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EXECUTIVE UPDATE

Message from the President & CEO

Published on: October 22, 2020

How times have changed. At the end of March 2020, the close of our fiscal year, Canada was just beginning to learn about the novel coronavirus, COVID-19. The world continues to face the global challenge of the pandemic. Perhaps contrary to world views of the past, today, we must view the world through the lens of our health and the health of those around us. Our work, travel, education, and personal activities have all been impacted. So too has the health of our economic systems.

Canadian energy systems are complex, serve many different needs, and create economic benefits with proportional environmental and social impacts. The current energy debate in Canada is largely focused on greenhouse gas (GHG) emissions from energy production, consumption, and exports. When we contemplate how to manage Canada’s GHG emissions, it is important to consider how we might confront emissions issues whilst maintaining the associated economic and social benefits.

Taking energy efficiency as an example, CERI has shown that there are some competitive advantages to improving energy efficiency for trade-exposed and energy-intensive industries. However, at least one-half of the options are not cost-effective. In some provinces, a decrease in electricity consumption comes with zero or minimal emissions reductions due to the nature of their electricity grids. In these cases, energy efficiency may not necessarily result in a net environmental or economic benefit unless efficiency is viewed in the context of the entire system.

When we consider carbon pricing, the debate often centers around whether to price carbon and, if so, how. When CERI considered how carbon pricing impacts economies, our research found that cap and trade systems are more effective than carbon taxes at reducing emissions, the very point of carbon pricing. Yet, we have seen numerous examples which employ cursory analyses to show net changes in carbon uses within an economy without netting out all the other activities that can affect emissions. Industrial systems change for a variety of reasons. For example, process changes, consumption patterns, new equipment standards, and the list goes on. So, why aren’t these other elements removed from the calculation of a carbon pricing impact? Systems are dynamic, so assuming the changes in our economic conditions are the result of one or several policies ignores all the other elements that affect energy use and emissions.

Finally, when we consider value-added products derived from energy commodities, economics are driven by more than their availability. What are the labour costs in the region compared to other jurisdictions? What are the tax implications? What are the logistics to get the valued-added product to the market? In our analysis, we looked at the competitiveness of producing more value-added products from Canada’s natural gas and crude oil. While the development of these resources may be economically competitive with other regions, adjusting the assessment for other system challenges could result in a completely different conclusion.

Systems thinking is important because Canada’s energy systems are intertwined with industrial, commercial, and public sector activities. CERI’s individual studies are pieces of a puzzle. While the full picture can be difficult to see at times, if one fits the pieces together, a better understanding of the interconnectivity of energy systems can be gained. This insight is vital to government, industry, and environmental organizations who can utilize CERI research to make better informed policy and business decisions. If we focus only on the individual pieces of the puzzle, we are likely to create new challenges whilst trying to solve existing ones.