Canadian oil producers’ net zero alliance
June 10, 2021 | James Lin
Image by drpepperscott230 from Pixabay
On June 9, 2021 a group of Canadian oil producers announced they had formed an alliance to make their operations net zero by 2050, in line with the broader commitment from the federal government. The alliance includes Canadian Natural Resources, Cenovus Energy, Imperial Oil, MEG Energy and Suncor Energy, some of which had made individual net zero commitments leading up to this announcement. Named the Oil Sands Pathways to Net Zero, it covers 90% of Canada’s oil sands output.
Oil sands operations currently use natural gas. The companies plan on achieving net zero through a combination of carbon capture & storage, an eventual switch to alternative fuels like clean hydrogen, and evaluating the potential of technologies such as small modular nuclear reactors. They also plan to work with the governments in Ottawa and in Alberta on the required regulatory and fiscal frameworks, including engagement with Indigenous communities.
So why are oil companies banding together to take on a collective net zero challenge? The main reason is an increasing public concern for issues around environmental and social governance, or ESG for short. ESG refers to a set of non-financial factors associated with corporate sustainability that are gaining prominence with groups ranging from investors to insurance providers. This puts pressure on companies to adopt ESG values as well to access the required financial services. The alliance can therefore serve as a signal to financial partners that the oil industry is serious about net zero and climate change.
It remains to be seen how successful the oil companies’ alliance will be in achieving net zero, however the very fact that the alliance exists would not have been foreseeable only a few years ago. This is because until recently, these companies followed a carbon-intense business model that was at odds with concepts like net zero or ESG.
There are also skeptics saying that oil companies are simply making a pitch for federal funding, and that increased renewables (rather than increased oil) are more important for net zero aspirations. Indeed, the carbon capture & storage initiative is expected to cost the oil industry $2.5 billion per year.
What does this mean for Canada’s nation-wide net zero commitment by 2050? There is still uncertainty over what exactly the alliance will do and who will pay for it. Nonetheless, the fact oil companies are committing to a net zero policy is a strong signal they are serious about helping Canada reach its net zero goal.
James is the son of INZ founder Charles. He has a PhD in economics from the University of Alberta.