’s Richard Brooks on latest IEA outlook report

October 24, 2023
“Canada's banks and pension funds are holding us back.”

Territories of Indigenous peoples including Ho-de-no-sau-nee-ga (Haudenosaunee), Anishinabewaki ᐊᓂᔑᓈᐯᐗᑭ, Mississaugas of the Credit First Nation, Mississauga, Wendake-Nionwentsïo (so-called Toronto, Ontario, Canada)  – Today, the International Energy Agency (IEA) released the new World Energy Outlook 2023 report, revealing that our energy systems are already on track to transform off fossil fuels and decrease demand significantly by 2030, with IEA Executive Director Fatih Birol stating: “The transition to clean energy is happening worldwide and it’s unstoppable. It’s not a question of ‘if’, it’s just a matter of ‘how soon’ – and the sooner the better for all of us.” 

On this latest report and what it means for Canada’s financial institutions, economy and jobs, Richard Brooks, Climate Finance Director, issued the following statement: 

“Canada is at a serious disadvantage in what is clearly an accelerating energy transition, according to this latest outlook report from the IEA. Canada’s biggest banks like the Royal Bank of Canada (RBC) and its public pensions, like the Canada Pension Plan (CPP), remain amongst the largest financiers and investors in oil and gas in the world. We run the risk of falling behind and being increasingly part of the problem rather than solution. And with more than 18 million hectares of forest having burned in Canada this past year, we can’t afford to keep making the problem worse. There are massive societal and economic benefits unfolding before us and Canada’s banks and pension funds are holding us back.”

Implications for Canada:

  • Financial institutions in Canada are overinvesting in fossil fuels according to the World Energy Outlook (WEO) and its various scenarios, most importantly the Net Zero Emissions (NZE) scenario.
  • Canadian financial institutions are not helping to close the gap sufficiently in increasing investments in low carbon energy solutions such as renewables, efficiency and grid expansion.
  • With global demand for fossil fuels set to peak this decade, continued increases in production of fossil fuels in Canada, particularly investments in new infrastructure after 2023, risk being stranded. These will likely not see their life expectacies for a full return on investment met as demand drops. This means a waste of resources, finances and potential distraction from better, more guaranteed long term investment and job opportunities on the clean energy side.
  • It is clear that building new gas plants in Canada (see Ontario, Alberta for example) does not align with the IEA’s NZE scenario even with increasing demand for electricity in Canada, particularly with renewables being cheaper, efficiency programs able to cut or slow demand growth and with emerging policy frameworks to limit and decrease emissions. 
  • Canada needs to align its subsidies and tax incentives with the IEA roadmap, removing subsidies from and adding CO2 cost and other environmental surcharges to fossil fuels and further incentivizing clean energy production and other climate solutions measures. Upfront costs should be reduced for consumers to adopt efficiency measures and switch to electrification for homes and transportation.
  • “However, the lifetime costs of clean energy alternatives often remain higher in countries where fossil fuel subsidies have still not been phased out.” (WEO 2023)
  • “In the NZE Scenario, public revenue from taxing CO2 goes some way to offset declining oil and gas revenues, reductions in fossil fuel subsidies provide some direct relief for governments, and taxes on the use of electricity shore up revenue from energy consumption” (WEO 2023)
  • Alberta and Ontario are good examples of this statement that the IEA has made about policy consistency in regards to renewables: “A lack of sufficient and continuous policy support increases investor uncertainty, and the sudden withdrawal of policy support can cause nascent markets to crash.” (WEO 2023) – Alberta froze new renewable development in 2023 and Ontario canceled wind and solar projects when the new PC government took power in 2018. No new renewable projects at scale have been built in Ontario since then.
  • Methane gas demand continues to drop in each new WEO report. This raises key questions about the profitability of projects like LNG Canada and the Coastal GasLink pipeline plus other new gas projects under consideration in BC.
  • Oil spending levels are above where they should be globally. This is true for Canada.