While the majority of the G7 leaders renewed their countries’ commitment to fighting climate change this weekend, there are increasing signs of political defections from the low-carbon strategy.
U.S. President Donald Trump, who has repudiated the Paris Accord, skipped out of the two-day meeting in Quebec early, before the other six leaders started talking climate.
Ontario is now officially “open for business” under the leadership of newly elected Progressive Conservative premier-designate Doug Ford, who campaigned against the province’s cap-and-trade program and in favour of a 10-cent cut in the price of gasoline.
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That led to a rousing vote of confidence from Alberta’s Opposition Leader Jason Kenny.
“The Ontario PCs are strongly committed to fighting Justin Trudeau’s federal carbon tax, and joining a future Alberta government in defending Canada’s resource industries,” the United Conservative Party leader said in a statement celebrating Ford’s win.
But just as Ontario voters were preparing to elect a pro-business party opposed to climate action, one of Canada’s most celebrated business leaders was sounding a very different note.
“Reducing our dependence on oil is one of the single greatest challenges that our society faces,” said Sergio Marchionne, the man credited with rescuing carmaker Chrysler, merging it with the Italian auto giant Fiat.
Marchionne, who completed an MBA at the University of Windsor and a law degree at Toronto’s Osgoode Hall, has until recently been a critic of battery-powered cars.
But Marchionne has changed his tune.
Business follows the money
Just over a week ago, Fiat-Chrysler announced it was launching a multi-billion-dollar plan to catch up with its competitors, introducing a fleet of 30 hybrid and fully electric cars to join its Fiat 500e.
Environmentalism is only part of Fiat-Chrysler’s motivation: The company says high-efficiency electric powertrains will keep fuel costs down, keeping buyers happy.
Listening to some conservative politicians, you might think all business was ideologically opposed to cutting carbon.
Of course, that’s not true. Business follows the money.
New research published last week in the journal Nature Climate Change indicates that even if political leaders backed off their commitment to stop climate change, business will do the job on its own.
The search for financial efficiency and the steady progress of technology means that the world is going to use a lot less coal, oil and gas, the researchers say, shaking up global energy investment.
Announcing the study last week, the BBC worried that a “Carbon ‘bubble’ could cost global economy trillions.”
But the head of the Cambridge University team that conducted the study, Canadian Jean-François Mercure, was quick to play down any hysteria over the financial risk implied by his research.
“Ideally, we would promote the recognition of these risks in a way that doesn’t lead to panic,” said Mercure, who initially studied physics at the University of Montreal, before transferring his math skills to modelling the economic future of technology.
Mercure hopes there will be “an orderly transition” that gradually moves financing away from risky assets. That process has already begun, he says, led by people like Bank of England governor and fellow Canadian Mark Carney.
And financial markets may eventually decide to provide less money for projects seen as higher risk.
The Cambridge research extrapolates current rates of adoption of low-carbon technology and shows that if trends continue, the result will be a drastic, market-based decline in growth in demand for fossil fuels, leading to losses in the order of $1 trillion to $4 trillion US by 2035.
That is quick for such a large sum of money.
Finance will watch the trend
The global use of technology such as hybrid and battery vehicles, solar power and wind power remains small. But just as we’ve seen by calculating the mathematical curve for the adoption of previous innovations, such as the automobile or the cellphone, it is possible to project a long-term trend.
Even without running the statistics, we can see the same story in Marchionne’s race to catch up with GM, Toyota, Renault-Nissan, Tesla and all the other carmakers expanding their electric fleets.
And while his research shows demand will not fall off a cliff, Mercure says he expects the need for oil will stop growing around 2030.
Somewhere before that date, he suggests, the world’s cheapest oil producers, including titan Saudi Arabia, will open the taps to make sure it is not their crude left in the ground when oil demand falls further.
Still, predicting the future is hard, and it is possible the Cambridge scientists’ trend calculations won’t come true. Perhaps some new technology, such as cheap carbon capture, will change the market once again.
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But as 2030 approaches, if the forecast seems to be coming true, it is the more expensive oil, such as that set to be shipped via Canada’s taxpayer-funded Trans Mountain pipeline, that won’t find investors — and eventually won’t be wanted.
“In our view, it is completely possible, and probable, that the pipeline would not deliver as much return as the government currently expects it to,” said Mercure.
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