represents just under half of global petroleum consumption, a significant migration to EVs has far reaching implications for both the oil industry and global emissions.

This is where the perfect storm comes in.  No one, purchasers and vehicle manufacturers alike, anticipated the avalanche of demand for EVs.  In Canada, the current wait time for many EV models can be as long as 2 years or more, depending on the desired model.

Globally, 2022 plug-in sales captured 17% of the vehicle market in September 2022.  That is double the percentage in 2021 at 8.3%.  A doubling again in 2023 would bring global plug-in sales to 30%.  Those vehicle manufacturers that do not keep up with this trend, may experience a Kodak-like downfall.

The pace of the market migration to EV progression is both dependent on the EV supply keeping up with demand and government initiatives.

It is critical that EV sales leap forward quickly because the environmental gains are being undermined the growth of the SUVs, vehicles with 20% greater fuel consumption than sedans.  These “yesterday” SUVs contributed to one billion tonnes of emissions in 2022, a daily increase in petroleum consumption by 500,000 barrels per day, one third of the increase in petroleum demand.

What follows are the EV existing and anticipated market indicators in different jurisdictions.

Electric vehicles: Soaring in China and Europe

China’s 2022 plug-in portion of new vehicle sales came in at 30%, fully electric, or battery electric vehicles (BEVs), 22%.  Not only is this considerable in terms of local market share, but also in view of total EVs sold in China are greater than in the rest of the world.

Notably pertinent, China is a major global exporter of EVs.  For EV sales in Europe in September 2022, exports from China acquired 11% of the market.  An irony of sorts, Tesla’s Shanghai factory is China’s largest EV exporter.  Other exporting brands from China are BYD and SAIC, while Xpeng, NIO and Great Wall have global expansion plans.

For Europe, plug-in 2022 sales reached 14% of the new vehicle market, 10% BEVs.  That said, there are wide variances among European countries.

Norway is way ahead of the pack with plug-ins 2022 taking up about 88% of sales, BEVs 79%.  As of January 1, 2023, all Hyundai Motor Norway vehicles on the market are fully electric.  One stride away, Volkswagen will offer only BEVs in Norway, beginning January 1, 2024.

The Netherlands is the European EV runner-up, with plug-ins at 51% of total 2022 sales and BEVs at 44%.

Sweden, Norway’s neighbour, scored in 2022 56% of the market for plug-ins and 33% for BEVs.

German 2022 plug-in sales captured 31% of the 2022 national vehicle portrait, BEVs 18%.

The U.K., closer to the European average, had 23% plug-ins for 2022, 17% all-electric.

Though projections are inherently different, depending on the sources, it has become increasingly apparent that EV dominance will likely occur in Sweden, Ireland, China, and Germany by 2028 or before.

Electric vehicles in North America: U.S. and Canada

Thanks to vehicle legislative and policy initiatives in China and the European Union, China and Europe are way ahead of North America for EV and battery production capacity, availability and sales.

EVs were 5.8% of new vehicle U.S sales, 16% in California, for the year 2022.

In Canada, sales of plug-ins in 2022 reached 8.9% of the new vehicles market.  In the provinces with legislated zero-emission vehicle sales targets plus and rebates, BC and Québec, the percentages of 2022 plug-in sales were 18.1% and 13.2% respectively.  Ontario, without any provincial incentive program, registered 6.9% in 2022.

Weighed against the impressive advances in zero emission vehicle (ZEV) sales in China and through much of Europe, Canada’s requirements that 20% of new vehicle sales be ZEVs by 2026, 60% by 2030 and 100% by 2035, appear timid.

Lax Canadian ZEV mandates confer automakers extended time to sell greater numbers of the more profitable internal combustion engine vehicle (ICEV) models, while lowering stranded assets risks for ICEV production lines and R & D facilities.  This is strikingly disturbing since the growth of numbers of high emission sport utility vehicles (SUVs) nullified emission reductions progress from ZEVs in 2021.  Perhaps Canada bowed to pressure from the automakers to stretch out the time period for the expansion of manufacturers’ EV capacity and market in North America.

By contrast, the Government of Quebec has taken a different approach.  Recognizing that North American EV demand is greater than the supply, the province increased its EV target from 1.6 million EVs on the roads by 2030 to 2 million.  This change implies that the EV percentage of total light  vehicles sold must be around 50% by 2025 and two-thirds by 2030.  With current North American EV production falling short of demand, automakers will be required to prioritize distribution to Quebec to comply with Quebec regulations.

California, with roughly the same population as Canada, also has more ambitious targets than Canada.  The state obliges automakers to achieve ZEV targets for passengers vehicles at 35% by 2026 and 68% by 2030.

The bigger North American story is U.S legislative initiatives for one of the world’s most ambitious climate plans, with EV manufacturing and the battery supply chain embedded.

The US$369 billion for climate action under the more than 700-page U.S Inflation Reduction Act (IRA) has generated a race for the U.S. to close the gap with China on EV manufacturing and battery production, and to a lesser extent, with Europe.

The IRA being a thick brick, clean tech sectors are still working on figuring out what it all means.  It doesn’t help that the U.S. government is still engaged in defining the devil in the details.  Guidelines on labour-related eligibility requirements were only made public on November 29, 2022.

What is clear is the battery supply chain segments of IRA and the Bipartisan Infrastructure Law (BIL) offer the U.S. the North American advantage.

To this effect, the IRA tax credits apply to all stages of the battery production and supply chain in North America such that one can stack up the credits (add them up).   The stacking up tax credit ceiling is 40% before 2024, and rises to 80% after 2026.

Assuring North American, but primarily U.S., dominance in all things related to batteries, the rebate for EV buyers is US$7,500 provided that there is compliance with critical minerals, battery components plus other requirements.  These requirements encompass stipulations that a certain percentage of battery components must be assembled or manufactured in North America, 50% before 2024, increasing to 100% by 2028.

In the absence of all of these essentials, the rebate is only US$3,750 so long as it meets the critical mineral exigencies outlined in the article Critical minerals: Global and Canadian developments.

Concerning BIL, it allots US$7 billion from 2022 to 2026 to support the U.S. battery supply chain, with US$3 billion for battery material processing and US$3 billion battery for manufacturing and recycling.  Additional funds related to recycling are US$200 million for a battery design, recycling, and reuse program; along with US$110 million for battery collection and recycling programs.  Among research eligibility criteria, there is “advanced transportation technologies.”

On the manufacturing of clean energy and clean transportation products, the IRA offers US$60 billion worth of incentives.  Specifically for clean tech manufacturing, the IRA dedicates US$10 billion in tax credits.  Another US$20 billion in loans are assigned to build new clean vehicle facilities.  Lastly, an additional US$2 billion in grants support the conversion of conventional auto manufacturing assembly sites to produce EVs.

North American IRA and BIL content and manufacturing of the requirements aside, there is the determination emphasized in the President Biden State of the Union Address of February 7, 2023, for U.S. public financing compliance with the Buy American Act.  It remains to be seen how the Buy American Act will intersect with the IRA and BIL.

Evidently, the IRA, BIL and the Buy American Act together constitute a U.S. investment attraction advantage over Canada.

Granted, the $5 billion Stellantis and LG Energy Solution joint venture to set up the NextStar battery production facility in Windsor, Ontario was a coup for Canada.  However, that project was announced in March 2022, before the much unanticipated adoption of the IRA in August 2022.  And this doesn’t compare to the order of magnitude of battery-related existing and planned projects in the U.S., as per the information on U.S battery activities below.

So too, in January 2021, before the IRA was passed, was the GM decision to retool its Ingersol, Ontario plant at a cost of $1 billion to produce the BrightDrop electric vans.  BrightDrop production began in December 2022, its entire production is sold out for 2023 and GM expects this plant to produce 50,000 vans annually by 2025.  Alongside its BrightDrop production line, GM plans to construct a new building to assemble battery packs.

For Canada to be remain competitive, the U.S. legislative packages left little choice but to act quickly.  Accordingly, the Canadian government was in a high stakes just-in-time subsidy bidding competition with several U.S. states and cities prior to Canada’s Budget 2023 that resulted in the coup of Volkswagen deciding to build a 150 hectares C$20 billion PowerCo North American battery gigafactory in St. Thomas Ontario.  PowerCo is Volkswagen’s in-house battery manufacturer.

The Ontario Volkswagen plant represents the largest investment in Canadian automotive history.  It is the largest battery plant in Canada and the largest PowerCo production facility, outside Germany.

The federal contribution for PowerCo in subsidies and tax credits may climb to C$13.2 billion over 10 years, on a per battery basis, plus a $700 million grant.  While that is a lot of money from the Canadian government, the competing U.S. incentives are greater than that of Canada.

Presented a week after the Volkswagen announcement, Canada’s Budget 2023, March 28, 2023, attempts to provide ongoing equivalency to the U.S. IRA by comprising a refundable tax credit equal to 30% for, among other things, the manufacturing of EVs, critical minerals extraction processing or recycling, plus battery and battery components production.  Budget 2023 also extends reduced tax rates for zero emission vehicle technology manufacturers.   The downsides of Budget 2023 can be found in the segment which follows on Canadian carbon bombs.

Another coup for Canada came with the April 2023 revealing that Ford Motor Co. intends to spend $1.8 billion to retool its Oakville, Ontario to be renamed the Oakville Electric Vehicle Complex.  The new site will have a battery assembly facility thereby rendering the complex fully integrated EV manufacturing location.  The retooling and production will begin in 2024 and 2025 respectively.  The Canadian and Ontario governments will contribute $295 million each.

After all that, the combination of IRA incentives outstripping those of Canada and the C$13.2 billion in federal support for the Volkswagen battery project in St. Thomas Ontario resulted in Stellantis calling a halt to the construction of its battery production facility in Windsor, two months after the federal offer to Volkswagen.  Stellantis wanted the Canadian government to step up with more financing.  The federal government did so in July 2023, upping its contribution to C$15 billion over 10 years.

Even with these highly significant EV investments in Canada, prior to the IRA being approved, the marathon for playing roles in the North American segment of the vehicle revolution was in high gear in the U.S., proportionately outstripping Canadian ventures.

In advance of the unexpected approval of the IRA in August 2022, by the third quarter of 2022, US$210 billion worth of cumulative investments in the U.S. EV sector were divulged.  The battery portion of these investments is US$54 billion for the construction or expansion of 37 battery production plants.

Nearly all of the U.S. projects below were known before the IRA and BIL were adopted.

The U.S. state of Georgia became the home for to 30 electric vehicle (EV) projects involving 18,100 employees since 2020.  By 2022, Georgia had been selected for 51 EV manufacturing and battery facilities.

Shouldn’t one take notice of October 2022 Hyundai ground breaking Hyundai event for a US$5.4 billion Metaplant in Bryan County, Georgia, a BEV plant to annually deliver 300,000 Hyundai, Kia and Genesis BEV units in its first phase, beginning 2025, with 8,100, employees.  Should all go well, the plant may manufacture 500,000 BEVs or more per year.

To supply batteries to the MetaPlant, in December 2022, Hyundai teamed up with South Korean SK On, for a US$4-5 billion battery facility, in Bartow County Georgia, with operations likely to begin in 2025 as well.

The Bartow County SK On plant is the second SK On battery production facility in Georgia, the other in Jackson County, a US$1.7 billion plant that furnishes batteries for Volkswagen and Ford.

One other notable battery project in Georgia pertains to November 2022 information released on a US$2.57 billion FREYR Battery plant to produce battery cells in Coweta County.

Also in Bryan County Georgia, Hyundai Mobis Electric Powertrain Business Unit made public a US$926 million investment to annually manufacture over 900,000 EV Power Electric systems and 450,000 Integrated Charging Control Units?  Construction started in 2023, with a manufacturing target start in 2024. The new plant will generate 1,500 jobs, jobs added to the existing 1,200 Hyundai Mobis employees in the state.

How about the Rivian US$5 billion investment for a second EV plant in 72 km east of Atlanta, Georgia?  Rivian hopes to annually produce 400,000 EV RIT pick-ups and RIS SUVs at the 1.86 million square metres Georgia site, with 13 buildings spread across 2,000 acres.  The campus will employ around 7,500 people.

Rivian’s first plant is located in Normal, Illinois.  Though 5 times smaller than the planned Georgia facility, the Illinois location underwent two expansions.

One other company that have chosen Georgia for EV technologies is the school bus manufacturer, Bluebird.

The Vietnamese EV start-up, VinFast, which entered the Vietnam local market in 2021 with its E34, is miraculously already up to speed to serve global markets.   By November 2022, VinFast made public its intention to invest a minimum of US$4 billion in its first North American assembly plant in Chatham County, North Carolina.

In West Tennessee, Ford has committed US$5.6 billion for BlueOval City to produce batteries and next-generation EV pick-ups, starting 2025.

Further on battery production, one of the most ambitious U.S. battery initiatives are those of GM joint venture with LG Energy Solution (LGES).  The joint venture currently entails three Ultium Cells battery plants, one of which started operations in 2022 in Warren near Lordstown, Ohio.  Two other plants are under construction in Spring Hill, Tennessee and Lansing Michigan, to be opened for business in late 2023 and 2024 respectively.

A fourth Ultium project is planned.  This time it will be a US$3 billion joint venture with Samsung SDI to produce smaller pouch, nickel-rich prismatic and cylindrical batteries, exclusively for GM.  No location has yet been identified.  The GM goal is to have battery production capacity for one million EVs by 2025.

A battery production initiative announced post the IRA coming into effect, in January 2023, is the Honda and LGES joint venture (JV) in Fayette County, Ohio, near Jeffersonville.  For the first phase the JV, known as the L-H Battery Company, will invest US$3.5 billion for a facility that would create 2,200 new jobs.  When all stages are completed by 2024, the total JV financing will amount to US$4.4 billion.

Among other U.S. battery production news, are the following projects.

Ford and SK Innovation have a Memorandum of Understanding for BlueOval SK battery cells and arrays manufacturing in Kentucky and Tennessee.

One other Ford battery alliance involves China’s CATL, the world’s largest battery manufacturer to produce lithium iron phosphate (LFP) batteries, in Marshall, Michigan under the umbrella of a wholly owned Ford subsidiary.

For Ford to manoeuvre around political concerns about a Chinese CATL battery incursion in the U.S., the emerging arrangement between Ford and CATL to fit with the IRA eligibility criteria is one that would see Ford building the US$3.5 billion BlueOval Battery Park Michigan on its own Marshall land, license CATL LFP battery tech and benefit from CATL support staff.  CATL would not have any equity in the new facility.  Production is slated to kickoff in 2026.

Next up on the battery list is the Stellantis NV US$2.5 billion joint venture with Samsung SDI under construction in Indiana.

KORE POWER has plans for a lithium-ion battery cells manufacturing in Buckeye, Arizona.

Not long ago, Redwood Materials revealed its intentions for a US$3.2 billion battery recycling facility in Charleston, South Carolina.

From here on, with the IRA and BIL now in place, new EV-related investments in the U.S will likely spiral at a mindboggling rate

The challenge for Canada to have a proportionally equivalent share of the North American vehicle industry metamorphous is an ongoing peril for Canada to not be left too far behind the U.S.

Moreover, the IRA tax credits for North American content have European EV stakeholders reconsidering their European investment plans to switch some of their projects to North America.  Swedish-based Northvolt, a battery producer aiming for 25% of the European market by 2030, has estimated it is possible to seek US$8 billion by 2030 by modifying European intensions to move production projects to North America instead.

Northvolt rethinking in favour of North American government support may be taking shape.  In July 2023, Northvolt was evaluating the possibilities of setting up a US$7 billion EV battery plant in Saint-Basile-le-Grand, Quebec, 25 km east of Montréal.  If this materializes the plant would comprise facilities for manufacturing battery cells, cathodes and recycling.

Total U.S. clean tech manufacturing investments since the IRA

Data is incomplete on U.S. clean tech manufacturing announcements since the passage of the IRA, although recent indications are such that during the 9 months preceding May 2023, US$70 billion in investments in facilities were reported.

The caveat is most of the new facilities announced for solar panels, wind turbines, EVs and batteries will not start production until 2024.  And when they do go into production, the supply will not be sufficient to meet demand.

The employment impacts, according to one assessment, is that U.S. new clean tech manufacturing will generate 900,000 jobs over the next 10 years.

Carbon bombs: The oil and gas industry perfect storm response

Though in 2020, Shell, Total Energies, ExxonMobil and others were writing down assets to the tune of tens of billions each, 512 oil and gas companies disclosed that their firms currently have plans for initiating the production of 230 billion barrels of oil equivalent (bboe) of untapped resources before 2030.  Urgewald, a German non-profit organization, found that 655 out of the 685 upstream companies it surveyed, 96% have expansion plans.

A frightening projection in the same league is the CleanTechnica estimate that there are at least 195 carbon bombs underway and planned.  This is equivalent to the entire CO2 emissions from China over a decade.

A carbon bomb is defined as a fossil fuel endeavour that engenders a billion or more tonnes of CO2 over its existence, about the same amount of emissions of 18 years of current global emissions.  Canada, the U.S. and Australia are amid the countries with the most prominent carbon bombs.

The largest oil and gas companies will be spending US$103 million per day over the coming decade.

Thus far, for the next ten years, Shell, Chevron, Total Energies and others, have committed US$166 billion of investments in new oil and gas projects.  Many of these projects span over decades.

Both the IEA and the International Institute for Sustainable Development have determined that no new oil and gas projects should be approved to stay within the Paris Agreement 1.5°C target.

More down to earth, why are oil and gas firms ignoring the nearing possibilities of peak oil and gas?

Even BP has acknowledged a world less dependent on fossil fuels is nearing.  BP Chief Economist, Spencer Dale, said the Ukraine war has “permanently dented fossil fuel demand.”  The BP Energy Outlook 2023 acknowledges the lasting global impacts of the war in Ukraine and the Inflation Reduction Act.  The Outlook views the migration to EVs significantly impacting half of the traditional oil demand and renewables hurting the gas electric power market, one of the largest longstanding users of natural gas.

Notwithstanding BP’s Outlook, the trajectory of the oil and gas sector has not changed.

A Carbon Tracker analysis of 35 of the largest oil and gas companies revealed that the remuneration for executives goes up with greater production.

ExxonMobil links 41% of executive pay to production and Shell, 20%.  Other companies reviewed by Carbon Tracker have similar practices.

At first sight, production-related bonuses run contradictory to executive “Transition Positive” incentives to migrate to clean energy, while decreasing fossil fuel production.  There may not be any discrepancy when one takes a closer look.  It seems shifts to low carbon alternatives, as defined by the industry, may actually augment fossil fuel production.  Most important, broader corporate objectives can override less aggressive low carbon objectives.

A common industry description of a low carbon business activity is that of gas sector expansion as a “bridge fuel.”  The sector is fully aware that gas-related methane emissions, especially from shale sources, renders this fuel as bad as coal.

Another low carbon favourite of the fossil fuel industry is carbon capture, utilization and storage (CCUS) despite the fact that not a single CCUS project has met targets for emissions reductions, costs and timelines.  Billions in government subsidies for CCUS are available the U.S., Europe and Canada.

If this sounds totally confusing, maybe it is supposed to be.  Whatever, it is apparent that growth in oil and gas production trumps all other considerations.

Kathy Mulvey of the U.S. Union of Concerned Scientists described the messaging of the oil and gas sector as “a well-established playbook that includes greenwashing with misleading or outright false claims about their climate-related actions.”

Of course, shareholders are equally focused on oil and gas production growth.

Canadian carbon bombs 

At the COP27 UN November 2022 conference on climate change, Canada rejected the insertion in the conference final statement, the phasing out of oil and gas production.  The Canadian government explanation of this stance is consistent with Canada’s 2030 Emission Reduction Plan (ERP) to put a cap on oil and gas emissions, and not on production.

The Canadian government’s justification of its position for omitting a cap on production is such that some provinces would contest a federal cap on production in the courts.  This rationale is weak.  The same provinces contested the federal carbon tax and the Supreme Court ruled in favour of the federal government.

This federal discarding of restrictions on production conveniently aligns with the carbon capture utilization and storage (CCUS) fantasy that emissions can be reduced while production is increased, thanks to the support of $5 to $7 billion in subsidies for CCUS by 2030.

To be more specific, Canada’s Budget 2023 includes enhanced tax credits for fossil fuel sector CCUS that is in addition to the $5 billion for CCUS through to 2030, as per Budget 2022.  Another Budget 2023 CCUS component is the 15% to 40% investment tax credits for clean hydrogen.  Since clean hydrogen eligibility includes steam reformation of natural gas coupled with CCUS, and CCUS projects around the globe have not met targets for emissions reduction, costs and timelines, government initiatives to support oil and gas CCUS projects, as well as some clean hydrogen projects, are in effect new fossil fuel subsidies.  And all CCUS projects are energy intensive.

The Pathways Alliance, a CCUS consortium of 6 oil sands producers, will surely benefit from the Canadian government’s CCUS support.  The consortium is currently bombarding Canadian media with eco-responsible messages implying that the oil sands emissions can be reduced by millions of tonnes of CO2 annually.   These ads make no mention of the Canada Energy Regulator projection of oil sands peak production between 2030 and 2040.

All this seems to be a greenwashing exercise to distract public attention from Canada’s carbon bombs.

Canada has more than a dozen carbon bombs when one includes the burning of fossil fuels in the definition.  At least 75%, perhaps 95%, of fossil fuel related emissions are related to consumption.  The remaining 25% is associated with extraction, refining, fuel pipeline transportation and other upstream considerations.

If burning fuel is part of the calculations, Canada’s carbon bomb projects would emit more than 39 billion tonnes of CO2 equivalent, 8 times Canada’s carbon budget to achieve net-zero-emissions by 2050.

To reach Canada’s 2030 emissions reduction target, Canada must limit its emissions to 5 billion tonnes between now and 2050.  Current data suggests Canada alone will boost global aggregate temperatures up to 3-4°C.

Of the Canadian carbon bombs, 5 are oil sands projects in expansion.

As for the Bay du Nord offshore oil project, off the coast of Newfoundland, it bodes difficult to assess whether it is a carbon bomb.  That’s because there are no official numbers on the production potential.  At first, the production was predicted to be 300 million barrels when approved by federal government in April 2022, as per the estimate of the Impact Assessment Agency of Canada.  After the Canadian government approval, the promoter, Equinor, revised the projection to 500 million barrels.  In early 2023, a “significant new discovery” upped the total potential once more, this time to 979 million barrels.

A Newfoundland offshore oil project less mentioned in the media is the White Rose project for which the projected production was originally estimated at 400 million barrels.  The updated estimate is 436 million barrels.  Since 90% of petroleum is burned, mainly in the transportation sector, emissions related to the White Rose project will amount to 169 million tonnes of emissions, equivalent to the annual emissions of 68 million vehicles.

But wait there’s much much more in store off the Newfoundland coast!  A regulation was inserted in June 2020 into the Impact Assessment Act to exempt environmental impacts assessments associated with oil exploration approval for 735,000 km² off the Newfoundland coast.

Upcoming in 2023, 12,000 km² will likely be approved for Newfoundland offshore oil exploration in a zone critical to the protection of biodiversity.  ExxonMobil Canada, BP Canada Energy Group and Equinor are the stakeholders concerned.  The request for proposals in question occurred in 2022 for 100,000 km².   Four other requests for proposals are anticipated by 2029.

Three, potentially four, more carbon bombs are represented by Canadian shale gas projects.  The Montney shale gas project in northeastern BC and northwestern Alberta is one them.  The composition of the gas in question is 90% methane.  The Montney production won’t peak before 2050.  These deposits have the potential for emitting 13.7 gigatonnes of CO2 equivalent.

The CoastalGas Link, the pipeline to transport Montney gas to the LNG Canada liquification and storage terminal at the port of Kitimat, will be another major source of methane, once construction is completed and operation begins.  Here lies new potential for pipeline methane leaks.

The U.S. Environmental Protection Agency (EPA) data indicates the order of magnitude of gas pipeline leaks of methane is humongous.  EPA records show that there were 2,600 gas pipeline leaks in the U.S. between January 2010 and October 2021, spewing out 753 cubic metres of methane.  That is tantamount to the global warming impact of the annual emissions of 2.4 million cars.

Two other shale gas carbon bombs underway are the Duvernay and Spirit River projects in Alberta.

The three remaining Canadian carbon bombs are BC coal projects, in progress or awaiting environmental assessments.  This may come as a surprise since the Canadian government has plans for phasing out coal for electricity generation.  But these plans exclude metallurgical coal for steel production.

While at 8% of global emissions are associated with steelmaking, it doesn’t have to be that way.  Electrification of the industry is an option.

In January 2022, SAAB announced it will invest US$4.8 billion between 2022 and 2030 to achieve a zero-emission footprint by 2030 by replacing fossil dependent steelmaking with mini-mill electric arc furnaces and rolling mills technology.  The transition will result in a greenhouse gas emissions reduction of 8 million tonnes of CO2/year.  The outcome of this corporate decision will be a 10% decline in Sweden’s emissions and 7% in Finland.

Six global banks, Citi, Crédit Agricole CIB, ING, Société Générale, Standard Chartered, and UniCredit, have joined the Sustainable STEEL Principles.

In spite of the low carbon steel alternative, Canada is the third largest producer of metallurgical coal.

German balancing act 

By July 2022, the German government adopted 7 laws, over 600 pages in total, to accelerate increases in renewables capacity.

The recently adjusted renewables targets are 80% by 2030 and a nearly 100% by 2035.  Presently, at the end of 2022, renewables account for about 50% of the country’s power supply.

Complimenting Germany’s push for a rapid transition to a green economy, at a December 2022 meeting of European Union energy ministers, plans were endorsed to fast-track approvals for clean energy projects and the transmission grids to transport these new energy sources.

On emergency actions to reduce gas consumption, Germany passed the Substitute Power Plant Standby Act allowing the shutting down of gas power plants to reduce gas consumption.  This Act, in sync with other mandatory measures plus incentives, aims to curtail German gas demand by 20%. This encompasses building heating system maintenance and operation stipulations, coupled with subsidies for having 6 million heat pumps installed by 2030.

While this sounds good so far, the Russian decision to cut Nordstream 1 gas flow to Germany has created an immediate crisis. Energy transitions take time.  Especially, since gas serves 27% of Germany’s current energy requirements.

The current energy crisis has given rise to German plans for 6 floating liquified natural gas (LNG) terminals, floating storage and regasification units (FSRU).  Also, there may be as many as 3 onshore LNG terminals to come at a later date.  The goal is to end Russian gas imports by Summer 2024.

The first FRSU in Wilhelmshaven received its first LNG ship in early December 2022, the Norwegian-flagged Höegh Esperanza.  The other 5 are expected to become operational in 2023.

While German utility firms claim LNG terminals are critical to the country’s power needs, these terminals can hook Germany on LNG for many decades to come.  This may be environmentally many times worse than Russian gas imports due to energy required to cool the gas for shipping.  At the destination countries, there are the additional methane emissions associated with regasification and major leaks during the production, transport and storage of LNG.

Germany has indicated that the LNG terminals will eventually be used to import green hydrogen.  Unfortunately, with the conversion of clean energy to hydrogen entailing a 30-40% energy loss, a diversion of massive amounts of clean energy production, and a plethora of application technological impediments and inefficiencies, the credibility of this premise is suspect.  If the green hydrogen is converted back to electricity, the energy loss is a whopping 75%!

Not surprising, gas exporting countries, Canada, the U.S. and Qatar are pushing hard to be Germany’s energy saviors.

Among other nations proposing to come to the fossil fuel rescue of Germany and Europe at-large are several African countries.

Summing up, the German legislation and policies, together with IEA document Renewables 2022 prognostication plus EV sales, imply the green transition will have the medium- and long term edge over fossil fuels.  Political fortitude and the success rate of climate actions will determine the lifecycle and future plans for floating and onshore LNG terminals.

U.K. first new deep coal mine in 30 years

In December 2022 the U.K. government approved the first new deep coal mine in 30 years, the Woodhouse Colliery project in Whitehaven, northern England.  Once in operation, this mine will emit 400,000 tonnes of emissions annually, the equivalent of 200,000 additional cars on the road.  This undermines the country’s net-zero by 2050 goal.

Given the coal from this mine has a high sulphur content and is in excess of U.K. steel industry needs, it will be exported.

The takeaway

The perfect storm has everything in place for a transition to a green economy within this decade.

The main hurdles for a rapid green transition are two-fold.

The first is that there are countries, Canada and Germany cases in point, that are concurrently supporting action on climate change, while locking-in engagements on fossil fuels.

Planned increases in the Canadian production of oil and gas and lame EV objectives do not auger well for Canada to meet an emissions target for the first time in its history.

Amplifying Canada’s green economy challenges is the complexity of counterbalancing the U.S. IRA and BIL.  The U.S. legislation dilemma for Canada is compounded by a robust existing U.S. green economy momentum.

The second big hurdle is the fossil fuel industry tunnel version of the perfect storm, bringing in opportunities for augmenting production exponentially, trillions in profits and rewards for industry executives and shareholders.

Several Shell clean tech executives have resigned subsequent to the altered the view of Shell CEO, Wael Sawan, who placed the emphasis on a “ruthless” approach to maximizing value, meaning being “absolutely committed to our upstream business.”  For Sawan, this means that only green power projects with high returns or in sync with the value chain of Shell would get corporate support.

What then is the bottom line?

The dominance of renewables through to 2027 and beyond, together with the substantial increases in EV sales, bode for peaks in oil and gas nearby.  Be that as it may, the projections for the timing of these peaks vary considerably.

Simultaneously, others expect doing the same thing over and over again will produce different results, as per Einstein’s definition of insanity.

Does this constitute a revolution in progress?

One might find consolation in recognizing bumpy paths are to be expected for colossal global transitions, as has been the matter of women’s rights.

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