NEB says fossil fuel demand will peak in two years
The report is the first time the National Energy Board has suggested fossil fuel use will stop growing
Mining & Resources
Oil & Gas
OTTAWA—The National Energy Board says Canada’s addiction to fossil fuels will peak in two years, but the change won’t affect economic growth.
For the first time, the board’s annual energy futures report says that with climate change policies and growth in clean energy, Canada’s consumption of fossil fuels to run cars and heat homes will max out in 2019, start to decline slightly and then flatline over the next two decades.
“If you look at our forecasts for the last 10 years, the trajectory for fossil fuel keeps coming down and down and down,” said NEB chief economist Shelley Milutinovic.
“This is the first time where it’s actually peaked and will go down.”
Just last year, the report showed fossil fuel use in Canada would be slower than previous predictions but would continue to grow all the way to 2040.
Natural Resources Minister Jim Carr said Canada is in a transition to a low-carbon economy but the report confirms Canada’s strategy that the country isn’t going to stop needing fossil fuels anytime soon.
“Oil and gas will be produced in Canada for quite some time while we’re in this transition,” said Carr.
The report looked at three different scenarios, including a base case using existing policies and plans, a case looking at what would happen if the carbon price grows $5 per year after hitting $50 per tonne in 2022, and a case looking at both an increased carbon price and faster adoption of new technologies like wind and solar power.
In all three scenarios, fossil fuel use in Canada peaks in 2019 before declining or standing still. In the higher carbon price scenario, fossil fuel use declines eight per cent more than in the base case, and in the technology case scenario it falls 13 per cent more.
But in all three, average economic growth is forecast to be around 1.7 per cent a year. That growth projection assumes the carbon price is returned to Canadians in the form of grants or lower taxes and that most other developed nations raise their carbon prices, too.
It also believes oil production will continue to grow despite lower use of oil within Canada as export markets still demand Canadian crude.
In any scenario, wind energy production will at least double and solar energy production more than triple over the next quarter century, the board projects. It also expects electric vehicle sales to grow to three per cent of all vehicles sales by 2020 and 16 per cent by 2040.
In 2016, less than one per cent of all vehicle sales were plug-in cars, and 95 per cent of all the electric cars sold were in Quebec, Ontario and B.C.
Under the high technology scenario, the NEB says electric vehicle sales would soar to six per cent in 2020 and to 47 per cent by 2040.
There are some nations, notably Great Britain and France, that intend to ban the sale of gas-powered vehicles by 2040, though even Canada’s biggest proponents of electric cars believe that’s not realistic in this country.
Milutinovic said the report is not a prediction because it’s based on certain assumptions that could change depending on both domestic politics and international events, not to mention the arrival of technologies nobody has even imagined yet.
“These forecasts are never going to work exactly as you predict because there are so many things that are going to happen over 25 years that we can’t see at this point,” she said.
She pointed to fracking technology to extract natural gas and oil that 10 years ago nobody knew much about.
“That was a disruptive technology that even two years before that people weren’t seeing and it’s had a massive effect on both the oil and gas industry in North America.”