Can Canada avoid the energy crisis in Europe? – Lake Superior News

SAULT STE MARIE, THUNDER BAY, ONTARIO ~~~~~ May 31, 2022 (LSNews) Robust economic growth as the world emerged from the pandemic, coupled with the world’s heavy reliance on abundant and affordable energy from fossil fuels, led to a significant rebound in oil and gas consumption after COVID-19. According to most forecasters, oil and gas will continue to be an important component of the global energy mix over the coming decades, even in the most conservative estimates. In fact, projections show that at least in the medium term, the demand for these conventional energy sources will increase and they will continue to fuel economic growth, especially in developing countries.

However, a combination of market forces and government policies threatens global energy security, as demand for oil and gas is expected to increase in coming years without a commensurate increase in supply. Declining investment due to volatile commodity prices and aggressive climate policies, combined with the West’s response to the war in Ukraine, risks limiting the global ability to meet this growing demand. The inevitable consequence of this mismatch of supply and demand is a shortage of energy which will cause energy prices to rise for an extended period, hampering economic growth and increasing the cost of living.

Nowhere is this truer than in Europe, which is experiencing its worst energy crisis in decades. Over the past two decades, governments across Europe have intervened in the region’s energy markets by radically altering the composition of its energy mix. In particular, European climate policies have strongly encouraged the proliferation of wind and solar to the detriment of coal and nuclear. Yet, as renewables (wind and solar) cannot fully meet European electricity demand due to their intermittency, the market has become increasingly dependent on natural gas – a predictable and dispatchable source of energy. – as a marginal supplier in times of high demand for electricity. But European climate policies have also led to a significant decline in domestic natural gas production and storage capacity, making Europe dependent on Russian natural gas imports. Specifically, several EU countries, such as Ireland, Germany and France, have banned hydraulic fracturing, which has effectively impacted the region’s ability to produce reliable and affordable energy. what she needs. Another example is the spike in EU carbon prices, which is driven by the region’s ambitious climate policies and goals. For most of its history, the European Union has had modest carbon prices, typically below €15 per tonne. However, recently, the price of carbon has increased very rapidly, from 22 euros per tonne at the beginning of 2020 to more than 60 euros in the fall of 2021 and 90 euros in December 2021.

Declining production and storage, coupled with increased demand for natural gas due to greater reliance on intermittent wind and solar and a strong economic recovery, ultimately led to a significant spike in the price. of natural gas in 2021. Because natural gas is such an essential component of electricity production in Europe, the price of natural gas partly determines the price of electricity. As a result, electricity prices have reached record highs in 2021, increasing by more than 200% in Germany, the UK, Spain and France. In the Nordic region, prices have jumped 470% compared to 2020. Overall, aggressive climate policies via soaring carbon prices and forced energy transitions to renewable energy sources have largely contributed to the energy crisis in Europe.

Europe’s experience can serve as a cautionary tale for Canada’s federal government, which is implementing the same set of policies that contributed to Europe’s energy crisis. For example, Canada will have a carbon tax of $170/tonne of carbon dioxide by 2030, while the price of European Union Emissions Trading System allowances is around $110/ton. Like many European countries, particularly Germany, Ottawa has mandated the phasing out of conventional coal-fired electricity generation and accelerated the deployment of renewable energy sources to support its goal of reaching 90% electricity generation. emission-free electricity by 2030.

In addition, the European cap on greenhouse gas emissions is a feature of its regional carbon pricing system and some countries, such as Germany and the UK, have added a carbon tax on top of this carbon pricing system. cap and trade. Canada’s federal government plans to cap greenhouse gas emissions from the oil and gas industry, without creating a corresponding permit market, on top of its already ill-conceived carbon tax.

Even though global market forces are beyond Ottawa’s control, many of our policy decisions are self-inflicted wounds that contribute to the problem. Given the current context of rising energy prices, Canadian policymakers should consider the political implications of aggressive climate policies that significantly limit reliable and affordable energy production.

Authors:

More from this study

Adobe PDF Summary

Adobe PDF Read the full report

#LSN_Econ #LSN_SSM #LSNews_TBay #LSN_ONNews

Below please rate and share this story
To help us know what is important to you

The Fraser Institute is an independent, non-partisan research and education organization based in Canada. We have offices in Calgary, Montreal, Toronto and Vancouver. Visit our website


Want to know who is nominated for an Outstanding Business Achievement Award?

Want to know who is nominated for an Outstanding Business Achievement Award?


Warning to Anglers and Other Users of St. Marys Rapids

Warning to Anglers and Other Users of St. Marys Rapids

Mary I. Bruner