Caught between climate warnings and economic realities, Canada and the world face tough fossil fuel choices

Update: The federal government will approve the Bay du Nord offshore oil project in Newfoundland and Labrador. Follow CBC's latest coverage here.

The UN's latest warning about the world's climate goals slipping away is looming over a pending decision on whether a large offshore oil project will go ahead off Newfoundland, promising a much-needed boost for the province's economy but potentially moving the world further away from avoiding climate disaster.

The report on climate mitigation from the Intergovermental Panel on Climate Change says that limiting global warming to 1.5 C above pre-industrial levels this century, one of the goalposts of the global Paris agreement signed in 2015, is all but out of reach without massive and immediate emissions cuts, along with technology to capture and store carbon emissions at industrial facilities.

In fact, to reach even the less-ambitious target of limiting warming to 2 C, carbon emissions around the world have to reach their zenith by 2025 — three years from now — and start declining after.

That means some tough decisions for governments weighing economic development against cutting emissions.

"Politicians have to always make decisions among competing priorities, and they have a lot in front of them and really complex decisions to make," said Sarah Burch, professor at the University of Waterloo in Ontario and a lead author on the report's chapter on sustainable development.  

"But what the report shows us is just how important it is to move away from the extraction and combustion of coal, especially, immediately, but also oil and natural gas to electrify transportation, to make our buildings more efficient, to enable active transportation, and to scale up carbon capture and storage."

The report also warns that as the world cuts emissions, oil and gas projects may become "stranded assets" — projects with no buyers for the resource they produce.

"Investing in new fossil fuel infrastructure is moral and economic madness," UN Secretary General Antonio Guterres said at the report's release Monday.

"Such investments will soon be stranded assets, a blot on the landscape, and a blight on investment portfolios."

Decision on offshore project imminent

Barely a week after the release of the report, the Canadian government is due to decide whether to approve one such potential asset: Bay du Nord, a massive offshore oil drilling project proposed about 500 kilometres east of Newfoundland. 

The province's government and its MPs in Ottawa are staunch supporters of the project, and the governing Liberals will have to carefully consider the economic consequences to Newfoundland if Bay du Nord is scrapped.

"I think our work as a government and as a responsible government is to ensure that the transition happens as smoothly as possible. And obviously, if we end up with a lot of stranded assets in the coming years or decades to come, then it will probably be an indication that we haven't been able to do that," federal Environment Minister Steven Guilbeault said at a news conference following the release of the IPCC report.

Guilbeault did not indicate which way his government will go on the Bay du Nord decision, but said he was confident that Canada's climate plan will reduce emissions from the oil and gas sector, even if it increases production. The plan includes policies to reduce methane emissions, which leak from equipment on oil and gas sites, a clean fuel standard, which is aimed at progressively reducing the emissions from fossil fuels when they are burned, and a cap on oil and gas emissions.

"I know of no other countries in the world, especially not a large oil and gas producer like us, that has made a commitment and is in the process of developing a cap on emissions of the oil and gas sector," Guilbeault said. 

"So what our plan clearly shows is, regardless of what happens with production, we will meet our 2030 targets."

Canada is not alone in grappling with these decisions. The United Kingdom is looking at a large oil platform in the North Sea. Australia might expand fracking. Guyana is going ahead with a large offshore oil project. Qatar — the world's largest natural gas producer — has embarked on a project that will further boost its output by 40 per cent. 

According to the IPCC, emissions from existing and currently planned fossil fuel projects would already push global warming beyond 1.5 C, to say nothing of new projects in addition to those.

'We need that going forward'

Dave Mercer, president of Unifor Local 2121, the union that represents offshore oil workers in Newfoundland and Labrador, said Bay du Nord is sorely needed.

"We're not talking hundreds of jobs. We're talking thousands of jobs. We're not talking about millions of dollars, we're talking about billions of dollars," he said. 

"We need that for our education. We need that for our health-care system. We need that for going forward. We need that for just transition. We need that."

Newfoundland and Labrador has Canada's highest unemployment rate, and its provincial government is drowning in debt. A report commissioned by the provincial government last year suggested spending cuts, tax increases and a streamlining of various public services to get out of the financial malaise.

But the report also suggested funnelling oil and gas revenues into a future fund that could be used to finance a green transition and pay down debt.

Mercer echoed that idea of a fund to help workers.

"Let's use the money and the profits from that and put it together and start sustaining some economic growth when it comes to making sure that we got enough money to start the transition," he said.

"I'm not against green transition. I'm not against transition at all. But I think using Newfoundland oil is going to get us to that transition and in a cleaner way, there's no doubt, and make a lot of money doing it."

Skeptical of economic benefits

But Angela Carter, a leading researcher on the oil and gas industry in Canada who lives in Newfoundland, is skeptical about any lasting economic benefits for workers and the provincial economy if oil production is expanded.

"We start producing oil in 1997. It's supposed to be an economic miracle. It's supposed to break us free of what folks said was under development and poverty," she said. 

"And here we are, a couple of decades out. And our society really hasn't changed that much."

Carter cited research from Clean Energy Canada in 2021 that suggested the renewable energy sector may perform better at driving employment growth than the fossil fuel sector over the next decade. Clean energy jobs are set to grow nearly 50 per cent by 2030, while fossil fuel jobs will drop nine per cent, according to the report.

"If we keep doing what we've always done, we're going to keep getting what we've always gotten. And the development of the oil sector hasn't been a path to prosperity for this province," Carter said. 

"But the other side of this is that it's also on a path of climate chaos and crisis. It's playing into a future that's very unstable climate-wise. So this is why the transition has to happen."

Guilbeault said the federal government will make a decision on Bay du Nord by mid-April. The project, if approved, will start producing oil by 2028 and continue until about 2058.