Changing energy systems is a long process that involves social change as well as technological innovation. But we need to get the energy transition under way.
One of the problems with the climate change and energy policy debate in Canada has been the focus on short-term, incremental goals. Mitigating climate change is not about securing a 5, 10 or even 20 percent near-term greenhouse gas (GHG) emissions reduction. It is about radically overhauling the way we produce and consume energy so that within three or four decades, GHG emissions are essentially eliminated from the energy sector. Only by doing so can we hit by 2050 the 80-90 percent overall emissions reduction target that is needed in order to meet the internationally agreed objective of limiting global warming to 2°C over the course of the 21st century.
This challenge won’t be met by tinkering at the edges of energy policy. It requires transforming our society, overhauling everything from the way we generate and use energy to how we construct and live in our built environment, fuel industrial activity and provide mobility.
Even if the changes needed to reduce greenhouse gas emissions feel like a mountain to climb, responsible leadership would acknowledge the eventual shift that must come.
Looking at the country today, it may be hard to imagine how such change could come about. Canada’s per capita carbon footprint is among the highest in the world. It has a carbon-intensive industrial base, an expanding oil and gas sector and sprawling cities with underdeveloped mass transit. The current government does its best to pretend the climate problem does not exist and drives development of our extractive industries with scant regard to environmental sustainability. And the Canadian financial elite is focused on oil and gas plays, while our media is saturated with advertisements extolling the virtues of oil and gas.
Yet nothing lasts forever. Governments get voted out and external pressures for change grow. Much of the global community — even carbon-intensive economies such as China — is starting to take climate change more seriously and pushing forward new renewable technologies. As the effects of climate change become more apparent, an international consensus for decisive action may grow. Canada is extraordinarily vulnerable to any international movement away from oil, and we already see signs of jurisdictions such as California and the European Union considering penalties on oil that has a high carbon profile.
So even if the changes needed to reduce GHG emissions feel like a mountain to climb at the moment, responsible leadership would acknowledge the eventual shift that must come. The multigenerational time frame for a move away from energy-related GHG emissions requires us to think in terms of a societal transition. Transition conveys the concept of a process leading to cumulative change over a span of several decades. And it imparts a clear sense of direction. While the pace of change may vary, its orientation is clear.
History offers many examples of socio-technical transitions: think of the movement from canals to railways, the rise of mass production or the transition from sail to steam for maritime transport.
History offers many examples of such socio-technical transitions, in which social systems and behaviour are able to reconfigure themselves to adopt — and benefit from — technological changes. Think of the movement from canals to railways, the rise of mass production or the transition from sail to steam for maritime transport. Historical experience suggests that periods of relative socio-technological stability, where innovation focuses primarily on incremental improvements to a dominant design, alternate with periods of more profound system change.
At the outset, novel technologies typically appear inferior to the existing regime. They are more expensive and carry some functional disadvantages. Furthermore, they face the phenomenon of “lock-in,” where an established technology is closely linked to its enabling institutions, like access to capital, subsidies and regulations, making a switch to alternatives difficult.
Yet over time, problems accumulate for the existing regime. More challenging innovations emerge in protected niches (look at how digital technologies have upended media in ways almost unthinkable just over a decade ago). Entrepreneurs and innovators develop attractive ideas of what the future will bring. Governments can see opportunities in assuming an active role in mobilizing resources (think of railroads or the Internet), and in reorganizing legal rules to facilitate change through expropriating property, changing regulatory standards, adjusting intellectual property regimes and so on.
Consider the transition from horse-drawn transport to automobiles. Between 1880 and 1920 there was a burst of experimentation to develop a modern passenger vehicle. All the new technologies had to overcome the vested interests of an existing system that fought to preserve its position. But advances in technology unleashed a competition among alternative chassis configurations and power-trains based on steam, electricity, ethanol and even compressed air. Ultimately the design settled on a four-wheeled vehicle driven by an internal combustion engine running on gasoline.
This dominant design has been stable for a century. Over time, hundreds of thousands of engineers and vast amounts of capital have been mobilized to secure incremental improvements that have given us the automobile we know today. As the industry grew, auto producers and their allies in the petroleum sector used a range of political and economic tactics to disable competitors (streetcars, ethanol fuels), institute societal norms compatible with the new regime (people should stay on the sidewalks) and secure investment of societal resources (building national highway networks). The auto sector is closely integrated with the oil and chemicals industry — the production of steel, glass, plastics, synthetic rubber, electronic control systems and so on. It involves networks of dealers, repair shops, institutes for training and design, finance (for firms and consumers) and insurance, and complex governmental regulation. Moreover, it has co-evolved with the design of buildings and the organization of cities.
Yet even this extensive socio-technical system is beginning to show strain. A variety of concerns, from climate change to the cost of gasoline and urban air quality, have increased interest in alternatives: electric cars, plug-in hybrids, fuel cells, natural gas and biofuels. New business models are emerging (direct sales, car sharing) and there are hints of a shift in the interest of the younger -generation away from vehicle ownership. Pressure from industry outsiders like electric vehicle manufacturer Tesla threatens to disrupt the old ways of doing things.
Movement to low-carbon energy systems will be similarly protracted and turbulent. There is no shortage of technologies we can exploit and no certainty about which will emerge dominant. Does the future lie with hydro power and new renewables like wind and solar, or does it lie with older carbon-light technologies like nuclear energy that carry their own political baggage? Is carbon capture and storage viable? How great is the potential to enhance energy efficiency through improved appliance and lighting technologies and building design?
Many of these alternatives remain expensive today, but prices can fall dramatically as new technologies develop and scale effects kick in (not to mention what happens when the external costs of fossil fuels for the environment are quantified). Massive Chinese investment in solar panels (stimulated in part by Germany’s rapid deployment of renewable technologies in its “energy transition”) has driven prices down over the past few years. Tesla Motors aims to do the same with batteries for electric cars.
A proper transition strategy would hear the call of economists for economy-wide incentives such as a carbon tax or carbon trading to wean producers and consumers away from polluting fuels. But removing barriers to innovation and breaking the lock-in of established technologies also requires sector-specific policies that drive research and development and encourage deployment of new energy solutions. Governments can identify promising “transition pathways” that show how energy systems can move over time to a carbon-neutral configuration. Such pathways can draw on existing scientific, industrial and financial strengths to support key technological and social innovations to promote decarbonization.
Traditional energy companies are already beginning to recognize that change is coming (for example, using a shadow carbon price for current investment decisions). But governments can do more to encourage them to adopt a transition framework, and to redeploy expertise and capital toward low-carbon innovation. Moreover, policy can encourage the emergence of new low-carbon energy businesses that can disrupt the dominance of the carbon energy establishment.
Changing energy systems will take decades. It will produce losers as well as winners. But by consciously approaching this as a long-term transition, Canada can maximize opportunities for building a strong economy around a low-carbon future and improve public health and welfare in the process. The low-carbon transition is a global phenomenon that may move in fits and starts but is heading in one direction. Canadians can choose to accelerate the modernization of their energy economy or remain complacent, counting the money that for now is pouring in from fossil fuel production, as we ride the old economy down.