Fork in the Road

What will (or could) this pandemic mean for fossil fuels, the climate movement, and the neoliberal project in general? We asked three experts.

Watershed Sentinel Staff

Our strange new coronavirus-dominated world has been called many things: a fast-forward preview of future climate change disruption, a warning from nature, the end for the era of small government, a binge for “disaster capitalism, a driver of xenophobia and waning international cooperation that will jeopardize climate action.

But the common thread through much of the commentary is that for the planet and climate, coronavirus offers the unexpected possibility of radical, beneficial change.

As journalist Nafeez Ahmed writes, “Amid this unprecedented crisis, we face a unique opportunity to transition to a regenerative civilizational paradigm which no longer breaches environmental boundaries in ways that make pandemics like this inevitable.”

Or simply, as journalist Amy Westervelt tweeted, “What better time to fix shit, what better time to rebuild, rethink then when EVERYTHING is broken?”

With an eye to this overarching question, the Watershed Sentinel reached out to three experts to ask how the pandemic is affecting the climate movement, the long-term outlook for fossil fuels and renewable energy, and how Canada’s economic response to the crisis could speed transition to a low-carbon economy.

Following are conversations edited for length and clarity.

 

Bail out the old or invest in the new? Laurie Adkin

The economic beating from COVID-19 has prompted some of the largest public investment measures in history – with varying goals. In some jurisdictions relief for fossil fuel interests has included suspension of environmental protections, regulatory rollbacks, and criminalization of environmental protest, on top of direct financial aid.

Other jurisdictions, such as France, Spain, and the city of Amsterdam, are leveraging their COVID-19 funds by tying bailout money to reforms on polluting industries, or by enacting permanent climate-friendly policies that will boost economic recovery.

Laurie Adkin, professor of political science at the University of Alberta, says if devotion to fossil fuels doesn’t mire us in the economy of the past, Canada’s response to coronavirus could hasten a transition to an ecologically sustainable economy.

WS: What are your thoughts on a bailout by the federal government of the oil and gas sector?

LA: There are big players in the industry that are trying to take advantage of the situation. We saw an example of that with the letter by [the Canadian Association of Petroleum Producers (CAPP) to the federal government] that was leaked to Environmental Defence Canada. It listed about 30 areas of environmental regulation CAPP wanted to have put on hold, including things like asking the federal government to not proceed with the ratification of UNDRIP. It was an astonishing list. It was the industry’s chance to use the pandemic as an excuse to put all these regulatory things on hold that they never wanted.

Simply handing over to the oil and gas sector what it wants, without any kind of public consultation or discussion with experts in energy policy and climate change, could further anchor us to our dependence on fossil fuel extraction and exports, which would be a very, very bad deal for citizens and taxpayers down the road. We could get stuck with a lot of public debt for stranded assets, on top of all of the environmental liabilities that we already know about.

How could the federal government best spend stimulus money to support a transition to a sustainable economy?

The Trudeau government has done well by first providing the income replacement programs. But we are going to need to provide income security permanently, and I’m hoping that we will move towards something like a universal guaranteed income.

What kind of economy do we build? I would be investing in public ownership of the renewable energy system, because it’s never going to happen fast enough if we leave it up to the market.

We are also going to have to restructure the economy to produce things that we need sustainably, and we have to phase out fossil fuels. Now, I know it’s going to take probably at least 20 years. But, we can phase out the oil sands sooner. Non-conventional oil and gas extraction through in situ and surface mining and fracking is extremely environmentally destructive. It generates about 15% of Canada’s greenhouse gas emissions, so we’re never going to get our greenhouse gas emissions down if we don’t stop production in that sector.

Oil sands production is mainly for export, so the argument has been made that we could supply needs for oil and gas in Canada, while we’re going through this transition, from conventional oil and gas, which has a lower carbon footprint. This gets us into other questions about dealing with the Americans and trade agreements but I believe it can be done.

What kind of economy do we build? I would be investing in public ownership of the renewable energy system, because it’s never going to happen fast enough if we leave it up to the market. If the government does that, it gets the long-term stream of revenue coming back that can repay that upfront investment. I would also be paying a lot more attention to agriculture. Canada is going to be one of the few places left in the world, depending on how fast and how much the average temperature rises, that is going to be able to produce a lot of food.

This virus maps itself on existing social inequalities, so that the people who are most vulnerable and have the highest fatality rates are people who already had compromised health, poor living conditions, and poor access to medical care.

Let’s build an economy on food production, value-added food products, and transporting food to regional markets through an electrified sustainable transportation system. Also, we should be building up intercity transportation networks, public transportation in cities, and investing massively in retrofitting of buildings. There’s huge potential for jobs in these sectors.

There’s also potential for many good jobs in the public sector. In human services you need teachers, childcare educators, people to look after elders, people in home care, nurses, doctors. We’ve been through decades now of defunding of education and health care and we’re seeing the consequences, and this applies to the COVID-19 crisis.

How does neoliberalism relate to coronavirus?

We have been poorly prepared for a crisis like this because of the underfunding of the health system, infrastructure, and many other things. This virus maps itself on existing social inequalities so that the people who are most vulnerable and have the highest fatality rates are people who already had compromised health and poor living conditions and poor access to medical care. The extreme income inequality after four or five decades of neoliberalism is clear.

Maybe people are now a little more open to realizing that the neoliberal model has failed to fulfill any of the promises that were made about trickle down wealth and prosperity. But on top of that, the whole idea of economic growth is insane. We can’t keep compounding economic growth year after year after year. I mean, the planet doesn’t grow.

 

The outlook for fossil fuels & renewables: Michael Barnard

Leading oil companies have lost, on average, 45% of their value since COVID-19 hit.11 But in the analysis of Michael Barnard, chief strategist at TFIE Strategy Inc., a low-carbon business and technology consultancy, the pandemic has only heightened the impact of long-simmering factors driving decline of the industry – to the potential benefit of renewable energy.

how is coronavirus affecting oil and gas?

Oil and gas led the loss of value in the stock market when the coronavirus hit, but that was just a kick in the pants when they were already going down.

The fracking process led to a boom in fracked natural gas and unconventional oil extraction of shale oil. So prior to coronavirus and a Saudi-Russia price war, in two years the United States was expected to become a net exporter of crude oil. Now at current oil prices, low-cost producers want to kill off higher-priced competitors pretty much en masse, probably to get rid of 50% of the production in North America, which gets us back down to 1972 levels or so and makes [the US] oil dependent.

And there’s other factors that play in here. The oil and gas industry, especially in the United States but also in Canada, was given unreasonable financial support by financial institutions. It was easy for them to get cheap money. A lot of them went into debt for exploration and operations with the expectation of making money off higher oil and gas prices. Starting in late 2019 we started to see a very significant increase in the rate of bankruptcies in the fracking industry. Now the financial institutions who five years ago were willing to extend favourable debt terms are in many cases foreclosing entirely on debt and seizing the assets of oil and gas producers instead of allowing them to go into bankruptcy. The idea is they can get 10 cents on the dollar instead of five cents on the dollar for their bad debt. We see not only the shutdown of expansion, we should see the shutdown of all the previously marginal production. So we end up with less production, especially focused on oil. Except that comes with a corollary, and that’s where the renewables question starts to come in. Oil has nothing to do with renewable electricity, but natural gas does.

Oil and gas was already a fragile industry where liabilities were mounting. Oil and gas demand for transportation is going to suffer a five-year lull. People are not going to get on planes and travel nearly as much as they used to. They’re not going to get in their cars and drive as much as they used to. People will stay a lot closer to home, and that entire demand sector for oil and gas is going to diminish.

Before the fracking boom in the US, as wintertime approached the price for natural gas spiked. But fracking meant that they could fulfill that spike in demand by producing more gas. So fracked natural gas assisted in reducing the cost of natural gas and reducing its [price] volatility.

So now, potentially 70% of the supply of natural gas in North America is at risk of shutting down entirely, and the other 30% keeps going bankrupt. This implies the cost of natural gas is going to go up and it’s probably going to get more volatile annually again. So we see a projection where natural gas prices increase, which turns into an increase in the cost of natural gas electrical generation, [making electricity generated by renewable power more competitive].

If you have that eventual rising price, is there opportunity there for, for instance, LNG Canada? If they can weather the storm until prices climb, will the companies left standing be in a better position?

No, they’re screwed. LNG delivered to China is always going to be expensive. It takes a lot of electricity to compress and chill LNG. And then you got to shove it into tankers and you got to take the tankers across the ocean and unpack it on the other end. And LNG tankers are massive exploding bombs so you have to keep traffic away from them and stuff like that. They are characteristics that can be managed. But China [is shifting to low-carbon energy]. China builds more wind and solar every year than pretty much the rest of the world. You have to combine the United States and Europe to get close to what China does in either wind or solar every year. And China is building more nuclear every year. And they’re shifting all transportation to electricity. China had 430,000 electric buses on the roads at the end of last year, and they were already reducing daily demand for oil by 300,000 barrels a day. They’re shifting all electrical generation to low carbon options and all transportation to electricity.

Are renewables sustaining economic damage from COVID-19?

Absolutely, everything is being disrupted. Right now, we’re seeing existing projects that were in construction shut down. We’re seeing lawyers looking at force majeure and frustration clauses. Supply chains are also being disrupted, so some projects that were able to go forward with the labour couldn’t get the parts.

But have you seen the stories about clear skies over LA and other areas? A lot of that comes from coal and gas generation and a lot of it comes from cars burning diesel and gasoline. None of that comes from renewable electricity and electric cars. One of the things we’re getting in many parts of the world is a cleaner air dividend that people don’t want to give up. And so the discussion then becomes, well, let’s maintain our clean air dividend by investing our stimulus and recovery funds in renewables and electrification. We will see that barrelling down the pipeline.

The money that goes to the oil and gas industry that isn’t coming from places like Saudi Arabia, the United States and Russia will be going to clean tech. If Biden becomes the US President and the Senate and the House both sweep Democratic – which I see as a strong likelihood right now – the United States in 2021 will be turning and burning on a Green New Deal, and China already is.

It sounds like you’re pretty hopeful that this will potentially overturn the status quo around energy globally?

Yeah, oil and gas was already a fragile industry where liabilities were mounting. Oil and gas demand for transportation is going to suffer a five-year lull. People are not going to get on planes and travel nearly as much as they used to. They’re not going to get in their cars and drive as much as they used to. People will stay a lot closer to home, and that entire demand sector for oil and gas is going to diminish. Electric cars on the other hand, and renewable-generated electricity, are going to get cheaper and cheaper.

 

Climate movement: Catherine Abreu

After last year’s unprecedented climate strikes, 2020 seemed primed to be a breakthrough year for the climate movement. Then the virus came, and suddenly that momentum was in question. Yet as Catherine Abreu, executive director of Climate Action Network Canada explains, climate activists have adapted and connected with allied movements to reach a public with increased appetite for change.

WS: How has coronavirus affected the climate movement so far?

CA: We’ve seen our work escalate, as we develop recommendations for how communities and governments can pull out of this crisis in a way that’s climate smart. But many of our usual means of coming together have been completely altered. The year of climate activism, including international climate negotiations, has been cancelled or postponed. Our ability to gather in the streets has been totally hampered, of course, so we’re having to find creative ways of coming together. As you can imagine, a lot of that is happening over Zoom calls. Climate groups are also working more closely with health, social justice, anti-poverty, humanitarian, and migrant justice groups. I think we’re all coming together in this, feeling motivated by a desire to care.

Has coronavirus created opportunities for climate action?

This pandemic has shown society what really matters. We have become reoriented to the importance of our own health and well being, and the ways our health and well being are inextricable from that of the non-human world. It has opened the door to conversations with people outside of the climate movement that perhaps would not have been as easy to have in the past. It’s also shown us where the vulnerabilities are. We see the impact of the growing gap between rich and poor: income inequality, the gap for access to resources, the precarity of work, and the dangers of an economic system that externalizes environmental harm.

We’ve been shown, too, what our resources are. We have been seeing this instinct for people to come together in the face of crisis, to do that creative problem solving. We have seen the power that political will, taken efficiently, can have.

This pandemic has shown society what really matters. We have become reoriented to the importance of our own health and well being, and the ways our health and well being are inextricable from that of the non-human world.

Another thing we’ve witnessed are the financial resources we can muster. In Canada the federal government was planning to spend about $70 billion on climate action over the next decade. The [Canada emergency wage subsidy] will cost the federal government $73 billion over the next six months. The scale of what’s possible has completely changed, and that is a real opportunity.

We’ve also seen the resilience of natural ecosystems. There’s no silver lining in this – no environmentalist is celebrating these things because it comes of human suffering and it’s temporary – but we have seen clearer skies, we’ve seen animals coming back into spaces that they haven’t been in decades. That’s a window into what the world could look like if we were living more respectfully within the boundaries of the planet.

And then finally, we’ve seen the power of those who benefit from the status quo, who opportunistically are lining up to ask for reckless bailouts and the rollback of environmental and social protections, particularly in the fossil fuel industry.

 


This article appears in our Summer 2020 issue.

 

 

 

 

 

 

 

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