Image credit: Dundurn Press
"Carbon Change: Canada on the Brink of Decarbonization"
by Dennis McConaghy
Dundurn Press / October 2022
Reviewed by Ron Wallace
This is Dennis McConaghy’s third book, one that follows Dysfunction: Canada After Keystone XL and the Donner Prize winner, Breakdown: The Pipeline Debate and the Threat to Canada’s Future in 2019.
A former senior executive at TC Energy, McConaghy brings refreshing perspectives to the current Canadian and international policy debates associated with decarbonizing energy systems. Carbon Change examines Canadian and international policies for energy and the global climate while providing a much-needed, perhaps overlooked, analysis of the true, and rapidly developing, costs associated with decarbonization. His timely warning, one that increasingly confronts the economies of the U.K. and the EU, centres on the true economic and political costs of policies required to achieve these climate goals.
With a sensible, fact-based approach, McConaghy poses a direct challenge to reigning political and economic leaders by advancing arguments for the continued use of hydrocarbon resources while implementing practical measures for carbon reduction. Having advocated for carbon taxation as a key component of any market-driven energy transitions, the author decries the current lack of responsible and practical energy replacement systems, driven by unprecedented governmental interventions, with ever-more disastrous consequences for the economies of Western societies. He notes: “A cost/benefit analysis approach would create a more economically optimal outcome for managing the climate change risk than unconditional adherence to decarbonization.”
The outrageous economic costs and penalties associated with current attempts to implement comprehensive energy transitions have persuaded many developing countries to adopt much more cautious approaches to decarbonization. Consequently, coal usage has increased significantly in the past few years – a development that will render moot the efforts of advanced Western economies, including Canada, to reduce global emissions. The author poses a seminal, urgent question for senior policy-makers: “How can we optimally use hydrocarbons for energy transitions so as to maximize global human welfare?”
In this regard, he notes the limitation in current climate policy debates: “The official and loudest voices in the climate-policy world have limited the conversation by moralizing, and by considering only the potential damages that climate change might cause. This is an inadequate substitute for dispassionate cost/benefit analysis.”
Recent studies show that while more nations pledge to achieve net zero emissions, even if realized, they will not reduce global energy-related carbon dioxide emissions to net zero by 2050. Citing a 2022 McKinsey Consulting report on net zero (NZE50), the author notes that the estimated costs for NZE50 are a staggering US$9.2 trillion annually until 2050.
His rational conclusion is that:
… achieving decarbonization is expensive, perhaps infinitely expensive, based on the status of technologies currently available … and intractably, replicating the ‘gift’ that hydrocarbons represent is immensely difficult. Hydrocarbons offer massive energy stored via fundamental chemical properties, available when needed at minimal cost. The substitutes are intermittent and inherently more costly, due to the complexity of their production. Moreover, they often rely on mineral components that are themselves costly and energy intensive to produce.
This dispassionate, reasoned approach to the arena of energy-climate policies is long overdue and one that senior Canadian and international policy-makers alike should urgently entertain. Noting that there are no available energy technologies that could be a silver bullet to address climate change, McConaghy concludes that new, and material, technology breakthroughs will first be required: “The way forward will also require abandoning long-standing delusions that we can run modern economies on windmills and batteries, and this is true for North America as much as it is for Germany.”
Using the global economic contraction caused by the COVID-19 pandemic as an illustration, McConaghy notes the social and economic sacrifices required and compares those with current decarbonization (NZE50) policies:
The economic contraction we experienced throughout 2020, due to the pandemic, illustrates the kind of sacrifice required to effect even the modest emissions reductions that occurred that year. To sustain and exceed that level of emissions reductions would require massive intervention, not only to decarbonize energy systems, but to constrain basic human activity throughout the transition and likely beyond … Notably, 2020 was the only year since the UN climate process began in 1992 that global emissions actually fell in absolute terms. The cost of achieving it was a mandated contraction in human activity.
Final sections of the text entitled “Reconsidering Climate Policy” contain valuable considerations for policy-makers with suggested practical approaches for global decarbonization, most certainly including Canada. With the eminently sensible conclusion that the current plan for NZE50 is unworkable, even impossible, he predicts that the world will approach a 3°C increase in average global temperature “regardless of whether developed economies of the G7 attempt to effect decarbonization.”
With the urgent warning that current policies will lead to disastrous outcomes, McConaghy’s overall recommendation is that Canada should immediately change course and promote a global carbon tax:
Canada should not attempt to progress decarbonization in the face of these realities, but rather to become an advocate of uniform, properly conditioned carbon pricing across the G7 … If Canada persists with decarbonization domestically, a policy that will have no impact on global hydrocarbon demand or emissions, it will only impose on itself massive economic costs, most of which will be imposed on western Canada and especially Alberta.
McConaghy’s latest book is a valuable and timely contribution to a debate that urgently needs to be advanced to shape strategic, informed policies for decarbonization in the West. Describing the emerging economic and political realities that have resulted from current climate policies – initiatives that have been complicated by epidemics and warfare – as “a brutal realism to the fundamental arguments of optimal climate policy,” the author provides constructive alternatives for future policy debates at a time when a serious reconsideration of current decarbonization policies in the West is significantly overdue.
Debates surrounding decarbonization have rapidly evolved into material considerations, not just for national economic policies but for global security. The author presents a passionate advocacy addressed to the public and policy-makers alike to reconsider optimal policies to address the threat of climate change. This is a refreshing, objective assessment that comprehensively addresses the developing failures of current policies while providing a prescription for sound alternatives to achieve “policy objectives consistent with the risk and economic capacity to afford both the requisite reduction of that risk and adaptation to whatever changes do occur, and then take the necessary actions to meet those objectives.”
Carbon Change should be required reading for senior policy-makers, including parliamentarians and heads of many international agencies. It provides a sound basis for a thoughtful, practical reconsideration of current national and international climate and energy policies. I highly recommend this book to members of the general public and most certainly to senior decision-makers.
Ron Wallace, PhD, completed post-graduate work at Queen’s University, the University of Waterloo and the Stanford Graduate School of Business. Having retired in 2016 as a permanent member of the National Energy Board, he is currently a Fellow of the Canadian Global Affairs Institute and a board member of the Canada West Foundation.