Decarbonization: Discovery, Design and Decisions Shaping the 21st Century Economy
Mar. 02, 2016
Speech by Michael Crothers, Shell Canada President and Country Chair and Vice President North America Unconventionals, at the 2016 Globe Conference, March 3, 2016.
Good afternoon. I would like to acknowledge the Coast Salish Peoples on whose traditional territories we are gathered today.
Canada is swiftly approaching 150 years as a nation. And while decarbonization will define the coming decades, Canadians have tackled some huge societal challenges in the past from initial nation building efforts, fighting two world wars, through to designing and implementing universal healthcare. And when I look back on these and other examples, I’m struck by three key elements common to each hurdle we’ve overcome. Firstly, we had a shared sense of vision. Secondly, a practical plan was set. And lastly, there was tremendous collaboration and a sense of urgency to act in the greater public interest.
To overcome the decarbonization challenge, we need a shared vision.
It might come as a surprise to learn that globally Shell was among the first oil and gas companies to acknowledge climate change and we have been calling for a price on carbon for nearly two decades. We recognize that transitioning our energy system will be a huge challenge and we must square our vision for decarbonization with the growing demand for energy.
Whether you’re a supporter or a detractor, hydrocarbons will remain the primary source of energy for some time. And that isn’t just Shell’s self-fulfilling prophecy. Groups ranging from the National Energy Board to the International Energy Agency forecast that energy demand will rise due to a growing global population and higher living standards. It’s important to remember that today, some 3 billion people still lack access to the modern energy many of us take for granted.
So as emerging economies climb out of poverty and up the energy ladder, the world will need to meet this demand. But how will that happen?
Often we’re presented with a false choice between renewables OR hydrocarbons. But both will be vital to meeting demand in the coming decades.
Shell expects renewables to eventually become the largest component of the global energy system towards end of the century. Indeed, Shell sees major opportunity particularly for solar where one of our scenarios shows it could become the world’s largest primary energy source by 2060 and for wind where we have projects globally.
Shell shares much of the same vision as those in the environmental movement when it comes to decarbonization. Where we may differ is on the pace of the transition. As the transition occurs over coming decades, we need to decarbonize our energy system rapidly while renewables assume an ever larger share of that demand.
Once we have a shared vision we need to put a practical plan in place to realize it.
In order to meet the projected energy demand by 2050 while controlling climate change, we will need to DOUBLE the world’s energy supply from 2000 levels while at the same time dramatically reducing the world’s CO2 emissions. This is an incredible challenge. But I believe if given the right frameworks, human ingenuity will prevail.
To put the decarbonization vision into action, we must create well-designed policy frameworks to balance energy needs with environmental protection, and provide incentives to spur innovation.
As I mentioned, Shell has long called for effective carbon pricing frameworks. They create powerful economic incentives to reduce emissions and develop cleaner methods of production.
I am encouraged by our federal government’s intent to work constructively with provinces to facilitate a national approach to climate policy. B.C. in particular has blazed the trail in Canada and continues to lay claim to having the most comprehensive carbon pricing policy in the hemisphere.
And I’m pleased to see that government revenue from climate policies like Alberta’s will be reinvested in GHG reduction technologies. This further encourages the industry to work together to implement potentially game-changing technology to enable responsible growth.
We are a country of resourceful people. We figured out how to take the oil out of the sands. We’re learning how to get more carbon out of the oil. Canadian ingenuity will be key to unlocking lower-carbon solutions that can be exported, generating new revenue streams.
For our part, Shell is investing in lower carbon energy, especially in areas where we have the skills such as natural gas production and technologies that increase energy efficiency and reduce emissions. We also have a strong focus on low carbon transport fuels where we’re one of the world’s largest producers of low-carbon biofuels.
And we operate carbon, capture and storage technology or CCS…
Shell and Canada are leading on CCS which prevents CO2 from entering the atmosphere. Our Quest CCS project in Alberta will capture and store more than one million tonnes of CO2 each year from the Scotford Upgrader which is already one of the world’s most energy efficient hydrocarbon processing facilities.
With Quest, Shell was a technology facilitator, making a shared investment with the governments of Alberta and Canada to bring this landmark project to life. The project was under budget and on schedule, leading to an ideal start-up. Already, we’ve successfully sequestered half a million tonnes of CO2. Shell is now openly sharing our technology and processes with other countries to help bring down costs of future projects worldwide.
Shell is now a gas and oil company with a long tradition of innovation – and by the way, I deliberately say “gas and oil” given the shift in our portfolio. We continually review the resilience of our portfolio, and know that long-term success depends on our ability to anticipate the types of energy and fuels people will need in the future. All while remaining commercially competitive and environmentally progressive within the policies set forth by governments. And with the right solutions, this balance could become Canada’s competitive advantage.
Shell’s recent combination with BG is a strong platform to refocus the company, to create a simpler and more competitive Shell. With this move, you can gather that Shell also sees a growing role for natural gas as one of those lower carbon opportunities.
Now don’t get me wrong, I understand that although it emits half the CO2 of coal in power generation, natural gas doesn’t come without its critics. But if global decarbonization is the prize and if we’re willing to be balanced in the energy debate, then I believe natural gas is a key part of the energy transition.
Natural gas can make a rapid and affordable contribution to reducing emissions from electricity by replacing coal. Indeed this is a key driver for the Asian companies partnering with Shell on the LNG Canada project. These countries are looking to displace more carbon intensive energy and Canada can be a responsible and reliable supplier.
Natural gas is also a low-carbon, clean-burning ally to renewables. It can help overcome the current challenges renewables face in availability, intermittency and storage.
And finally, natural gas has an expanding range of uses. Traditionally it has powered our homes, businesses and power industries, but other markets are opening up for LNG, for compressed use in vehicles, and for cleaner fuels using gas to liquids technology.
One of the challenges associated with natural gas production is controlling methane – a very potent greenhouse gas. Shell has many initiatives already in place to reduce methane emissions, such as fugitive leak detection and repair, energy efficiency measures and venting reduction programs.
Using methane as an example, there is both an environmental and economic imperative for us to further reduce emissions. The current oil price is forcing us to sharpen our competitive edge and innovation will be key to both our economic and environmental challenges. We recognize that carbon leadership also has to be considered in the context of economic competitiveness. We must ensure policies drive the right behaviours for trade exposed sectors and that jurisdictions have similar levels of ambition to avoid simply shifting emissions to less restrictive regions.
Again, given pragmatic plans with regulatory frameworks that allow industry the flexibility to find the most cost-effective solutions, I am confident we will succeed.
So as you’re hearing, I am hopeful about our industry’s ability to remain economically and environmentally competitive…but we need Canadians to give us the opportunity to compete.
Few other countries have as much incentive and ability to become best-in-class when it comes to reducing carbon from our energy resources.
Lastly, I don’t believe that success is a realistic option without strong collaboration and urgency to act.
Now, the key to this success may not lie in the lowly bicycle…but I’m a passionate cyclist. When I’m not working or travelling I love getting out on my bike. To use a cycling analogy, I see the future of collaboration on energy issues akin to a cycling peloton. Peloton is the close formation cyclists use in a race to move as a team. To conserve energy, riders alternate riding in front and cutting into the wind.
Increasingly we are going to require different sectors to lead at different times and for us to offer both encouragement and challenge.
The energy policy and business decisions made over the next 5-10 years are critical. They will determine whether or not the world can meet its goals in an orderly way. Shell conducts research and collaborates with civil society and businesses outside our sector to innovate and deliver energy responsibly.
Many of you will have taken notice this past November when Shell and other energy companies shared the stage with environmental groups alongside Premier Notley as Alberta unveiled its climate leadership plan. Together, we came out in support of the plan, which sets an economy-wide carbon price in the Province, increases the price of carbon for large industries and puts a limit on oil sands emissions. As you’ll appreciate, it wasn’t easy getting to solutions we could all support. I’m proud that we found common ground and increasingly Shell sees multi-sectoral collaboration as the way forward.
It is clear to Shell that if we aren’t part of the climate change solution, the solution won’t include our industry. We’re supporting some fantastic initiatives such as Smart Prosperity which earlier this week outlined its vision to increase Canada’s economic and environmental competiveness. Shell shares the group’s ambition to see a stronger, cleaner economy that builds a better future for all Canadians.
We’re also supporting our people and their capacity to participate in social innovation. This includes the Energy Futures Lab, a coming together of people from various sectors in Alberta to identify pathways for decarbonization. Shell staff are working alongside peers to understand the various implications and trade-offs associated with transition – messy, complex and highly important work.
We CAN overcome the challenges around decarbonization. By shaping our shared vision together, by building practical plans and sound policy to spur action, and by working collaboratively to successfully transition our energy systems and ultimately our economies.