Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 15 - Evidence - February 16, 2012
OTTAWA, Thursday, February 16, 2012
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 9:06 a.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Good morning, colleagues. I am calling to order this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources as we continue our study into developing a strategic framework for a Canadian energy policy for the future.
We are privileged this morning to with us Dr. Fatih Birol, Chief Economist, International Energy Agency, who is with us by video conference from Paris.
Good morning, Dr. Birol. Can you hear us?
Fatih Birol, Chief Economist, International Energy Agency: Yes, I can hear you.
[Translation]
The Chair: Are you comfortable in English or do you prefer to testify in French?
[English]
Mr. Birol: I prefer English, if that is possible for you.
The Chair: That is fine.
I think you are familiar with our committee. We visited your agency in Paris several years ago and I believe you were involved. I also believe you have been here to Ottawa at meetings of the Canadian Nuclear Association. I think I met you there.
Mr. Birol: Exactly, yes.
The Chair: We had been hoping to visit Paris and you and your colleagues, in particular in this study we are doing, but, time and budgetary constraints being what they are in this day and age of economic tightening of the belt, this is the best we can do for now. We are so pleased that you are making yourself available.
The Canadian Standing Senate Committee on Energy, the Environment and Natural Resources has been engaged for three years in a fairly in-depth study on the energy system in Canada generally. As you know, we are in a federal state here and have provincial jurisdiction over the resources. We are trying to find a way to make our system more efficient, sustainable, cleaner and greener for greater prosperity for Canadians in all parts of our country for the future. That is the gist of our study.
I am Senator David Angus, a senator from Quebec. Around the table we have 12 members of our committee. Since you are not right here with us, I will not introduce everyone today, but they will introduce themselves when they question you later.
Colleagues, as I said, Dr. Birol is the chief economist of the IEA, with overall responsibility of that organization's economic analysis of energy and climate change policy. He oversees the annual World Energy Outlook, which is the flagship publication of the IEA; and he is recognized as the most authoritative source for energy analysis and projections. He is also responsible for the IEA Energy Business Council, which provides policymakers with a business perspective on energy market issues. He is a frequent contributor to media and delivers numerous speeches each year at major international summits and conferences.
We all have before us the current World Energy Outlook. This is going to form the basis of the good doctor's testimony this morning.
Dr. Birol, you should know that all members did receive this document and also briefing notes prepared for us by our Library of Parliament. Hopefully, we will appear to be a wee bit intelligent on our questioning later. We will do our best. You are the expert today and we are all ears to hear your evidence. Please proceed.
Mr. Birol: Thank you very much, Mr. Chair and dear members of the committee.
First, I would like to thank you for inviting me to share my views about the global energy picture. Regarding the IEA, International Energy Agency, we have 28 member governments: the U.S. and Canada, the Americas, all the European countries, plus Japan, Australia, Korea and New Zealand.
As you said, Mr. Chair, one of my chief tasks is to prepare the World Energy Outlook, which analyzes the global energy picture and highlights the challenges in front of them.
In the next 10 or 15 minutes or so, after a brief introduction, I would like to tell you my views on four distinct topics that I believe are all important for Canada. First, I would like to talk a bit about the oil markets, where we are today and where we are heading. Second, I would like to talk about global gas markets; that is, the major transformation taking place in the global natural gas markets. Third, I would like to talk about post-Fukushima, how the nuclear energy industry could look and what are the consequences of it for any of us. Finally, I would like to finish by talking a bit about the climate change challenge in front of us and where we are today with respect to the targets that are set to us by scientists worldwide. As you know, energy is a major contributor to climate change.
To start with, before looking at the future, there are three major preoccupations that are crucial for governments worldwide. The first one is the threat of depression — that is, a recession in the economy, a financial crisis. This is a major preoccupation for almost all the governments of the world — and Europe mainly — and, at the same time, the emerging countries such as China and India. The slowing down of the economy, which will have major implications for energy demand, is a major concern.
More important than that, as a result of the financial crisis, many governments are canceling significant amounts of energy projects and they are changing their policies. Their main concern is to deal with the public deficit now and some key policies that would help to promote sustainable energy are either postponed or cancelled, or are taken much less seriously than it was before. This financial crisis is a major issue for the energy projects and policies worldwide.
The second one is that on March 11, Fukushima changed the perceptions of many countries. Not only Japan and Germany, but many governments, many countries, are giving a second thought to the future of nuclear expansion. I will elaborate on that in a minute, but it is something that we have to note.
The third point is the so-called Arab Spring and what is happening in many Middle East and North African countries, or what has happened. In many countries, it has led to changes in governments. However, in some other countries it led to changes in the mindset of the governments. I see more of a nationalistic behaviour, especially where oil production and oil policies are concerned, in many Middle East and North African governments, which will have implications for future oil and gas production prospects. If you wish, we can discuss that later on.
These are some of the uncertainties — that is, technological, economic and political uncertainties. One thing is certain: hundreds of millions of people in the emerging countries would like to have better lives and better economies. That means more energy. Energy means better lives and better economic growth. We can be sure that the global energy demands will grow, mainly driven by the emerging countries and by the people in those countries who would like better lives and higher income levels.
The Chair: Dr. Birol, to interrupt you briefly, when you listed some of the main countries involved in the IEA, you did not mention China. Would I be correct that they are not members?
Mr. Birol: They are not members, Mr. Chair. We work with China very closely, but they are not members, unfortunately, because China is a very important part of the global energy equation. We work mainly with the industrialized countries for the time being. We work very closely with China, but they are not members of the IEA for the time being.
We expect that more than 90 per cent of the growth in global energy demand will come from non-IEA countries. In fact, global energy demand growth is driven by four countries, namely, China, China, China and India, in that order. Three times China and one time India because China is responsible for almost half the growth in global energy demand. This is the general picture on energy.
When I look at the oil market, we see two important trends. First, oil demand is mainly driven by growing car ownership in emerging countries. In China, Russia, Brazil, India and Middle East countries there is a strong demand, but on the supply side — that is, where the production will come from — we see that the world will have to rely more and more on a fewer and fewer number of countries in the Middle East. Saudi Arabia, Iran, Iraq and Kuwait are the countries that will be bringing the bulk of the oil to the market. Under normal conditions, this means that oil and geopolitics will be more and more inter-global. That is a trend that I do not like to see, but it is one that the world is following closely.
I think Canada has a special role here. Canada is one of the few countries, outside of the Middle East and North Africa, which could bring a lot of oil into the market, especially the oil sands. We expect a strong growth in oil sands, almost 5 million barrels per day in the next 25 years of growth, which will be definitely a welcome development that will be important for addressing oil security worldwide. This is another issue.
When we look at the global picture, there is also important change. Today the United States is the largest importer in the world. However, this picture is changing quickly. Within 10 years, China will overtake the United States as the largest oil importer in the world due to the growing car ownership.
I would like to tell you a few things about natural gas markets. There is a major revolution taking place on the natural gas side. The unconventional gas revolution — the shale gas revolution, which started in the U.S. and Canada — is now going everywhere. We see, in addition to the U.S. and Canada, gas production growth coming from Australia, which will be followed by China, Malaysia and Indonesia. We expect strong growth from those countries.
A few years ago, scientists were telling us that we had enough gas for the next 60 to 65 years. Now, we have enough natural gas proven reserves to last 250 years. This gas is unlike oil in that it is dispersed throughout the world, which is definitely good news. Therefore, we made a report last year that asked: Are we entering a golden age of gas? There is lots of gas coming to the market but we did not say: We are in a golden age of gas. We asked the question because there is one problem: In front of the development of shale gas, there is a road block — some of the environmental concerns related to the extraction and production of shale gas.
You have seen some examples in the United States and some in other countries. This creates a problem and definitely gives a different image to gas than it really deserves. The good news is that we believe that the number of problems related to shale gas production can be solved with good regulation and existing technologies. We do not need to discover new technologies, and with the right regulations, this can be solved. Therefore, this year in the World Energy Outlook 2012, we are making a gas-rated analysis, which we call, "Golden Rules for a Golden Age of Gas." We need golden rules if we want to see a golden age of gas.
I will say a couple of words on nuclear power post-Fukushima. In the year 2010, we saw a substantial number of new reactors — the highest number since the 1980s. However, events at Fukushima cast a shadow on the future of nuclear power. Perhaps you heard that the German government decided to phase out their existing nuclear power plants. A few other European countries followed the example of Germany. In many other countries, governments, industry, and men and women in the street have given second thought to nuclear power's future. For example, in France we will soon have presidential elections. One of the two topics discussed is the future of nuclear power. One of the two major candidates wants to see a significant reduction in the nuclear share of the French energy mix. A debate that one could never have imagined a few months ago taking place in France. Even in Japan, which is a major nuclear country, we see a major debate in terms of the future of nuclear power there.
In World Energy Outlook, we have looked at what happens if the expansion of nuclear power will be much lower than expected by the many analysts in our business as usual context. We see at least two things: First, the gap from global nuclear expansion, vis-à-vis business as usual, will be met by renewable energy, coal and natural gas. That will mean higher energy prices because higher coal and higher natural gas means higher coal prices, higher gas prices. Therefore, for consumers this may not be a good-news picture in terms of the economy.
Second, nuclear power generates electricity without carbon dioxide emissions. If it is substituted by coal and gas in addition to renewables, we will see additional carbon dioxide emissions, which means that climate change will be more of a problem to deal with in the future in that low nuclear context. Therefore, a lower nuclear future may mean higher energy prices and higher carbon dioxide emissions, which is definitely not good news, given what we believe.
Finally, I will say a few words about climate change. As you know, energy is the largest contributor to greenhouse gas emissions when compared with other sectors. With the current policies in place, the global temperature will increase significantly more than what the scientists have told us: a temperature increase of two degrees Celsius. Currently, we are on an unsustainable path in terms of our energy mix and energy use. In World Energy Outlook, we have found that we are very close to saying goodbye to keeping the temperature increase to only two degrees. Our current infrastructure of industries, power plants, cars, trucks, et cetera, means that if we do not see a major change in energy investment trends worldwide as of 2017, we will look in our energy system and we will have to say goodbye to the trajectory of two degrees. The door to a two-degree trajectory will be closed forever.
These are some remarks on the oil markets, gas markets, post-Fukushima nuclear industry and climate change. As I said, from an energy security point of view and from a climate change point of view, the world energy system is on an unsustainable path. It is up to governments, such as the Canadian government and others, to bring us from this unsustainable path to a sustainable path. Therefore, I appreciate very much that you are studying the energy picture.
I am thankful to you for giving me this chance to testify before the committee. I will be very happy to take your questions.
The Chair: Thank you, Dr. Birol. Do you have any plans to come to Canada in the near future?
Mr. Birol: Yes, sir, I would like to come to Canada at the end of May or in early June.
The Chair: If some members of the committee could come to Paris in the next month or so, would you be there to receive us?
Mr. Birol: It would be a great pleasure.
The Chair: I will turn to our deputy chair, Senator Grant "Climate Change" Mitchell, to ask you some questions.
Senator Mitchell: Thank you. I could not have been introduced in a more favourable way.
I am somebody who is very concerned about climate change, despite the fact, or because of the fact, that I am from Alberta, probably the energy centre of Canada.
I would like to start with the climate change observation that you made. It is striking and startling, and I think we all need to heed it. We still have people in our Senate who do not believe in climate change science. What do you say to people like that?
Mr. Birol: I would say two things. First of all, the overwhelming majority of scientists I know and trust tell me that climate change is a serious risk. I am not a climate scientist myself, but I realize that those scientists — and they are the overwhelming majority of the scientists worldwide — say it is a real issue. Therefore, I think climate change is a real challenge in front of us.
Second, many of the policies that I recommend in regard to climate change — to use energy more efficiently, to use more nuclear power, to make more use of renewable energy, and to use carbon capture and storage — are the technologies and policies we would need for a sustainable energy future, even if there were no climate change,.
Senator Mitchell: Thank you. The point you make very powerfully is that dealing with climate change does not have to be an economic disaster or problem. In fact, it is an economic opportunity.
Mr. Birol: In many cases, yes.
Senator Mitchell: You made a very powerful point in your presentation — you made many of them — that will, I think, particularly appeal to all of us around this table. It is that Canada's energy resources have a great role to play in energy security in the world. Could you elaborate upon that in the sense that our oil sands, for example, are secure? We are a dependable, politically stable country, but how far reaching do you see our future role in security, beyond North America, maybe to China and so on?
Mr. Birol: When I look at the global oil picture, except for the Middle East, Canada is the only place where I expect a substantial amount of oil-supply growth. There is very significant growth coming from Canada, and this is definitely very welcome. First of all, it is a stable country. Second, there is diversification. Most of the oil will come from the Middle East and North Africa. This comes from the Americas, and that is very good.
Of course, where this oil will go is another question. It will go to some of the consumers in the Americas, or it will go to Asia. This is something that will be determined by the markets, but I can tell you that China will import substantial amounts of oil in the years to come. I think China may well be one of the potential customers for Canadian oil in the years to come.
Senator Mitchell: You also made another point that will resonate with us in Canada, and that is about the potential for natural gas. There is real concern, particularly, for example, in Quebec with the environmental implications of fracking. You were very positive about that. You feel that with the golden rules of gas development, that can be changed. You are bringing out a report, but could you give us some insight into how we overcome those environmental concerns with respect to fracking?
Mr. Birol: First of all, the problems related to fracking, in many areas, are real problems. Unlike some people say, I do not believe they are overblown. They are real problems, and people are facing those problems, especially in terms of contamination of water, which leads to serious problems. We have to, first of all, underline this.
Second, however, these problems can be solved by using the existing technologies, but this would increase the cost of production for the companies. The companies would make perhaps a bit less profit than they do in the absence of using the best technologies.
Third, in some countries it is unfortunately not an obligation that the companies have to use the best technology. Therefore, every state has to make very precise rules so that the companies, when they get the licenses and have operation rights, have to obey those rules. They may increase the cost of production a bit, but would minimize, if not nullify, the implications. In many cases, we see that the implications are real problems. If it is not taken seriously by government, this could well be a roadblock to the development of safeguards work-wise.
Senator Massicotte: I have read a lot about your reports, and I compliment you for their credibility and detail. However, some people criticize the organization as being funded by a certain number of oil-dependent countries who somewhat prejudice the credibility of your reports. Could you talk about the funding of your organization and why your credibility is to be sustained on a world level?
Mr. Birol: Our funding comes from 28 governments. They are, again, Japan, Korea, Australia, New Zealand, all the European countries, Canada, and the United States. How much money each country puts into our budget is published on our website. Anybody can have access to that.
I find it rather simplistic to make a direct link between government funding versus how we deal with climate change and other issues. I think credibility needs to be measured by the appreciation from our readers, from the audiences we are talking about, from the media, from the energy industry, from governments, and from academia.
I can tell you that we enjoy a very high reputation in academia, governments and industry. I do not say that it is the best of the best, but we do our best. I think that is a reference to our work. Therefore, for anybody who would like to see our funding, it is all transparent on our website. You can look at it there. It is not a secret at all; it is very transparent.
Senator Massicotte: Your report basically summarizes that if the governments adopted all the new policies they have planned, the current projection would show a 3.5 degree Celsius increase in temperature. Maybe I am being cynical, but governments often do not do exactly as they said they would because it is often hard to implement. One would have to assume that we were going to go from 3.5 to maybe as much as 6 degrees because you say that if we do nothing, current projections would show a 6 degree increase in temperature. What is the impact of a 3.5 or maybe 6 degree increase in temperature on our world? Could you summarize for us in plain language where we are heading if we do not take an immediate curve in policy?
Mr. Birol: First of all, the temperature increase for us to be able to continue our lifestyle for the next decades to come should be a maximum 2 degrees Celsius. If we go above 2 degrees, it is a problem.
If the governments do what they say they would do, we will see an increase of 3.5 degrees, but if governments would behave as they have in the last few decades, this will bring us to a 6 degree temperature increase. Above 2 degrees, we will see the changes in the climate. We will see extreme weather conditions throughout the world. We will see a drought, especially in Africa and in China, and we will see a sea level rise, which is a problem for many countries, and we will see several animal species disappear from nature.
To sum up, a rather fragile equilibrium of our planet will be seriously damaged, which I do not believe is good news for any of us. The ones who believe in the climate change and do not believe in the climate change will be affected from this temperature increase.
Senator Massicotte: Just to make it more real, if you said we were going for a 4 degree Celsius increase, or 4.5, we all know it is dramatic, but how serious is that? From an economic point of view, can you say what percentage of GDP it affects? How do you put concrete terms to that consequence so we can all understand the severity of it?
Mr. Birol: The severity of it depends on how extremely the weather conditions will change. The analysis of the United Nations shows that this could have major implications, especially on the poor countries where most of the drought will be felt or most of the climate change will be felt. It will have major implications on the small island states where we see the sea level rise. The higher the temperature increase will be, the more serious the effects will be, but I think these changes will be costlier than the action we will take in order to address climate change.
Senator Massicotte: If I could have one last summary, I think I read in The Economist, because everybody tries to put numbers on these things, that I think South Korea also puts the numbers out, and they say the remedy to manage climate change at 2 degrees will probably cost 1.7 to 2 per cent GDP worldwide, but to do nothing is probably more like 10 per cent of GDP. Are those numbers somewhat accurate in your mind as an economist?
Mr. Birol: There are different estimates, sir, on that part. In general, it is much less costly to put policies and to push technologies to address the climate change and avoid the climate change than to be affected by the results of the climate change. The order of magnitude is 1:3, 1:4 in general.
The Chair: Senator Lang will be next. He is our man from the Far North, doctor.
Senator Lang: It is very difficult to talk about climate change when, over this past winter, we experienced minus 50, but I do have a question on climate change, and then I would like to go in a different question in a general sense, if I could.
The information that you refer to about climate change and the science that you refer to I understand comes from the United Nations and the organizations set up for them to study this particular area of concern and to bring recommendations. However, at the same time, the results of their studies have very much come into question, as you well know, in one way from the point of view that many of their studies have never been legitimately peer reviewed, and to my understanding that is a fact. Do you share that concern to some degree, and is your organization prepared to ask them to have more peer-reviewed examination of these studies to verify the numbers that they are coming out with?
Mr. Birol: I have two answers, if I may.
First, the recent developments in terms of the IPCC, the United Nations international Pilot Program for Climate Change, made us believe that there is a need for a better process of peer review of their work. This is definitely so, and I believe or at least I hope that they will have a much more robust peer review process for their next report.
Second, as I said a few minutes ago, even if we assume that there is nothing like climate change and it is only a fiction, this has come to what I said before. In order to address the climate change, there are a few policies, and the most important one among those is using energy more efficiently. About 50 per cent of the reduction to address the climate change comes from using energy more efficiently — using our cars, using our jets, using our television sets, industry power transfer more efficiently. If we do this, of course, even if there is no climate change, this is good news for the economy. To get the same output by using less energy is good news. Believe me, in many developing countries, emerging countries, these efficiencies or renewables, these policies, are pushed for a number of reasons, not for climate change but mainly to address the air pollution problem in the cities. However, it also helps to address the climate change. The policies that we are pushing for, such as more efficiency, more renewables, more nuclear power, more carbon capture storage, even if there is no climate change, would be the most economic sustainable energy future.
Senator Lang: I do not disagree to the latter part of your statement. It is just common sense at the end of the day.
I want to move to another area of concern to Canadians and to North America, and that is the question of pricing of carbon or possibly pricing of carbon, whether it be by carbon tax or cap and trade. I notice in the notes that we have that you are predicting $120 a barrel and maybe as high as $200 a barrel as time goes on and the expense of locating and getting the oil from the various oil fields expand, plus supply and demand. Many of us feel that, with the pricing as high as it is, that will cause countries and people to have to cut back in respect to how they use energy. In other words, they will have to become more efficient in order to be able to afford it. What would you say about that assumption?
Mr. Birol: First of all, I should tell you that I believe that the era of cheap oil is over. There may be some floatation in the oil prices in years to come because of financial crisis and that, but we will see oil prices on the high side, and three-digit oil prices is something that we need to get used to. This is really not good news for many consumers.
When it comes to the carbon prices, I think the carbon prices need to be introduced in the countries where there are not enough regulations to use energy more efficiently, but if there is a carbon price, it has to use energy more efficiently and make the use of energy in a less carbon future. However, even with the carbon prices, I believe the main chunk of the energy price will not be the carbon price or carbon tax but the price of energy itself.
Today, I tell you that 90 per cent of the growth of energy consumption will come from the emerging countries. In those countries, in fact, fossil fuels are heavily subsidized. They do not reflect the real cost of the energy. They are very cheap, artificially cheap, because governments are subsidizing them substantially to use higher carbon-related fuels.
Senator Lang: I want to move on to one other area, and that is the question of a pipeline from Alberta to the West Coast. In your monthly newsletter, you wrote that you felt that there should be a pipeline built from Alberta to the West Coast in view of the Keystone decision. Perhaps can you elaborate a little bit further on that.
Mr. Birol: I believe the Canadian oil sands is a blessing for the international oil markets, not only currently, but I see a strong potential for growth. It will be one of the very few places in the world where we can get oil in a stable way, without major problems.
I know about the research decision of the U.S. government. Of course, they have their reasons. I respect that decision, but I believe, looking at the global oil markets, that demand will be so strong that the oil production from the oil sands in Canada will definitely meet with consumers. There can be a pipeline this way or that way, north or east or whatever, but oil sands will meet with the customers. This will be sooner or later, but I certainly believe that you will not lack for oil sands customers in the future.
The Chair: Senator Sibbeston, another man from the far North, is next.
Senator Sibbeston: Some estimates suggest the Arctic contains as much as 400 billion barrels of oil equivalents, both as oil and as natural gas. These deposits are spread throughout the region and, as permanent sea ice diminishes, will become more accessible. What impact would the development of reserves of this size have on world energy? Is it significant?
Does it really matter at all that there are all those reserves in the Arctic, and could they be developed? Do you see significant production from this region occurring before 2035 or will it come later?
Are there safeguards and treaties in place to ensure that the development of hydrocarbon resources occur in an orderly fashion, or is there potential for conflict?
Mr. Birol: First of all, we have substantial resources, both oil and gas — hydrocarbon resources — in the Arctic region. This is very good news for all of us.
Second, when these resources will be turned into reserves and reserves into production and come to the pump stations is a function of a couple of things: first is the technology applied; second is the prices of oil and gas at the same time; and third, the regulatory framework and the challenges we have between the countries, and the countries and the companies there.
In realistic terms, I do not expect significant growth in the next 10 years coming from the Arctic region, but we may see a growing amount of oil and gas coming from the region if these three conditions are fulfilled. This will definitely be very good news for tight oil markets in years to come.
The Chair: Are you okay with that answer?
Senator Sibbeston: I am satisfied with that.
Senator Seidman: Dr. Birol, thank you so much for your dynamic presentation and your global perspective. I am from Quebec, and so my question has been asked already; it was about the shale gas issues. I am happy to hear that you acknowledge that the issues around fracking are very real and that you feel they can be dealt with using good regulation — that is what I understood from you — and that governments must recognize that there are issues and existing technologies.
I do not know if you have anything more to say about that good regulation and what exactly you have in mind here.
I would like to also ask, when you talk about existing technologies, what areas of energy R&D are receiving the most funding globally these days?
Mr. Birol: First of all, let me iterate, because you are right that this is a very crucial issue: The environmental problems that we are facing in many countries when producing shale gas are real problems; they are not made-up problems. They are real problems, especially conservation of water.
Second, during the process, we use a lot of water that is needed by those communities, as well as a lot of chemicals, which could have implications for the communities' water use. In many cases, just to give you an example of a good regulation, nobody knows what kinds of chemicals are used. Therefore, one of the golden rules could be — which we will report at the end of our study — that governments should make companies responsible to publish in a transparent way the kinds of chemicals they are using to employ their processes and what the implications of those chemicals are.
In many countries we see that if you buy food in the supermarket, you know what kinds of chemicals and additives are used. You understand what chemicals are used in ice cream, for example, or how much colouring is added and the implications of that. In that respect, I would say we will ask for more transparency, and we will ask for being really careful in terms of using water and other things.
In terms of the R&D, I think to date most of the R&D goes to the nuclear industry worldwide — the new generation of nuclear industry together with the biofuels, followed solar energy and wind. Those also enjoy substantial amounts of research and development, but the first one is the nuclear industry enjoys the R&D.
Senator Patterson: I am from Saskatchewan and we are a major supplier of uranium to utilities around the world. There is no question that there was a setback in nuclear power after Fukushima, but I think most governments asked the utilities to re-evaluate their safety procedures, which they did, and most of them — with perhaps some minor changes — found them to be adequate. There is no question in an environment like this that it is politically popular to say we will phase out nuclear power generation, but that usually lasts as long as it takes them to find out they have no alternatives.
Given greenhouse gas emissions, do you feel that nuclear generation will again become robust and move forward?
Mr. Birol: After Fukushima, we saw three different types of political responses from governments. The first one was from governments like Germany that wanted to phase out nuclear power plants, followed by some European countries. The second group of countries are still contemplating what they will do. Most of those are European countries. The third group, which is comprised of countries like China, Korea, India, Russia, where the bulk of the expansion plants were already there before Fukushima, have said they will go ahead with their expansion plants.
I expect that with the new, better safety regulations we will see nuclear power plants in the future but, as a result of the safety regulation, the cost of building nuclear power plants will increase somewhat. However, nuclear will still be a very cost effective type of electricity generation.
We may also see some delays in the nuclear power plants, but I would expect we will still see expansion in nuclear capacity. It will be definitely very big news for climate change. However, as I have said, the countries that I mentioned today, which have the bulk of the growth of capacity of nuclear — and, it comes from China, India, Korea and Russia — will not build nuclear power plants mainly to address climate change but for energy security and to keep the cost of electricity down. At the end of the day, it will also have to address climate change. I personally believe that nuclear power is the key solution to both the energy security and the climate change problems in the absence of nuclear power. The problems on both fronts will be much more difficult to address than they are now.
The Chair: You are aware, I think, that this week the United States — you did not mention them — approved a big, new nuclear installation. Is that correct, sir?
Mr. Birol: Yes, definitely so. I wanted to mention the countries where the bulk of the growth comes from. This news from the United States is good and I welcome that decision.
Senator Wallace: Dr. Birol, your comments about the expanded use of nuclear generation in the future seem to be the same indication that we are hearing from a number of sources. With that expanded use of nuclear generation, of course there is expanded nuclear radioactive nuclear waste as a result. The short-term and long-term containment and disposal of that is a significant issue. We are dealing with that in Canada, as you probably know at this time, and looking at different options.
From your international experience and perspective, what can you tell us about a global approach to this? Do you have any comments about the security and consistency of approach that is being taken by countries that will, over the long term, have to contain and dispose of nuclear waste?
Mr. Birol: Regarding nuclear power, we only talk about the economics of it, the implications on climate change and Fukushima, but there are other aspects.
First, I would like to see the countries who build nuclear power plants in the future devote their nuclear industry in line with the international rules and regulations and with the traditions and framework of the International Atomic Energy Agency.
Second, as you rightly pointed out, waste disposal is a key problem. The world has not yet found a definite answer to that issue. However, we know that in almost all the countries in the world that have nuclear power plants — that is, in Asia, Japan, Korea, France, and in other countries in Europe and in Canada — we have found already some nuclear deposits. However, maintaining that waste does not have major implications on the overall economics of nuclear power. Although we have not yet found a final answer to waste disposal, huge research and development activities are going on there. Looking at the current expenses worldwide, I do not see this as a major problem for the expansion of nuclear power from the point of view of technology and from the point of view of safety and economics.
Senator Wallace: With regard to wind generation and wind power, as you point out, it will become an increasing source of power generation in the future. In Canada, we have had some concerns expressed about wind generation. Some allege that there are significant health impacts from wind generation from the use of wind turbines, impacts on the environment, migratory birds and that type of thing.
From your international experience and perspective, have you encountered those same types of issues and, if so, how are they being dealt with internationally?
Mr. Birol: Wind power is one of the technologies that produce electricity without harming the environment directly in terms of air pollution or climate change. However, first, in most cases they are costlier to use to generate electricity compared, for example, to natural gas. In both Europe and China, where we see a major development of renewable energies or wind power, they will never be able to compete with the fossil fuels without subsidies; that is for sure.
Second, even in Europe today we see that wind power is facing public opposition in terms of the noise it is causing for the local communities, in terms of the visual negative effect for the communities it is causing and in terms of other local problems that it is causing. It is not a perfect solution from an environmental point of view, but still it does not emit carbon or cause air pollution. As such it has benefits, but it also has challenges in terms of both the noise and the aesthetic value for the communities. In Europe, we see these challenges coming up.
Senator Wallace: That seems to be very much the same result we are seeing here in Canada as well, those same kinds of concerns. Thank you very much, doctor.
The Chair: Now we go to a senator who has a different view than the deputy chair on climate change, Senator Nancy Raine.
Senator Raine: I do not want to ask you about climate change because I think the questions around the IPCC are concerning everyone.
I am from British Columbia, and we can see the pollution in our skies now coming from China. The skies are not as blue as they used to be. What can be done or what is being done to encourage the Chinese government to stop subsidizing gasoline for their citizens?
Mr. Birol: First, what will happen in China in terms of oil markets, gas, coal and electricity, will affect us all. The Chinese government is well aware that today China is the most polluting country in the world in terms of the largest carbon emissions and today 18 out of 20 most polluted cities in the world are in China. For example, a major topic in Canada is the oil sands and its relation to CO2 emissions. When I compare it with China, I told you that we expect a significant increase from oil sands in the next 10 years. This increase did not come from oil sands, but if it came from an average crude somewhere else in the world, the difference of CO2 emissions between those two would be equal to less than two days of emissions from China, to put in context how important China is and the difference in China, and so on. The Chinese government is making substantial efforts. For example, in addition to trying to use energy more efficiently and trying to push renewable energy, Chinese governments in many states in China are putting carbon price schemes in place in order to move to a more friendly use energy context.
Currently, China is a major emitter and will be so for many years to come. The Chinese government is aware of that and I believe China is becoming a major player in the global economy. In becoming a permanent member of the United Nations Security Council, China may well need, more and more, to have more responsibility in other global challenges such as environmental challenges.
The Chair: You think they should veto their emissions.
Senator Johnson: In 2009, the G20 countries pledged to phase out fossil fuel subsidies in the medium term. Can you tell us if your analysis indicates that these countries have been holding to this pledge?
Mr. Birol: We have analyzed and found out that currently every year over US$400 billion in subsidies are going to coal, oil and gas consumption throughout the world. We have pushed this agenda because, if those subsidies were phased out, people would use energy more efficiently. It is extremely cheap now in many countries, and since it is very cheap, people use it in a wasteful manner. We have pushed this agenda and we see that in some countries there are some — who are those countries? For example, Indonesia is a country which has made a significant effort. China is another one, a major improvement there. India has made major improvements, but they are still far from respecting this market process. I expect, if they bring those energy prices to international levels, everyone will gain from that.
One final issue: Many governments say we are subsidizing energy to protect the poor. I think this is wrong. We have found that of this $400 billion, only 8 per cent of that money goes to the lowest income levels, the 20 per cent lowest income groups; 80 per cent goes to medium- and high-income levels and they enjoy the subsidies from governments. Unlike the usual thought, it is not the poor who benefit from those subsidies, it is the medium and high income levels, and they use much more energy. Therefore we will continue to push to phase out those inefficient subsidies.
The Chair: Dr. Birol, it has been a fascinating morning. All my colleagues on the committee are sending me notes saying how much they enjoyed your presentation.
Would you like to say a final word to sum up?
Mr. Birol: Your country is very crucial in terms of oil, gas, uranium and hydropower. I think Canada is one of the cornerstones of the global energy system and will stay so for several decades to come. This is definitely very good news.
With regard to using energy responsibly, I know that your government is very much working to put standards on oil and gas production for the industry due to environmental concerns. Such policies would definitely be a very good example for other oil and gas producers worldwide.
I think Canada is blessed with oil, gas, uranium and hydropower resources and the global energy system is blessed with Canada.
I will be very happy, Mr. Chair, to host members of your committee in Paris. I will be very happy if I am invited, when I come over, to knock on your door and talk with you and your colleagues.
Thank you very much.
The Chair: Thank you, Dr. Birol. Perhaps the steering committee will be in touch with you in the next days to come and visit with you, because we are in the process of preparing our report which needs to be issued on or about June 1. In addition, as a follow-up to that, when you come to Canada in May, we will certainly make arrangements for a special session of the committee and we will look forward to hearing from you again.
In the meantime, on behalf of all the senators here, a warm and sincere thank you for your time this morning.
(The committee adjourned.)