𝐌𝐚𝐤𝐢𝐧𝐠 𝐭𝐡𝐞 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐂𝐚𝐬𝐞 𝐟𝐨𝐫 𝐂𝐚𝐧𝐚𝐝𝐢𝐚𝐧 𝐄𝐧𝐞𝐫𝐠𝐲

hosted by Konrad-Adenauer-Stiftung and the Macdonald-Laurier Institutes.

I was asked to give a brief “European Perspective” - limited to 5 minutes. I failed on the timing, but herewith my perspective, which inevitably takes many short-cuts and fails to back opinion with much substance. To do this subject justice would require a book - and sadly any book giving a good overview will probably be a history of this period. Let’s jump in.

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I’m British, but I have spent most of my adult life living and working in Europe, specifically France and/or for French companies in exotic places like Angola and Peru and the FSU.  I immigrated to Canada in 2021 with my family, and I sometimes describe myself as an “energy refugee” – this is not meant to disparage/diminish real refugees – but to highlight the importance I give to energy.   In my humble opinion, Europe is in the middle of a potentially catastrophic experiment. People think crucial energy systems are being “transitioned” but in reality, they are being “tested to destruction”.

When we were thinking of moving to Canada, I had a networking chat with someone who knows the Canadian political scene quite intimately.  His reaction was “Why the F*** would you want to immigrate to Canada!?!?” – my answer to that was, and is, energy security, (but of course the real story is that my wife is Canadian).

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Grow Mine Manufacture

In the modern economy it is worth remembering that everything is either grown, mined, or manufactured.   Wealth is generated through the exploitation of natural resources and through the trade that comes with value-add manufacturing and services. 

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Economic Europe is Germany

Germany is known as the engine of Europe – and it is hard to over-state its significance.  If we look at the balance of payments for the EU, Germany has a trade surplus that is greater that of all the other EU countries combined.  Moreover, the strength of the German economy (and thus the EU economy) is largely based on the old tech – of making stuff.  Almost 30% of the German economy is based on manufacturing, whereas for the USA that number is in the mid-teens, and Canada 10%.  And within that 30%, the four major sectors are automotive, mechanical engineering, chemical and electrical industry.  All of which are energy intensive.

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Cheap Energy – Blindness to value and false promise

Underlying the manufacturing miracle of the German Economy has been the massive supply of cheap Russian gas. And I want to emphasise the point about the cheapness of this energy.  There is enormous “energy blindness” in economics and politics  – cheap energy has been so ubiquitous for so long; it has become almost invisible.  The expression “familiarity breeds contempt” comes to mind.

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Energy Transition – Experiment in Decarbonization

In many quarters the fight against GHG emissions has become an all-consuming passion – but it fails to address the trade-offs inherent in the Energy Trilemma – of

• Affordability and.

• Security of Supply as well as

• Environmental considerations. 

Indeed, focusing only on decarbonization isn’t a bug it’s a feature and it is driven by an ideological but unproven view that the “energy transition” will not only replace fossil fuels and reduce emissions, but CREATE A BETTER ECONOMY. This extract edited from an EU document from 2019:

[the energy transition is] ‘𝘢𝘯 𝘰𝘱𝘱𝘰𝘳𝘵𝘶𝘯𝘪𝘵𝘺 𝘵𝘰 𝘣𝘶𝘪𝘭𝘥 𝘢 𝘯𝘦𝘸 𝘦𝘤𝘰𝘯𝘰𝘮𝘪𝘤 𝘮𝘰𝘥𝘦𝘭’, 𝘤𝘰𝘮𝘱𝘳𝘪𝘴𝘪𝘯𝘨 𝘢 𝘵𝘳𝘢𝘯𝘴𝘧𝘰𝘳𝘮𝘢𝘵𝘪𝘰𝘯 𝘵𝘩𝘢𝘵 𝘸𝘪𝘭𝘭 ‘𝘳𝘦𝘥𝘶𝘤𝘦 𝘦𝘮𝘪𝘴𝘴𝘪𝘰𝘯𝘴…𝘤𝘳𝘦𝘢𝘵𝘦 𝘫𝘰𝘣𝘴 𝘢𝘯𝘥 𝘨𝘳𝘰𝘸𝘵𝘩…𝘢𝘥𝘥𝘳𝘦𝘴𝘴 𝘦𝘯𝘦𝘳𝘨𝘺 𝘱𝘰𝘷𝘦𝘳𝘵𝘺…𝘳𝘦𝘥𝘶𝘤𝘦 𝘦𝘹𝘵𝘦𝘳𝘯𝘢𝘭 𝘦𝘯𝘦𝘳𝘨𝘺 𝘥𝘦𝘱𝘦𝘯𝘥𝘦𝘯𝘤𝘺 𝘢𝘯𝘥 𝘪𝘮𝘱𝘳𝘰𝘷𝘦 𝘰𝘶𝘳 𝘴𝘦𝘤𝘶𝘳𝘪𝘵𝘺 𝘰𝘧 𝘴𝘶𝘱𝘱𝘭𝘺 [𝘢𝘯𝘥] 𝘪𝘮𝘱𝘳𝘰𝘷𝘦 𝘰𝘶𝘳 𝘩𝘦𝘢𝘭𝘵𝘩 𝘢𝘯𝘥 𝘸𝘦𝘭𝘭𝘣𝘦𝘪𝘯𝘨’.

Having one’s cake and eating it….. These are easy words to say, or write in a policy document - the same can be found in Canadian policy documents and the American IRA – but they represent an aspirational, and indeed Utopian, future, with little or no basis in reality.  So, we should ask in all seriousness:

WHAT IF THIS IS WRONG?

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Cost of Energy

Why might it be wrong?  Wealth in any society is a function of surplus energy – in other words: you must have energy to get more energy, but anything that is “surplus” to this first step can be used for the rest of society. 

The larger the ratio of total energy to replacement energy, the wealthier the society.  The energy transition – reverting to wind and solar - is reversing this trend. 

If you don’t have cheap energy, you have high costs and this rapidly becomes manifest in the offshoring of energy intensive industries and the “deindustrialization” – Ironically,  this can show up as reduced emissions – which are celebrated when they should in fact be lamented.

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Federal Nature of Canada – Top-Down – Cracks appearing – but more robust

Comparing Canada and Europe - A big learning for me, as a newly landed Brit, has been that Canada has some surprising similarities to Europe – The EU is a federation of countries – Canada is a federation of Provinces and Territories which have geographical, historical and cultural identities – as well as a lot of political independence : the same description applies to the nation states of Europe – the federal government in Canada is dominated by two large ‘core’ provinces (Ontario and Quebec, rather like how Europe is dominated by Germany and France) and the one-size-fits-all top-down decarbonization mandate is problematic and is becoming a political hot potato. 

However, in Canada (as with the USA) there is greater diversity within the mainstream political parties, on the question of the role of energy.  Something noticeably absent in Europe; an absence that creates room for populists.  By over-selling the economic benefits of the energy transition – or less generously, lying about them – the political elite is losing popular support – a situation which will inevitably be exploited by populists.  Cracks are appearing – French yellow vests, the Dutch farmers party and Geert Wilders, Giorgia Meloni in Italy and AFD in Germany. 

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Resource Riches, Geography, Manufacturing, Neighbour

What Canada (population 40m) does have that Europe (population over 450m) doesn’t, is an enormous endowment of natural resources.  In addition, it has robust manufacturing and agricultural sectors, a strong nuclear industry as well as world-class universities and research – including Hi-Tech spill-over from the US.  And yes, there is also that extremely powerful economic juggernaut to the south (which is a blessing and maybe a curse occasionally).  So, Canada has a different equation to solve than that of Europe.

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Norway

So, what should Canada learn from Europe?  In my humble opinion – Canada should look to Norway – given that it has many similarities - cultural and political ties to western democracies, a cold climate, a border with Russia and most importantly it is a major provider of oil and gas (and to a lesser extent electricity).   The importance of this was highlighted in the aftermath of Russia’s invasion of Ukraine – whereby Europe survived the mild 2022-23 winter largely thanks to Norwegian gas.  German imports of Norwegian gas increased from 20% to 43% from 2021 to 2023. 

But despite having its well-known green credentials – the Norwegian view of oil and gas production is very pragmatic. And I would like to leave here with you some quotes.

Speaking at Hammerfest in Norway in April 2023 Norway’s Petroleum and Energy Minister Terje Aasland called on Norway’s oil and gas companies to:

fulfil their “social responsibility” to ensure the energy security of the country and  “leave no stone unturned” to boost gas production.

But this is not just a reaction the Russian invasion of Ukraine…. as can be seen from these like-minded quotes from 2021, well before the invasion:

Tina Bru, (2020-21) Minister of Petroleum and Energy of the centre right party Conservative party. 

"We will facilitate a future-oriented Norwegian oil and gas industry capable of delivering production with low emissions within the framework of our climate policy,"  

(We can note the parallel with Canada’s O&G industry’s Pathways Alliance)

Espen Barth Eide, 2021 the Labour party energy spokesman, now Minister of Foreign Affairs. 

"We don't think that we should stop producing oil and gas now and leave it for Russia or Qatar to supply…”.

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USA

Affordable and reliable energy supplies are critical to national security – just this week Professor David Gattie of the University of Georgia testified before the US House Energy and Commerce Subcommittee on Energy, Climate, and Grid Security.  His closing comment regarding a U.S. energy transition that prioritizes decarbonization was:

"A core national security concern for any proposed U.S. energy transition should be: Can the U.S., with its industrial base restructured around low- and zero-carbon energy, retain its 20th century economic, military, industrial and geopolitical advantage relative to 21st century strategic competitors and outcompete China and deny the CCP of its intentions to disrupt a rules-based international order"?

His answer to this question was, "No. And we don't want to learn that through a grand experiment on our energy and electric power sectors".

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Norway understands its role as a critical energy ally of Europe – it understands its “social responsibility” – Not only should Canada do the same, but in doing so it can unlock its super-power. 

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