Transcript The case for a national energy framework

A Tale of Two Systems
Master 2
The case for a national
energy framework
A ‘Big Idea’ for Sustainable Prosperity
Alexander Wood
Senior Director, Policy and Markets
April 28, 2014
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The political economy of energy:
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No real national energy policy/strategy in Canada
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Market –in terms of consumption –is either provincial (electricity) or North American (oil
and gas)
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Oil and gas seeking diversity of markets, both to avoid US policy risk but also to gain
higher price
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Provinces “own” the resource and so have first call on revenues/rents (although federal tax
regime does apply)

Creates mixed policy incentives: the Alberta fiscal model is one every province (at least
structurally) seeks to emulate, which complicates negotiation of federal/national policy on
either energy or on climate change/environment
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The political economy of energy in Canada (2)
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For Canada, overriding policy objective has gone from ensuring security of
supplyMaster
to seeking2security of demand
Role reversal for energy:
• Was input into manufacturing-led export model
• Now key component of commodity-led export model (for which manufacturing is
now an input)
• Manufacturing still a major part of the Canadian export earnings, but declining
• Policy emphasis on commodities reflects assumptions about booming emerging
markets (in which we may not be able to compete on manufacturing) and decline
of US market (which has been natural market for manufacturing, as part of NA
supply chain dynamic)
 Economic interest has shifted from need for low cost energy (for domestic
consumption) to high cost energy (for export earnings)
 Important to distinguish between electricity and oil and gas
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Energy Supply Forecast (NEB)
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Energy (Over)Supply
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Energy Demand Forecast
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Energy Demand Sectoral Growth Forecast
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Canada’s Emissions Gap
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Basic Conclusions:
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2 abundance of energy….and emissions
 Canada
has an
 Our approach to climate change is held up by conflation of two
systems, and the path dependence they represent
 Canada’s energy sectors – the export oriented energy
commodity sector and the domestic consumption system – have
differing interests
 Canada’s domestic energy use has decreasing growth rates and
carbon intensity, and energy export sector has increasing growth
rates and carbon emissions (despite intensity improvements)
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An energy framework for Canada
 Canada
could2- as a matter of national strategy - focus
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separately on the interests and opportunities of two systems
 Based on recognition that what the national economy needs to
thrive is not necessarily what energy export sector needs to
thrive (and vice-versa)
 Use carbon pricing mechanisms to both address emissions
growth in energy export sector AND generate wealth to build
out low-carbon, electricity-based, domestic energy system with
use of carbon pricing mechanisms
 Would allow us to take a potential barrier (path dependence of
current system) and use it to build out a new system
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Benefits for Canada
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 With a low-carbon domestic electricity economy, our
economic growth and emissions would be decoupled
 We would renew our historic comparative advantage in
electricity systems, and use it to build out innovation in
emerging markets for smart grid, energy storage,
electric mobility, etc.
 We would also address competitiveness issue of energy
intensive, trade exposed sectors
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Policy Research Needs
 HowMaster
to accomplish
this in political economy of energy?
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What federal-provincial models exist that could help?
Would new models be required?
 What models/precedents exist for the kind of transition
implied here? How can it be facilitated and accelerated?
 What are the financial and technological needs of such a
transition?
 What are the implications for Canada’s international
policies on climate change?
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