Already battered, Alberta braces for the energy transition — can it also embrace it?

In June, guerilla artists armed with stencils and spray paint appended a single word to the slogan on massive red signs welcoming drivers to Calgary.

In matching lettering below “Be Part of the Energy,” they added “Transition.”

You might call these surreptitious edits or acts of vandalism. Either way, they didn’t last long. The stencilled words were painted over within days but not before they sparked a new round of discussion about a topic that was once almost taboo in this city.

What does a low-carbon future look like?

It’s a question that looms large in the upcoming federal throne speech, which is expected to lean heavily on the concept of a “green recovery” in response to the economic damage wrought by COVID-19. It’s also a question being asked more and more, even in the heart of oil country.

There’s no easy answer, according to people who have studied this topic. But they say it’s time to start thinking, talking and acting in more concrete terms, because that future is coming — possibly a lot sooner than many people realize.

It was long assumed that an expanding economy went hand in hand with increased carbon emissions. Take a closer look at the data, however, and that’s increasingly not the case.

A recent report from the Canadian Institute for Climate Choices highlights the “decoupling” of growth and greenhouse gases. But, its authors note, this has happened unevenly across Canada. And they say it needs to happen a lot faster — both to meet our climate commitments and to keep our economy competitive as the world changes around it.

There is no easy way to get there. There are a lot of different paths to walk, and a lot of gum to chew along the way.

Blow after blow

To say Alberta’s oil industry has been battered in recent years is an understatement. Energy economist Peter Tertzakian likens it to being hit repeatedly in the forehead with a two-by-four.

The oil price crash of 2015. Pipeline expansions blocked time and time again. A global pandemic that significantly reduced worldwide demand. It’s been blow after blow, for nearly six years now.

The toll on the provincial economy, in the first two years alone, was 130,000 payroll jobs. Alberta experienced a modest recovery in 2017, but it later sputtered and stalled. By the end of 2019, the province had plunged back into a “mild recession.” Then came the 2020 wrecking ball.

Tertzakian said it’s especially acute for people living in rural areas. It’s hard enough making a career change in Edmonton or Calgary if you’ve built your life around working in oil and gas. It can be nearly impossible in smaller communities, where there are fewer alternatives.

“It’s not something that people in big cities, who develop policy, think about as much,” he said on a recent episode of the West of Centre podcast.

The hits keep coming to the oil and gas industry in western Canada whether it’s price, demand or market access. For those hanging in, the future is uncertain. Opinions vary on what the government’s role should be and the impact a so-called green recovery could have. Kathleen Petty looks at the current state of the industry and what to expect in the short term with two people who know it well: Rory Johnston, commodity economist and managing director at Price Street, and Peter Tertzakian, deputy director of ARC Energy research institute. 44:30

Rory Johnston is one of those big-city policy wonks — and he agrees. The Toronto-based commodity economist said there’s a “classic refrain” about laid-off oil workers in some regions of the country: “Oh, well. They’ll learn to code.”

“Not only is that insulting, I think it’s terrifying for rural communities to hear that’s what people in the cities and government think we need,” Johnston said on the same West of Centre episode. “And I think it’s deeply, deeply disheartening.”

It’s also unrealistic, Tertzakian said, to expect a transition to a “100 per cent knowledge economy when the bulk of our wealth has been — and continues to be — driven by resources.”

So what is the solution for places like Alberta? And for people who have built their lives around the fossil-fuel industry?

“It’s really complicated,” Tertzakian said. “We really need a holistic, collective approach to addressing this transition.”

The great decoupling

Making such a transition won’t be easy. There’s no simple set of instructions to follow, no straight line from A to B. But more and more, various groups are sketching out a rough map of the terrain we’ll have to navigate.

Take, for instance, the Canadian Institute for Climate Choices, a research organization supported by Environment and Climate Change Canada and more than a dozen other organizations, including Alberta Innovates

Last week, the institute released a 151-page report on what it describes as “clean growth.” This is not light reading; the executive summary alone weighs in at 4,100 words. But what it lacks in concision it makes up for in an effort to address the dizzying multitude of challenges that Canada faces from climate change.

“The best outcomes for Canadians will come from building resilience to the physical effects of climate change while keeping up with the accelerating global low-carbon transition,” the report reads.

That transition, of course, is expected to have an outsized effect in places like Alberta.

“I’m particularly concerned for individuals and communities that are highly dependent on some of these high-carbon sectors, and the types of job losses they may face,” said Rachel Samson, a research director with the institute.

The good news, she said, is that Alberta’s economy has already started to decouple its growth from carbon emissions. From 2005 to 2018, provincial GDP grew 34 per cent while greenhouse-gas emissions grew by just 18 per cent.

Alberta achieved this 16-point spread, in large part, by reducing its reliance on coal for electricity, expanding economic activity in the environmental and clean-tech sectors and adopting “leading agricultural practices” that help trap CO2 in soil.

That’s a good start, but the report says Alberta’s progress “is not moving fast enough to reduce risks.”

Another way the authors measure this risk is by comparing emissions data to employment. On this front, Alberta saw just a 10-point spread between job growth and emissions growth from 2005 to 2018. That compares to a 19-point spread in Quebec and a 32-point spread in Ontario over the same timeframe.

The upshot, the report says, is that Albertans face a higher risk of job loss as a low-carbon future approaches.

So again: What to do about it?

‘A comprehensive set of actions’

The report offers a slew of recommendations, such as creating “clear direction and accountability” within governments, better linkages between emissions and economic data and a fuller accounting of the cost of extreme weather events.

“There’s no one sort of silver-bullet action that you can take,” Samson said. “It’s really a comprehensive set of actions.”

A key area for Alberta, in particular, is helping existing industries speed up their own adaptations. That means not only reducing emissions intensity for existing product lines but also shifting entire business operations to new, lower-carbon activities.

Natural gas distributor ATCO, for example, plans to blend clean-burning hydrogen with its gas before piping the combined fuel to 5,000 homes in Fort Saskatchewan, Alta., starting next year. It’s a small step — the blend will be just five per cent hydrogen — but it’s the type of thing that Samson says we need much more of.

Another key, she said, will be support for small- and medium-sized enterprises. Nascent companies that produce innovative technologies and products need help to grow into larger-scale operations, which is critical if those technologies are to be adopted on a mass scale.

And technology adoption, according to the report, is an essential “catalyst” of clean growth: new, low-carbon technologies won’t reduce emissions if people don’t use them.

And that may be one of the biggest challenges of all. All-electric Tesla trucks and low-energy “passive homes” may generate a lot of headlines, but how many do you see around your neighbourhood?

“At the end of the day,” Tertzakian said, “society hasn’t changed that much.”

Disruption, denial, transition

That said, it’s not like nothing has changed.

Tertzakian sees plenty of “green shoots” in Alberta that could grow into something larger, including new businesses outside of the oil and gas sector and new approaches within the traditional industries themselves.

He says there are three phases whenever a major industry is struck by a sea change. First comes the disruption. This is followed, for a while, by denial. Finally, there’s acceptance and transition.

“I think we’re definitely in the transition phase now,” he said. “And you can kind of see it and feel it around, certainly in Calgary.”

While the tech industry is still relatively small compared to other cities, Tertzakian said there are “all sorts of different software companies” starting to pop up in Calgary. There are also more established tech firms looking to expand.

And then there are the pivots within the oil-and-gas sector, itself, such as re-purposing old wells for sources of geothermal energy or new methods of extracting hydrogen from oilsands while keeping the resulting carbon emissions underground. This isn’t pie-in-the-sky stuff. It’s happening now — on a small scale at least.

Ian Gates, a professor of chemical and petroleum engineering, in his lab at the Schulich School of Engineering at the University of Calgary, where his team is working on a new way to extract hydrogen gas from oil and bitumen. (Tony Seskus/CBC)

Predicting the future is impossible, of course, but a growing number of major players with serious skin in the game are taking a hard look at the state of the energy industry and placing large bets on wind and solar instead of oil and gas.

Last week, U.K.-based BP Energy outlined plans for a faster shift toward renewable energy, based on its forecast that demand for oil may have already peaked. This week, we learned of Royal Dutch Shell’s “Project Reshape,” an internal strategy to overhaul its business model, slash spending on oil and gas production and invest the cash in renewables instead.

The implications for Alberta in all this are massive — but not all negative. Even if demand for oil and gas diminishes, it isn’t going away anytime soon. And while investment dollars flowing into the oilpatch may dry up, there are avenues for capital investment to flow into other areas.

Norwegian consultancy Rystad Energy recently forecast that Alberta is set for a boom in large-scale renewable energy projects and, by 2025, will lead all provinces in wind and solar capacity. The firm believes Alberta’s deregulated electricity market and the provincial government’s plan to get off coal by 2030 make it especially favourable for developing these resources.

“Be Part of the Energy Transition” may not have lasted long on Calgary welcome signs, but the imperative endures. Do a quick Google search for that exact phrase and you’ll see it turn up in corporate documents for major oil and gas firms like MEG Energy, Lundin Petroleum and Suncor.

This transition will come with growing pains, especially for Albertans who have relied on oil and gas for so long. Change won’t come easy. But one way or another, it’s coming.

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