In the midst of a major, and some say final, downturn in the global oil industry, less than five years away from the province’s next major greenhouse gas emissions reduction target, and just seven months away from a critical global climate summit in Paris, Newfoundland and Labrador Premier Paul Davis says the government is willing to undertake some measures to contribute to the global effort to minimize the impacts of global warming, but that it has no intention of slowing fossil fuel development anytime soon.
Earlier this week Davis met with other provincial and territorial leaders in Québec City at a summit organized by Québec Premier Philippe Couillard to work toward a consensus on how to address the climate crisis in the absence of adequate leadership on the matter from the Harper government ahead of the Conference of Parties climate talks in Paris later this year.
The consequences of anthropogenic climate change—driven largely by the burning of fossil fuels—are mounting all over the world, including in Newfoundland and Labrador, where Labrador is warming at twice the global rate and warming ocean waters are threatening shrimp, crab and other fish species crucial to the province’s economy and people’s livelihoods.
Just prior to the summit Ontario announced it was committing to become the third Canadian province to put a price on carbon by introducing a cap and trade system. Québec also has cap and trade legislation, while British Columbia introduced a revenue-neutral carbon tax in 2008.
Speaking to The Independent on Wednesday, Davis said carbon pricing “is the best way to reduce greenhouse gas emissions,” and that his government is “working towards what we believe is the best model for us,” but that a decision has not yet been made.
“I think it’s fair to say we’re getting closer,” he said.
Davis cited the controversial Muskrat Falls mega-dam as a major contributor to reduced greenhouse gas emissions (GHGs) in and outside the province. If and when the dam comes online and replaces the oil-burning Holyrood thermal generating station, it would make the province’s electricity production 98 per cent renewable—up from 85 per cent—and, coupled with the proposed Gull Island dam upstream on the Churchill River, could help Eastern Canadian provinces and New England states transition from oil and coal to “clean, green” renewable energy, the premier said.
“In the area of electrical production I think we’re doing very, very well compared to other jurisdictions, which still rely heavily on coal and fossil fuels for generation of electricity.”
According to the provincial government’s Turn Back the Tide campaign, electricity production accounts for 8 per cent of the province’s total GHG emissions.
In the province’s 2011 Climate Action Plan the PC Government committed to reducing GHGs in the province to 10 per cent below 1990 levels by 2020.
The International Panel on Climate Change—the world’s leading research body on climate change—has said developed nations need to reduce emissions by 25-40 per cent below 1990 levels by 2020 (and 80-90 per cent by 2050) in order to have a 50/50 chance of limiting global warming to 2 degrees Celcius.
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In 2012, the last year with available data, the province’s greenhouse gas emissions sat at 8.74 megatonnes, or 5.5 per cent below 1990 levels. The 2013 numbers are expected in the coming weeks, a spokesperson from the Department of Environment and Conservation told The Independent on Tuesday. In the province’s 2011 Climate Action Plan, however, the government admits growth in the oil and mining industries would likely cause the province to not meet its 2020 goal.
On Wednesday Davis reaffirmed the government has no plans to reduce fossil fuel development—the biggest contributor to GHG emissions in the province—and is in fact taking steps to significantly expand oil development in the coming years with the hope offshore oil will still be flowing almost a half century from now.
“Based on the work that has been done and what we know about potential oil reserves off our shores, we know that there is a long-term future for oil and gas business in Newfoundland and Labrador,” Davis said by phone, waiting to board a flight at the Jean Lesage International Airport in the Québec capital.
“Of course it would depend on markets, and I don’t think the oil and gas markets are going to end in the next decade or two,” he added. “We’ll have markets for many years to come; the reserves are significant.”
In response to questions about the ethics of continued fossil fuel development, Davis emphasized the importance of oil to the provincial economy and said the province has a “responsibility to be in oil” and to pursue any further oil production “in a way that is as environmentally-friendly as possible.”
Troubling times for oil
In 2012 the oil industry accounted for 28.2 per cent per cent of Newfoundland and Labrador’s GDP, and in the 2012-2013 fiscal year offshore oil royalties accounted for about 24 per cent of total provincial revenues. By the end of 2013, cumulative oil production in Newfoundland and Labrador since 1997 totaled more than 1.4 billion barrels worth an estimated $102 billion.
Last year, however, oil prices dropped 40 per cent between June and December, delivering an estimated $900 million blow to the province’s treasury, according to a 2015 pre-budget consultation report from Finance Minister Ross Wiseman.
Brent crude—the global benchmark for oil prices—currently sits at $63 per barrel, a far cry from the $105 price tag the provincial government predicted in its 2014 budget a year ago.
Concurrent to Davis’ prediction that the fossil fuel industry has a long-term future in Newfoundland and Labrador, a global movement is afoot to abandon fossil fuels in favour of renewable energy, both out of ecological and economic moral necessity ahead of 2 degrees warming and before what many are calling the inevitable carbon bubble burst, which would leave fossil fuel companies with stranded assets and overly dependent economies in crisis.
We have products that are being sought out around the world, so we have a responsibility to be in oil. — NL Premier Paul Davis
The industry downturn has hit close to home in recent months. With thousands of Newfoundlanders and Labradorians working in the fossil fuel industry, both at home and in Alberta, the province’s labour force is particularly vulnerable. According to Statistics Canada, in February Newfoundland and Labrador lost 3,000 jobs, largely in the oil and gas sector, bringing the previous-12-months total to almost 7,000 lost jobs. More oil industry layoffs in the province were announced on Thursday.
Avery Shenfeld, chief economist at CIBC World Markets, told the Financial Post last month the February job loss numbers in Canada were expected, “conveying the early stages of the headwinds to the economy from weaker oil prices.”
On Tuesday, while Davis was in Québec for the climate summit, Minister of Business, Tourism, Culture and Rural Development Darin King opened the 2015 Arctic Oil and Gas Conference in St. John’s, selling the fossil fuel industry on the idea that Newfoundland and Labrador is ideally positioned to be a leader in the Arctic Oil frontier.
“Newfoundland and Labrador has become synonymous with offshore oil and gas exploration and production in challenging environments – making the most of our strategic location on international shipping lanes and northern sea routes, our accessible ports, our strength in cold ocean research and development, and world-renowned expertise in Arctic-like conditions,” he announced, according to a government press release. The conference, he continued, provides the province with a “tremendous opportunity to demonstrate the fundamental role our province will play in future Arctic activity.”
A new study published in the journal Nature in January found that “development of resources in the Arctic and any increase in unconventional oil production are incommensurate with efforts to limit average global warming to 2 [degrees] Celcius.”
The research study, co-authored by Christopher McGlade and Paul Ekins of University College London’s Institute for Sustainable Resources, continues: “Our results show that policy makers’ instincts to exploit rapidly and completely their territorial fossil fuels are, in aggregate, inconsistent with their commitments to this temperature limit.”
NL “really well positioned” to move toward a low-carbon economy
Natural Resources Minister Derrick Dalley announced earlier this month that net-metering legislation is forthcoming in the province. Newfoundland and Labrador is the only province in Canada that has not yet adopted either a net-metering or feed-in tariff program, which will enable homeowners and businesses to connect small-scale renewable energy sources like wind and solar to the power grid, feeding any excess created on-site to the grid in exchange for energy credits that can be used at times when they are producing less electricity than they are using.
While the province’s efforts to curb GHG emissions in the electricity sector are a step in the right direction, electricity production accounts for only a fraction of the province’s total greenhouse gas emissions, whereas, Davis acknowledged on Wednesday, the fossil fuel industry and a handful of others account for 50 per cent of the province’s GHG emissions.
“We need to find, what’s the best way for us to most effectively reduce greenhouse gas emissions while we continue to have a thriving economy,” the premier said. “And there’s no doubt there’s a balance there.”
According to MUN Associate Professor of Business Administration Natalie Slawinski, who is one of more than 60 Canadian academics behind the new research paper Acting on Climate Change: Solutions from Canadian Scholars, the time is “ripe” for Newfoundland and Labrador and all Canadian provinces to begin making substantial moves toward a low-carbon economy.
“There’s so much momentum right now that this year is the year that something has to happen, and I’m confident it will — not just in this province and this country, but in the world,” Slawinski said, speaking to The Independent ahead of a panel discussion at MUN in St. John’s on Friday that featured Acting on Climate Change lead author Dr. Catherine Potvin, a McGill University biologist, and co-author and MUN sociologist Mark Stoddart.
[Diversifying the economy] comes also with an opportunity to diversify in a way that aligns with the way the world is going, which is towards a low-carbon economy and society. — Dr. Natalie Slawinski, MUN
In the report the authors argue the first steps toward a low-carbon economy are for provinces to implement a carbon tax or cap and trade system, coupled with enhanced dialogue among provinces to discuss collaboration in the energy and transportation sectors.
Slawinski admits it’s difficult to sustain healthy public dialogue on the environment at a time when the economy is taking a hit.
“But ironically,” she said, “this is exactly the time we should be talking about the environment, because obviously our reliance on fossil fuels is problematic not just from an environmental perspective but from an economic perspective. So doesn’t that tell us something, that we have become over-reliant perhaps on that source of revenue?
“I think a lot of people have made the argument for the need to diversify our economy,” she continued, “but that comes also with an opportunity to diversify in a way that aligns with the way the world is going, which is towards a low-carbon economy and society.”
On Tuesday, while Davis and other provincial and territorial leaders were discussing climate action in Québec City, Bloomberg New Energy Finance (BNEF) founder Michael Liebreich made the argument in New York City that the scales have begun tipping in favour of renewable energy investments.
Though it has its critics, the global fossil fuel divestment movement, which has manifested in Newfoundland and Labrador, is undoubtedly shifting public opinion—evidenced by its stunning growth over the past year—on the need to transition to clean, renewable energy.
Whatever its origins, shifting public opinion and the resulting momentum is beginning to have a very real impact on government and industry decision-making.
“I think that there will start to be momentum and people will start to act, and politicians will start to see it’s what people want, because people care about this issue,” said Slawinski. “I believe Newfoundland and Labrador is really well positioned to move toward a low-carbon economy, but there will be a challenge in the short and maybe medium-term of how do we deal with the oil and gas sector? That’s a big challenge, there’s no question.”
Slawinski said while there aren’t any “silver bullet solutions” to the transition, “any solution needs to be really well considered.
“But the first step, and a really important step, is to have conversations with the right people at the table. It doesn’t mean everybody’s needs and goals will be met, but it means we’ll understand the issues in a really holistic way.”
It will be Davis’ turn to host a premier’s summit in July, when provincial and territorial leaders gather in St. John’s July 14-18. Though not intended as a climate conference, the gathering will be an opportunity to continue unfinished business on how Canadian provinces and territories can work to address climate change in their own jurisdictions while strategizing over how to pressure the Harper Government to take meaningful action in cooperating with other nations ahead of the Paris global climate summit this fall.