February 3, 2016

On January 21st in Calgary, Delphi’s Senior Vice President,Ted Ferguson, participated in “The road from Paris goes through Calgary” event at the Haskayne School of Business, University of Calgary. Below are his takeaways.

Facilitated by David Milia, Associate Director of the Centre for Corporate Sustainability at the Haskayne School of Business, the session featured a conversation with me and Linda Coady, Chief Sustainability Officer at Enbridge, about climate change policy developments – from the Paris Agreement to the Alberta climate change plan – and what they mean for companies in Alberta’s energy sector.

Paris Agreement takeaways: The world economy is shifting to low carbon

The UN climate conference in Paris in December achieved global consensus that carbon emissions need to be reduced. The Paris Agreement sent a strong signal to markets around the world, and the bar has definitely been raised with regards to managing exposure to climate risks at the corporate level. While there are still a lot of unknowns – such as the feasibility of achieving voluntary reduction targets – the agreement makes some progress with respect to reducing ambiguity for industry about what the future might look like: it looks low carbon.

Alberta Climate Change Policy takeaways: The government of Alberta is reading the tea leaves

The provincial policies are intended to accelerate carbon reductions in the short term (greening the grid, methane reduction, energy efficiency and economy-wide pricing) while building the long-term foundation for a more diversified and carbon-competitive economy.

Alberta is incorporating performance benchmarks comparable to other leading jurisdictions in North America, while also recognizing the uniqueness of the province as a major energy-producing and fossil fuel-rich jurisdiction. It marks the end of the ‘Alberta goes it alone’ era, as the province will now have policies and systems that are comparable with other jurisdictions.

With regards to instituting a cap on oil sands emissions, Alberta is embracing the long-term goal of decoupling future oil-sands growth from emissions growth by investing in next-generation technologies. The goal over the next 10 years is finding ways to bring oil-sands products to market with less environmental impact.

Alberta Climate Change Panel takeaways: The people of Alberta are braced and ready for change

Notwithstanding differences in perspective and opinion, the panel process generated very comprehensive and respectful dialogue. Most people were open to change and were in general agreement that the previous approach was not working. There was widespread support for Alberta’s oil sands being a critical part of the global energy mix and that it is imperative that we be able to demonstrate that they are being developed in a responsible manner in line with global expectations/requirements. Most stakeholders wanted ‘no surprises’ particularly when it comes to price spikes for producers or consumers, or employment impacts.

There was also concern about price volatility and competitiveness with respect to both electricity or carbon. Stakeholders identified the need for a highly integrated policy framework that can work across sectors over a 10 to 20 year period, with actions that can be deployed in both the short and long term.

Lastly, there was strong demand for a climate policy framework that allows governments, business and communities to test policy solutions that drive behaviours and investment in the right direction – a willingness to try new approaches, see what works and make adjustments over time. People in Alberta appeared to accept that energy systems are changing and they want to be part of that change – whether it be at the community level through distributed energy or small scale renewable or combined heat to power, or at the industrial or global level. They want business models for Alberta’s energy that are sustainable and that recognize the interdependencies between oil, gas and renewables.

Alberta energy companies: Where to from here?

The Alberta energy sector will continue to play an important role in meeting North American and global energy demand. The changing policy landscape is creating new drivers from a business risk management and investment perspective, and the business case for incorporating a climate dimension into a corporate business plan is certainly a lot stronger than it used to be.

Resilient energy companies are looking to diversify their operations both in terms of the type of energy they produce as well as the energy-related technologies and services they offer. They are looking to carve out a role within that horizontal spectrum, as opposed to only thinking vertically within their sector.

Some day in the future we may look back to this time and see that there were three types of oil and gas companies: the type that hoped these policies would go away and changed nothing; the type that chose to be best in class in the oil and gas sector, with a progressive approach to upstream emissions while focusing their investments in the fossil fuel sector; and a third type that used policy signals as a transformative influence on their business strategy, prioritizing new capital spending on renewable energy and other low-carbon energy resources.

Can we afford to take action on climate change and carbon?

We can’t afford not to. This is certainly a challenging time for the oil and gas sector. However, responding to this new reality at the bottom of a cycle should help make it more enduring. Additionally, there is great innovation, entrepreneurship and creativity in the Alberta energy sector. It is this spirit and skill set that will help to build the bridge to a sustainable energy sector in the province.

Ted Ferguson – Senior Vice President (tferguson@delphi.ca)

You can watch the talk here: