Get ready to pay even more for your energy…
Governments and companies worldwide are pledging to achieve net-zero emissions of greenhouse gases. What would it take to fulfill that ambition?
“The transformation of the global economy needed to achieve net-zero emissions by 2050 would be universal and significant, requiring $9.2 trillion in annual average spending on physical assets, $3.5 trillion more than today. To put it in comparable terms, that increase is equivalent to half of global corporate profits and one-quarter of total tax revenue in 2020.”
McKinsey & Company
The net-zero transition: Its cost and benefits | Sustainability | McKinsey & Company
In reading today’s New Brunswick Telegraph Journal newspaper, the cover page headline was “Gasoline prices soar in province”. This follows on the heels of widespread media coverage of rapidly rising energy costs across North America and internationally, including Europe and the UK. A recent headline in The Economist Magazine was entitled: “Britain scrambles £9-billion to help soften 54% household energy price blow.”
Also of interest is the growing controversy in neighbouring Nova Scotia with respect to Nova Scotia Power’s request to increase its rates by 10% over three years, as well as implement new charges to cover extreme weather events and the cost of closing coal-fired plants. Nova Scotia Power also recently cancelled plans to implement a monthly fee for people who sell excess solar power back to its system.
The proposed rate and fee increases garnered widespread condemnation from the Premier of Nova Scotia and opposition parties, the private sector and general public. The Premier also referenced personally intervening in the regulatory review process. This comes at a time when the Province of Nova Scotia is also pursuing an aggressive strategy to decarbonize its energy systems and has committed to having 80% of its electricity needs being supplied by renewable energy by 2030. The effect of this target will mean eliminating Nova Scotia’s reliance on coal nearly ten years earlier than the previous target of 2040.
The inevitable realty is that our effort to achieve “net zero” carbon emissions and the effective decarbonization of our energy systems means that society will need to pay more, much more in fact, for both our traditional energy supplies and emerging clean and renewable energy sources. We will also have to pay for the decommissioning of existing carbon-based energy infrastructure such as the coal-fired generating plants in Nova Scotia and New Brunswick.
By way of example, it is anticipated that carbon taxes (rising from $50 per tonne in 2022 to $170 per tonne by 2030) and the Federal Clean Fuel Standard (being introduced this year) will add as much as 50 cents per litre to the cost of refined transportation fuels by 2030 nationally and here in the Maritimes. This is not insignificant given the disbursed, rural nature of our population and our reliance on vehicles for basic transportation and commerce. Gas pump sticker shock will only get much worse.
Atlantic Canada also has the highest rates of energy poverty in the country, by far. 35-40% of Atlantic Canadian households are already experiencing high home energy cost burdens with greater than 6% of their after-tax income spent on home energy bills. Many cannot afford the costs associated with home energy efficiency retrofits or even consider switching to a hybrid or electric vehicle.
Don’t get me wrong – there is no turning back, climate change is our generations and society’s single greatest challenge. We need to act, and we need to act quickly, but we also need to have an informed public discussion around how we will pay for the decarbonization of our energy systems, and who will ultimately pay. Unfortunately, we are very good at debating global, national, and provincial greenhouse reduction targets, but not so good about discussing how we are going to actually get there. Sadly, Canada has made virtually no progress in reducing greenhouse gas emissions since 2005. New Brunswick is leading the country with a 38% reduction as of 2019, but much of that reduction is a result of the loss of industry and economic activity.
On a more positive note, the cost of renewable energy is on a steady downward trajectory, Atlantic Canada is proactively exploring innovative new clean energy technologies, including hydrogen and small modular reactors, and our four Premiers are working together with the Government of Canada and neighbouring jurisdictions such as the Province of Quebec on initiatives such as the Atlantic Loop.
There are also seeds of innovation emerging from our communities – Saint John Energy’s ground-breaking heat pump rental program and their Burchill wind project (for full disclosure, I am a member of the Saint John Energy Board of Directors); efforts by the Port of Belledune to embrace clean and renewable energy as part of a new vision and future for northern New Brunswick; the Alternative Resource Energy Authority (AREA) partnership between the municipal authorities of the towns of Antigonish, Berwick and Mahone Bay in Nova Scotia; the Property Assessed Clean Energy (PACE) Program in Nova Scotia, which provides an innovative way for homeowners to finance energy efficiency upgrades; Summerside, PEI’s national leadership in the adoption of renewable energy, energy storage and smart grid applications; the grassroots community work of the QUEST Canada network right across the region; and the leadership of our indigenous communities, such as the Pabineau First Nation, in embracing sustainable energy futures. As an aside, if you want a bit of inspiration, check out this video capturing an innovative partnership between the Pabineau First Nation and Halifax-based Natural Forces: Pabineau First Nation Video – YouTube
Aspirational greenhouse gas reduction targets are meaningless without also articulating the societal impacts (benefits and costs) associated with transforming our energy systems. It is inevitable that we are all going to pay more, and if we do not have a plan to proactively address the societal impacts associated with decarbonization, we risk taking one step forward and two steps back. It is also inevitable that the confrontational politics of rising energy prices will take hold nationally and here in Atlantic Canada, as we have seen in Europe.
I encourage you to read the full McKinsey & Company report and the associated six articles to better understand the transformational task ahead of us:
“The net-zero transition: What it would cost, what it could bring”
The net-zero transition: Its cost and benefits | Sustainability | McKinsey & Company
Considering these societal costs, perhaps what Nova Scotia Power has recently proposed may not be so unreasonable.
The key may be in finding creative ways to support the most vulnerable in adjusting to increasing energy costs, as well as finding cost-effective regional (Atlantic Canadian) solutions that leverage our collective clean and renewable energy resources and vast potential.