Building a Policy Bridge to Future-Fit Hydrocarbons

As a second COVID wave hits the province with full force and the impacts of prolonged economic repercussions become clearer, Alberta faces challenges that will ask us to reimagine what it means to bring our ingenuity, expertise, and innovative spirit to bear. In a province already reimagining the future of its energy sector, COVID-19 has shocked demand and disrupted expectations we might have had about what the future could look like. This turbulence has been accompanied by an accelerated commitment among financial institutions to scrutinize their investment portfolios and other activity through a climate science lens. The UN Principles for Responsible Investment initiative, a leading body pushing towards low-carbon pathways, has reported that signatories have more than $100 trillion in assets under management, and the Bank of Canada has made recent public statements about how we will need to decarbonize many facets of our lives in order to mitigate the worst impacts of climate change. Global investors are demanding a more stringent reckoning with an emerging consensus that prioritizes climate risk. With all of this as backdrop, several leading oil and gas companies have reduced the reported value of their assets by more than $80 billion in the first three quarters of 2020.

The climate-concerned investment trends are frequently presented as a problem for Alberta, but they could be an opportunity instead. The flip side of having high per-capita and per-barrel emissions is that Alberta has major emissions reduction potential. It means we should be a big market for the developers of clean technology solutions. Combine that with a strong history of innovation in carbon management and the potential for new ‘future-fit’ hydrocarbon feedstocks, and Alberta should have considerable opportunities to access the capital looking to finance the transition to a low-carbon emissions economy. What’s been holding us back? First, a view that the past must be entirely left in the past, abandoning existing skills, infrastructure, and resources in pursuit of a net-new future vision. Perfect can be the enemy of good, and the prospect of stranded assets creates real uncertainty at every level of society. Second, however, is uncertainty about where the terrain of global energy systems and markets may shift to and at what pace, combined with an inability to collectively acknowledge the reality that the “good old days” may not return. Taken together, overcoming these challenges require us to look to the future while also building on the rich legacy of Alberta’s communities and the enterprises they have built.

It is in this middle space of transition there is an important role for policymakers to play. Even as there is some crystallization around what should be left in the unsustainable past and what we might aim for in a low-carbon emissions future, in between there is a deep need for transition solutions, especially for resource-rich jurisdictions. Policymakers will be crucial in holding the space for better visions to evolve and attract supporters, in fostering sectoral responses, in creating the conditions for social and technological innovation to thrive, and in sending policy signals that are durable, credible, and on the scale of the challenges we face.

The Energy Futures Policy Collaborative (EFPC), an initiative of the Max Bell Foundation and the Energy Futures Lab, also involving the Canada West Foundation, Smart Prosperity Institute, Business Council of Alberta, and Emissions Reduction Alberta, aims to identify and support these possible responses. It will explore the question:

How we might use public policy to help attract greater investment and talent into the innovation and infrastructure for ‘future-fit’ hydrocarbons, in light of global investors’ increasing concern with climate change and growing appetite for low-emissions and transition-oriented opportunities.

The EFPC will unfold over the course of two years, casting a wide net and engaging more than just the usual suspects. This broad lens may seem perplexing to stakeholders on all sides of the convening question, who may have a laundry list of specific challenges and a portfolio of preferred solutions. It is essential, however, that we don’t zoom in too quickly. By keeping our frame broad, we aim to:

• Push ourselves to investigate the problem space from different perspectives, surfacing assumptions and asking better questions that open up new possibilities for solutions,
• Map the landscape of existing initiatives, projects, and thinking, enabling us to anchor in potent policy windows and to be additive and complementary to work quickly coming online
• Take a systems approach, recognizing the fact that no single actor or solution can move the needle alone and building towards a portfolio of possible solutions designed to amplify opportunities and anticipate unintended consequences.

Though our process will be systematic and structured, the journey we’ll be undertaking to explore this question will not be a linear one. A developmental approach will provide the team with real time feedback on what’s working and what’s not working, in addition to raising the question of whether our work is making a difference. This policy collaborative is also taking a new approach by building time into the process to conduct small scale testing. Lastly, while the process primarily targets policy recommendations as its key deliverables, it has been designed in such a way that it offers the possibility that potential solutions and initiatives could also emerge that are not policy-focused or targeted at governments (e.g. new partnerships, projects, public engagement activities, products/services). The Energy Futures Lab is well set up as a platform to connect such additional initiatives to further testing and development through its extensive network and existing partnerships.

The importance of this project being a collaborative that aims to harness the power of diverse perspectives cannot be understated. A multidimensional challenge such as this requires a multidimensional approach, one that taps into a broader and deeper variety of expertise, people, and lived experiences. Crucially, this is an opportunity to demonstrate to climate-concerned investors that there is a broader network of Alberta innovators and professionals working to bridge the gap between where Alberta’s energy sector currently sits in relation to climate change responses, and where it needs to sit for investors to feel confident investing in Alberta hydrocarbon resources, technologies, and skills.

As we set off on this initiative, there’s a palpable sense, in all corners, that the status quo can’t continue, with as many root causes and possible solutions as there are stakeholders. Our aspiration is to help policy leaders respond to and map pathways in this dynamic environment, and ultimately to play a role in helping attract climate-concerned investment capital into the innovations and infrastructure that will position Alberta for success in the 21st century.