Monday, November 30, 2009

An open letter to Stephen Harper and Ed Stelmach

The Rt. Honorable Stephen Harper
Prime Minister of Canada
House of Commons
Ottawa, Ontario
K1A 0A6

SJ: Endorse Bill C-311 and Bigras motion at Copenhagen climate summit

Dear Prime Minister Harper,
I firmly support your decision to travel to Copenhagen for the UN Climate summit. Thank you for taking this important step. Furthermore, I believe this Copenhagen summit is one of the most important international meetings in our lifetime. While you participate in this event, please act for the well-being of future generations and work to achieve meaningful reductions in green house gas emissions as detailed in Bill C-311 and the Nov. 24 Opposition Day motion put forward by Mr. Bigras of the BQ.

Our economy is often the excuse for not taking action on climate change. The recent TD bank report (TD Economics Special Report Oct. 29, 2009) indicates that this is simply not the case. If Canada were to meet our Kyoto targets, our economy would still grow by 23% from 2010 to 2020. At this level of economic growth, Canada could improve pubic transit, upgrade our electricity grid, subsidize key manufacturing industries to maintain 2008 levels, reimburse home owners for higher energy costs, invest in domestic agriculture, reduce personal income tax and create more and better jobs than in a “do nothing” scenario. Denmark took a similar strategy, starting in the late 1970s, and has demonstrated how this approach can improve the economy, achieve energy security and fulfill Kyoto commitments.

The report suggests that Alberta would be the most penalized province, with growth over the 10 year period dropping from 57% to 38% (which is still the highest growth in Canada) and this could cause regional tension. However, as a 3rd generation Albertan with a 30 yr. career in the oil and gas industry, I believe that the TD bank may not be including 2 important factors in their predictions. First, it may not be possible for Alberta and Canada to meet the higher level of economic growth as predicted in their models. During recent years we have seen Alberta’s economic growth restricted by shortages of labour and materials. In addition to this, the US DOE Energy Information Administration/ Energy Outlook 2009 predicts that world-wide oil production will not meet demand unless oil prices exceed $100/ barrel from 2010 to 2020. Canada’s economy currently consumes 5.6 Million barrels of oil equivalent per 1 million dollars GDP (this figure includes 2.73 Mbbls of oil) and it is the least energy efficient economy in the developed world. This leaves us highly vulnerable to this level of energy pricing. At first glance, this looks promising for Alberta - being a major oil exporter - however, we have recently seen that oil prices in excess of $100/bbl can damage world economies and ultimately stifle demand. Second, Alberta is among the best places in the world for solar and wind resources. Unfortunately, these sectors of the Alberta economy have been neglected and even Calgary’s Canadian Hydro Developers built their latest wind farm developments in Ontario because of Alberta’s inadequate electricity grid and the lack of incentive for renewable energy projects. If the Alberta government provided an environment that supported renewable energy, I firmly believe that Alberta would experience tremendous growth in this important sector of the economy.

Finally, I believe the outcome of the Copenhagen Summit will be a measure of our morality. While there is uncertainty in the climate science, like in economics, there is no doubt that we are damaging our atmosphere and the very planet that supports all life. Short term greed should not dictate something as important as this. Committing to ambitious reductions in green house gas emissions, as outlined in Bill C-311 and in the recent BQ motion brought forward my Mr. Bigras, is the right thing to do. Not only for energy security, job creation and stable economic growth but also for the environment.


Keith Hirsche
1161 Chapman Road,
Cobble Hill, BC V0R 1L7
Phone: 250 929 5586

cc: Hn. Jim Prentice - Minister of the Environment
Hn. Michael Ignatieff
Hn. Gille Duceppe
Hn. Jack Layton
Hn. Jean Crowder
Hn. Keith Martin
Hn. Gordon Campbell - Premiere of British Columbia
Hn. Ed Stelmach - Premiere of Alberta
Hn. David Swann

Business as usual is not an option

Temperatures - or at least tempers - are quickly rising in the run-up to the UN Climate conference which begins in Copenhagen on Dec. 7. As the Kyoto treaty winds down, there is hope that Copenhagen might be the place where a more inclusive and binding treaty will bring all nations together in an attempt to decrease CO2 emissions. As hope and potential for change increases, so does the fear, anger and resentment from the more conservative elements of our society. Organized opposition groups, like the Friends of Science, are using their considerable funding (mostly provided by the oil and coal industries) to broadcast advertisements that mock the scientific consensus of the climate modeling community (see ).

In contrast to these well-funded groups, we recently learned that world-class climate researchers, like Nobel prize-winning Professor Andrew Weaver at UVIC, are victims of a systematic removal of government funding.

In an effort to further confuse the process, a series of emails, software and working documents were stolen - or leaked - and distributed across the internet in an attempt to discredit the climate research community (see and for 2 interesting prospectives.) Finally, it certainly doesn’t improve public confidence when it appears that the climate modelling community were repressing publications that questioned the conventional wisdom about global warming in an attempt to strengthen the political case for action.

On the other side of the argument, politicians like Alberta’s Premier Ed Stelmach argue that any attempt to curb CO2 emissions will cause an economic catastrophe - especially for Western Canada. However, I just finished reading the TD bank’s economist's report on the potential economic impacts related to Green House Gas regulation. Some of the conclusions are amazing:
  1. In a “business-as-usual” or a “do-nothing” scenario, Canada’s economy would experience a 27% growth in GDP from 2010 to 2020. During the same period, Alberta’s economy would experience 57% GDP growth.
  2. If severe cuts in CO2 emissions were implemented (25% below 1990 levels by 2020 in accordance with the Kyoto protocol), Canada’s economy would grow by 23% over the same 10 year period. Alberta would continue to be Canada’s fastest growing economy with a growth of 38% by 2020.
  3. Carbon taxes would be re-invested in the economy and this would result in:
  • Improved public transit
  • Upgrades to the electricity grid to incorporate renewable energy
  • Investment in renewable energy and energy efficiency projects
  • Refunds to manufacturing to maintain 2008 output levels
  • Full refunds to home owners to offset higher energy costs
  • Investment in domestic agriculture
  • lower income taxes
  • improved job creation over the “business as usual” scenario

Effectively, carbon taxes would increase the cost of high carbon activities and reduce the cost of lower carbon activities. Market forces would do the rest. One might argue that this unfairly penalizes the oil and gas industry, however it needs to be recognized that the oil and gas industry is implicitly and explicitly subsidized through government support of infrastructure (roads, pipelines, refineries, etc), preferential royalty arrangements, research funding and military spending. It can also be argued that the environmental cost of oil and gas development - especially in the tar sands- is not being effectively accounted for in the current economic scenarios.

Finally, the TD report is only as good as its’ underlying assumptions and one of its’ most fundamental assumptions may be incorrect. Every economy can be evaluated in terms of its’ energy efficiency as expressed as the energy required to create $1M of GDP. On this scale, Canada is the worst of the industrialized countries, requiring the equivalent of 5.6 Mbbls/day of oil for each $1M of GDP. In reality, Canada only consumes approximately 2.7 Mbbls/day in liquid oil (or about 40% ) with the remainder of our energy needs coming from hydro, natural gas, coal, nuclear, etc. By comparison, Denmark only consumes 2.3 Mbbls/day in total energy per $1M GDP - this is less than half the Canadian requirement.

Unless we make fundamental changes to our economy, Canada will require almost 3.6 Mbbls/oil per day to meet the TD bank’s projected 27% growth rate. The US DOE Energy Information Agency estimates that world oil demand in 2020 will be 96 Mbbls/day. Their predictions indicate that this production level requires sustained oil prices ranging from $100 to $120/bbl from 2010 to 2020. Based on recent history, it is unlikely that Canada will be able to sustain economic growth with these oil prices. It is also worth noting that the the EIA concedes that it may be impossible to achieve this level of oil production and in a more realistic scenario, oil prices exceed $150/bbl by 2012 and near $200/bbl by 2020. It is highly unlikely that Canada’s inefficient economy can grow in this price environment.

Limiting carbon dioxide emissions is the best possible scenario for strengthening Canada’s economy. It has the potential to create jobs in the “green” sector while reducing Canada’s dependence on cheap energy. Doing nothing, or business as usual, is simply not an option for the economy - or the environment.

Wednesday, November 18, 2009

The next Great Recession - 2010 or 2011?

It has been a tough couple of years for the economy - in fact sometimes it is difficult to put everything in order. Through early 2008 oil prices steadily rose with apparently no end in sight. By the time we left Calgary in July, oil prices had exceeded $130/bbl. Increasing energy costs put a drain on the US economy, as shown by the Dow Jones Industrial average which dropped from a high of 14,000 in October 2007 to just below 12,000 in the Summer of 2008. However, I don't think many people could have predicted that the DJI would fall from 10,800 at the end of September to below 8,500 on October 10. No one had seen a drop like that since the great depression.
Looking back, the media blames sub-prime mortgages and lack of financial regulation. However, it is difficult to ignore the effect that oil prices had on the auto industry, transportation and consumer spending during those months when gasoline prices exceeded $4.00/gallon. It is also important to remember that this unprecedented price spike correlated with a time period where the world-wide demand for oil had clearly exceeded the available supply.
While governments injected hundreds of billions of dollars into the banking system, the economy continued to self-destruct until the DJI average reached a low of 6500 in early March 2009. In this same time period, demand for oil had significantly decreased and prices plummeted to a low of $31 in early 2009.
Since March, world-wide government stimulus spending has fostered steady but cautious economic growth. Unemployment is still high, leaving consumers cautious. In spite of this, the DJI is clearly showing a strong recovery, reaching the 10,000 mark in early November. And as the economy improves, so has oil demand.
During the downturn we saw world-wide oil production remain fairly steady. US demand was significantly decreased, but China picked up about half of the available surplus. Now with returning US demand, we are seeing a steady increase in the price of a barrel of oil. In fact, this increase is averaging out at almost $1.00 week.
Increases of this magnitude have never been seen - except for the first few months of 2008, where the increase was almost $2.00/week. Of course we all know how sustainable that was. So, if you want my prediction, I expect to see oil prices continue to climb over the coming weeks - until sometime in 2010 when the increases will again reach $2.00/week or so. After a month or so of these rapid increases the economy will nose-dive again - ultimately constrained by the inconvenient limitations of a finite oil supply.
We will enter this next economic collapse in a significantly weaker state than the recession of 2008. How will this affect the next cycle? If you know, you are much smarter than me.

Thursday, November 12, 2009

Drop in US energy use drags stock market lower - Yahoo! Finance

Sorry for posting these news items without explanation -

OK - here's the problem:

1) for the world-wide economy to improve requires oil production in excess of 86 million bbls/day.

2) maximum oil supply available is less than 86 million bbls/day.

3) When demand exceeds supply oil price immediately spikes which kills demand and therefore the economy.

Fasten your seatbelts, we are in for a very bumpy ride!

Drop in US energy use drags stock market lower - Yahoo! Finance

Higher oil prices seen threatening global recovery - Yahoo! Finance

Higher oil prices seen threatening global recovery - Yahoo! Finance

Tuesday, November 10, 2009

Sustainable Energy - without the hot air

Our son Trevor is in the second year of his masters program at UBC and part of his program includes a course on sustainable energy. During his studies he ran across an amazing book that takes on the whole issue of renewable energy, energy consumption, sustainability and climate change in an amazing way. The book is called "Sustainable Energy - without the hot air" and it is written by David JC MacKay, a professor of natural philosophy in the department of physics in Cambridge University. The book is freely distributed on-line and it can be found here:

I have devoted considerable time to learning about energy issues for the past 10 years or so and I have not found any better resource to get a clear perspective of the problems that we face in the coming years. Dr. MacKay does many important things right in the structure of this book. First, he converts all of our energy usage to a single understandable unit. Rather than talk about litres of gasoline for transportation, GigaJoules of gas for heating and calories for food, he converts all energy usage to kiloWatthours/person/day. This allows a direct comparison of how much energy we use to drive to work vs the amount of energy we use to heat our homes.

Next, he directly compares how much energy we consume from the burning of carbon based fossil fuels to the maximum amount of energy that we can possibly produce from renewable energy techniques. It is very sobering to realize that covering the entire land area of Great Britain with windmills, solar panels, solar hot water systems, tidal barrages and bio-fuel crops won't come close to meeting the current energy needs of its' citizens. This is demonstrated through a painstaking analysis of each energy generation system starting from it's basic physical principles. Then he compares these calculations to the actual performance of existing facilities to show the accuracy of the analysis.

On the plus side, David clearly shows that it is much easier to save a kWh of electricity (or any other form of power) than generate a new one. Clearly conservation and energy efficiency are the most important issues to tackle if we want to preserve some semblance of our society in the coming years. Once again, it is very refreshing to see that these problems are best addressed with basic fundamentals rather than exotic science.

Even more significant, the book clearly connects the serious problems of resource shortages, climate change and economic recession and demonstrates how the problems are best addressed with similar solutions. In fact, Dr. MacKay first intended to write a book about green house gas emissions and climate change but felt that this book might be ignored because of the high level of cynicism that has surrounded these discussions. As a scientist, he freely admits that there is uncertainty in science surrounding CO2 emissions and climate change. Then he proceeds to clearly demonstrate the undeniable link between the release of carbon dioxide from the burning of fossil fuel (probably the most comprehensive and understandable treatment I have read). He then compares our refusal to do anything concrete about climate change due to scientific uncertainty about the details to a motorcyclist who is riding along a treacherously narrow road that travels along the edge of a cliff. If fog blows in and obscures the road, should the rider to speed up because he can no longer see the edge of the cliff?

Lastly and perhaps most importantly, the book is written in a very accessible style. A chapter is devoted to each major issue and the text is written in a conversational style - and with a great sense of humour. The chapters are not cluttered with equations or footnotes which could destroy the smooth flow of ideas. At the end of each chapter there are several paragraphs or even pages that provide the evidence for every statement that has been made in the associated text. And as if that weren't enough, there is another chapter at the end of the book which meticulously covers the technical background of the chapter starting from the first principles of physics.

I truly believe that this book provides the complex reality of energy production and consumption in a manner that allows for informed debate and leads to the level of understanding we desperately need in order to face the enormous problems that lie ahead.