Canadian Oil and Gas Production in the Global Clean Energy Transition
Outlook and economic risks
This report assesses economic impacts of business-as-usual investment in Canadian oil and gas production. Using investment and production costs data from Rystad Energy, these impacts are modelled under three global demand scenarios from the International Energy Agency. The report finds restricting oil and gas expansion could effectively mitigate economic risks for Canada's investors, industry, and government, especially as the energy transition accelerates.
Canada's oil and gas industry is highly exposed to shifting international markets, with 81% of oil and 44% of gas exported abroad. As a result, the profitability of Canadian production is vulnerable to weakening international demand, rising competition, and climate-related trade risks.
Using three oil and gas demand scenarios from the International Energy Agency and global market modelling by Rystad Energy, this report finds the following:
- Up to 66% of future capital investments in Canadian oil and gas projects (2025–2040) are at risk of becoming stranded under a 1.5°C climate scenario. The percentage of stranded investments could be even higher in a world where carbon capture and storage technologies underperform.
- Even under current global policies, 5% of projected investments may fail to deliver economic returns. Under announced climate policies, including existing net-zero pledges, the share of stranded forecasted investments rises to 39%.
- Economic risks to investors, industry, and governments could be mitigated in all three demand scenarios by restricting future oil and gas development in Canada and abroad.
It has long been assumed that Canada's best economic interests lie in the continued expansion of oil and gas production. Instead, this analysis suggests a new paradigm whereby the most efficient way to leverage the economic potential of Canada's oil and gas industry is to limit its expansion while using the remaining revenues to accelerate growth in clean industries consistent with a changing global economy.
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