C. Emdad Haque Professor and Director Natural Resources Institute University of Manitoba

1. Scarcity, National Security and Sustainability: Policy Options and Recommendations for an Integrated Energy and Climate Security Strategy C. Emdad Haque Professor and Director Natural Resources Institute University of Manitoba Winnipeg, Manitoba Canada (Prepared for presentation at the NACTS Fulbright Scholars Workshop, Management of North American Resource: Policy Recommendations from Rigorous Research, November 17, 2008)

2. Key research questions • What are the likelihood global scenarios regarding depletion of non-renewable resources, particularly oil, and transition through the next 20-22 years, and what are the implications for North America? • Scoping of ‘energy security’, and how do ‘energy and climate security’ (i.e., greenhouse gas emission) relates to national security issues? • What roles are being played by the federal and state governments in energy and climate security? • What is rationale for an Integrated North American Energy and Climate Security Strategy (INAECSS)? • What are the policy options to deal with emerging issues and problems with the fossil-fuel based economy and to develop a sustainable energy strategy for North America?

3. Outline of the presentation • Role of oil in energy mix and global supply scenarios: the North American energy supply capacities and constraints • ‘Energy Security’, sustainability and climate security as national policy issue – US vs. Canadian perspectives • The role of public institutions in energy supply and sustainable development • The need to formulate an Integrated North American Energy and Climate Security Strategy (INAECSS) • Specific policy options for strengthening energy and climate security and long-term sustainability

4. Methodology • Review of the literature and thematic analysis • A Content Analysis – summaries by objective analysis • Questionnaire Survey of key informants (15)

5. Normative analysis Positivist approach Macroeconomics Simulation Modeling Forecasting Political science & studies policy analysis Empirical studies - Technical reports - Historical records Critical Social Theoretical work nominal Energy Policy Literature

6. North American energy consumption relative to global • Significant changes in energy consumption due to globalization and worldwide consumerism • Absolute increase in North America but decline in relative share • Change in energy mix

7. World energy consumption and market share, 1970-2030 Sources: BP; International Energy Agency; Sieminski, 2005. ‘World Energy Futures’, p. 25.

8. Future trend • 2000-2030: 1.9% growth rate 338 mmb/d of oil equivalent • Regional changes • 1970 Asia 15% of global energy consumption; 27% in 2000; 37% in 2030 • Oil consumption 128 mmb/d in 2030 • Natural gas 30% of total energy consumption in 2030 (combined gas cycle turbines)

9. US consumption of oil and gas • PETROLEUM & PRODUCTS - 2005: 21 mmb/d -2030: 27.5 mmb/d NATURAL GAS - 22 Tcf in 2004 -85-90% from Canada

10. US dependence on imported oil, 2001

11. Global energy model: reserve, peaking and depletion • USGS, IIASA, and Greene et al. models • Recoverable conventional crude oil 2 trillion barrels of oil (Greene et al.) • USGS 2000: mean 3.0 trillion for oil, and 3.3 including natural gas liquids

12. Estimates of world petroleum resources (USGS, 2000 study)(mean) (in billion barrels)

13. World Energy Council (2001) • 85% of world total bitumen in Alberta, Canada – 1.7 trillion barrels of bitumen • Orinoco Oil Belt, eastern Venezuela – 90% of known extra-heavy oil • USGS: world shale oil 2.6 trillion barrels – 1.5 trillion barrels in the Green River formation, USA

14. Conventional oil peak 2022 Middle East reaches median target R/P ratio of 15 in 2041 and output declines Increase in unconventional oil production US conventional flat until 2020, and fall off afterwards Gaps are filled by imports Sources are unconventional oil – oil sands in Canada (14 mmb/d after 2030 & flat through 2050) Future scenario (WEC model)

15. Major challenges – water availability, environmental impact – emissions, on site upgrading • Additional import – from Venezuela and Russia • Oil shale production begins gradually after 2010 and increases after 2030

16. Source: Greene, 2003, p. 53

17. Source: Greene et al. 2003, p. 3

18. 33% increase in oil consumption during 2001-2020 Natural gas by over 50% Demand for electricity by 45% Recent trend: 1991-200, used 17% more energy then in the previous decade Domestic production increase 2.3% Increasing dependency on foreign oil and natural gas (including liquid natural gas) US dependency on imported oil and gas

21. Source: Greene, 2003, p.46

22. US Dependency on foreign oil and gas: ‘Energy Security’ concerns • “assurance of the ability to access the energy resources required for the continued development of national power. It is the provision of affordable, reliable, diverse, and ample supplies of oil and gas to the [country]..,its allies, and its partners – and adequate infrastructure to deliver these supplies to market” (Lalicki & Goldwyn, 2005: 9)

23. Consumer-producer relationships Dynamic facets – outcome of continuous process Security of demand and security of supply OECD’s energy security perspectives Growing import dependence Geopolitics and terrorism Geographical concentration, monopoly and monopsony

24. Finite, non-renewable resources • Barriers to investment • High and volatile energy prices • Policy levers

25. ‘Energy Security’ concept and policy discourse • National Dependency and Vulnerability (NDV) notion – energy efficiency, stock holding, fuel switching, substitution options • Inward looking – fear of price volatility as a result of geopolitical uncertainty • Kalicki and Goldwyn (2005): institutional and policy failures in the USA and lack of coordination between energy and foreign policy

26. Synergic Cooperation (SC) Notion – interdependencies create positive international atmosphere and long-term cooperation • E.g., International Energy Agency (IEA) 26 member countries • 1990-91 Gulf War and IEA’s response

27. 1989 Canada-US Free Trade Agreement (FTA) • Preventing future use two-price system by Canada • Restraining US from using restrictive measures • Access to US market and “proportionality clause” i.e., Canada cannot arbitrarily cut-off contracted US buyers of Canadian oil and gas. If declared shortages occurred, Canada could only reduce supply proportionately over an agreed three year-based period.

28. 1950 emission of carbon 1.5 b metric ton 1990: 6 billion metric ton – USA 20-25%, Canada 2.5% Mid-late 1980s: US executive vs legislative branch dispute Bush’s State and Local Climate Change Program (1990) Clean Air Act Amendments (1990) Emission trading introduced Intermodal Surface Transportation Efficiency Act 1991 Mass transit 1992 Energy Policy Act Atmospheric and climate impact of fossil fuel use: policy concerns and issues

31. Kyoto Protocol 1997 Opposition to Berlin Mandate by the Congress EPA and Dept. of State support vs. Treasury, Energy, Defense and Commerce’s opposition Exxon Mobile’s funding to the American Enterprise Inst. & Competitive Enterprise Inst. Bush (Jr.)’s new domestic plan – emphasis on carbon intensity – not overall emission – 18% GGI through 2012 Since 2001 – 29 billion dollar fund

32. New Jersey, New Hampshire, New England states, Wisconsin and Oregon New Jersey adopted in 1998 3.5% reduction below 1990 levels by 2012 Programs included conservation, creating and using new technologies, waste management, recycling and education New Jersey’s agreement with the Netherlands GHG emission reduction policy initiatives of the States

33. Clean energy technologies - the renewables portfolio standards - electricity distribution surcharge - voluntary renewable purchase Key questions: - Sustained support to renewables - Cost containment & competitive neutrality - Combination of policies than single renewables policy California case study: renewable energy policy & electricity restructuring(Ryan Wiser et al. 1998)

34. 1970-1990s – improving energy efficiency Change behaviour and life style Home insulation program 1980s – focus on R&D, market-based research and demo projects 1993 Energy Efficiency Act NRCan regulate 20 products that use energy Canadian approach to sustainable energy and climate change issues

35. Tax deduction – wind farm , fixed-location fuel cells and ancillary fuel reformation Electricity purchase by NRCan from renewable sources Strategic objective of renewable energy

36. Energy efficiency: Assessment/monitoring Auditing Fiscal/tariffs Information/education Labelling Mandates/standards Institutional framework R&D/technology procurement Third party financing Voluntary agreements Strategy measures of renewable energy - regulatory strategies - economic incentives - R&D support - Market development Sustainable energy strategies – efficiency and renewable energy technologies

37. US proved reserve 21.4 billion barrels conventional oil Mexico 14.8 b b Canada 4.3 bb conventional oil + 178 bb nonconventional oil 2004 – 24.2% of total US net energy imports from Canada and 8.4% from Mexico USA met 14% of gas consumption by imported gas; Canada provided 94% Why an Integrated North American Energy and Climate Security Strategy?

42. Table 1 Value of North America energy commodity trade (in million current US dollars)

43. Secured supply for consumers and secure market for producers • Cost competitive • Scope for R&D cooperation • Collective response in crisis • Broader trade and economic cooperation • Adjustment to market (integrated economy) and institutional failures

44. Electric sector (40% GHG): cost competitive wind, geothermal, hydro Renewable portfolio standards (20% by 2025 (Locky, 2007) Energy efficiency standards in industrial, residential and commercial sectors Transportation sector - plug-in hybrid - electric vehicles market-based cap-and trade system Common Goal: Transition from non-renewables to renewables

45. US national energy independence – a myth? Security and Prosperity Initiative (SPP) 2005 US Energy Independence and Security Act (EISA) 2007 Challenges - Executive and legislative branch quibbling Influence of interest groups Geopolitical uncertainty Role of subsidies and economic incentives to renewables Institutional efforts

46. Canadian Challenges • Water and carbon emission in the production of noncoventional oil • Federal and provincial jurisdictional disputes – offshore oil exploration • Volatility of oil price • Protectionist measure in USA

47. Recommendations for research • Public institutions role in energy market • Diversification and facilitation of energy transition • Impact of subsidies and incentives at the local and state level • Opportunities and barriers in cap-and trade • Electoral Cycle and resource allocation to long term policy goals

48. Change in consumer behaviour and life style • Local and public participation in energy and climate change policy • Conservation and demand management – economic disincentive • Economic tools for improving energy efficiency

49. Dissemination of Best Practices in the reduction of emission (European and North American local & state experience) • Integration of energy policy with climate change and foreign policy • North American energy and climate change policy approach – institutional requirements for energy security and sustainability e.g., trilateral public-private organization

50. Promotion of cross-cultural research by continental team – transdisciplinary • Issues of social justice and equity in energy development and use • Cross border energy trade – security and ownership issues (e.g., Pemex in Mexico)