Demand for fossil fuels will max out in two years, NEB says

The National Energy Board says Canada’s addiction to fossil fuels will peak in two years, but the change won’t affect economic growth.

For the first time, the board’s annual energy futures report says that with climate change policies and growth in clean energy, Canada’s consumption of fossil fuels to run cars and heat homes will max out in 2019, start to decline slightly and then flatline over the next two decades.

“If you look at our forecasts for the last 10 years, the trajectory for fossil fuel keeps coming down and down and down,” said NEB chief economist Shelley Milutinovic. “This is the first time where it’s actually peaked and will go down.”

Just last year, the report showed fossil fuel use in Canada would be slower than previous predictions but would continue to grow all the way to 2040.

The report looked at three different scenarios, including a base case using existing policies and plans, a case looking at what would happen if the carbon price grows $5 per year after hitting $50 per tonne in 2022, and a case looking at both an increased carbon price and faster adoption of new technologies like wind and solar power.

In all three scenarios, fossil fuel use in Canada peaks in 2019 before declining or standing still. In the higher carbon price scenario, fossil fuel use declines eight per cent more than in the base case, and in the technology case scenario it falls 13 per cent more.

But in all three, average economic growth is forecast to be around 1.7 per cent a year. That projection assumes the carbon price is returned to Canadians through grants or lower taxes and that most developed nations raise their carbon prices, too. It also believes oil production will continue to grow despite lower use of oil within Canada amid demand.

In any scenario, wind energy production will at least double and solar energy output more than triple over the next quarter century, the board projects. It also expects electric vehicle sales to grow to three per cent of all vehicles sales by 2020 and 16 per cent by 2040.

Milutinovic said the report is not a prediction because it’s based on assumptions that could change depending on domestic politics, global events, and new technologies.