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This past weekend a distinguished group of experts in governance and energy gathered in Waterloo, Ont., for the annual conference of the Centre for International Governance Innovation. The CIGI event took place in the gorgeously restored Seagram's distillery, a Governor General's Award-winning building in this southern Ontario university town. The lovely surroundings, however, belied the seriousness of the discussions within.
This year the centre dedicated its conference to discussing energy, which, as an issue, is rapidly moving up the list of priorities for decision-makers everywhere. The western world's installed energy infrastructure is struggling to keep up with burgeoning global demand, and it's not clear how we are going come up with the new generation. As one delegate put it, foreign policy is increasingly being conducted on the basis of energy needs, and talk at the conference was of the need for a "war-time" or a Manhattan-Project-like approach to restructuring the energy infrastructure of our western societies.
The conference's first session saw a brief discussion of peak oil, the idea that we're closing in on a peak in terms of liquid fossil fuels that can be produced on a ready basis. The idea we may be near peak was considered a subject for "kooks" not so long ago, but it's being taken more seriously today, says Thomas Homer-Dixon, one of the panel's participants.
Homer-Dixon, of course, is the author of The Upside of Down, which looks at the possible consequences of a one-time reversal in some of our traditional key energy trends. According to him, even Exxon-Mobil has now conceded peak oil and estimates that OECD countries are set to peak within 10 years. The consequence of that will be to put "the call" on OPEC to raise output to make up for any gaps. The cartel will be closely watched (and under heavy pressure, no doubt), but it's also not clear that it will be able to step in with production increases necessary to continue to support the fossil fuel dependency of the last 50 years.
The dire consequence here is that if we do hit a peak and follow that up with serious production declines of, say, 8-12% a year, we will have to prepare ourselves for severe price shocks in the global economy. Homer-Dixon went on to point out— and this is the point he makes in his book — that the overall energy dynamic for society (that is, the total amount of energy available to us) is moving from one of steady expansion to one of gradual decline, and that the consequences of such a major reversal will be serious.
Homer-Dixon noted that in the very early days of the oil discovery boom, the so-called EROEI in the oil industry was somewhere close to 100-to-1. That is, for every barrel-equivalent of energy invested to drill, we got back a return of 100 barrels. But as we've eaten through the easy oil, that number has steadily decreased, and is now somewhere closer to 17-to-1. And it's only 4-to-1 in the case of the oil sands.
What's the big deal? Well, if you use more energy to guarantee basic energy supply, you end up with less "extra" energy to use elsewhere. Or, as Homer-Dixon put it in his address, using more of our capital wealth to produce energy means there "will be less left for everything else."
But it gets worse. As the supply of cheap, energy-efficient oil dwindles we begin to re-carbonize by ramping up our use of coal, which is actually fairly high in terms of its EROEI — say 80-1 for dirty coal and somewhere closer to 60-1 for coal-fired electrical generation installed with clean coal technology. Contrary to what many in the world think, we are actually seeing a reversal of our historical trend toward less carbon-intensive forms of energy (natural gas is less carbon-intensive than oil, which is less carbon-intensive than coal) as coal-fired electrical generation has been rapidly built out to meet rising global energy demand. This is especially true in China, where 50% of railroad tonnage is coal.
The consequence is that we have a relatively small amount of time to cut CO² emissions, but it may be that estimates for the amount of carbon going into the atmosphere provided by the International Climate Change Panel are significantly underestimated.
The suggestions? A price on carbon of at least $30 a ton will be key for getting clean coal on-stream. We might also have to consider a major global buildout in nuclear power, and this was the subject of the second day of the conference. Nuclear is going to be a key area of research for CIGI in the years ahead. In fact, the newest member of the think-tank, former deputy secretary-general of the UN Louise Fréchette, (now a distinguished fellow at CIGI), will spend her time there helping to hash out questions about international reprocessing of nuclear fuels and the dangers of proliferation. That last one is a major consideration if, as is being suggested, we're going to see hundreds of reactors built in all kinds of countries that have never had reactors before. Is there hope we can move the globe to a new and sustainable energy equilibrium?
Thank goodness that Jim Balsillie of Research In Motion has generously put his own money toward CIGI and the discussion of these issues. They are big questions, and Balsillie's generosity will do much to get us to the big answers. He was a constant presence at the conference, as was Paul Martin and a long list of domestic and global luminaries.
Thanks, Jim. The country needs ya.
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