By Andrea Zanon

Last year, both the United States and Canada have increased their oil and gas production, reaching record targets and profits. In fact, in December 2023, the U.S. became the largest oil producer globally, with 13.5 million barrels of oil produced per day (BPD). In early 2024, Canada produced 4.9 million barrels per day, becoming the fourth-largest oil producer behind the U.S., Saudi Arabia, and Russia. Both countries are expected to hit new records in 2024, with 14 million bpd and 5.4 million bpd, respectively.

While the politics of oil and climate are colliding, we should expect more green growth investment from both countries. In the U.S., the Inflation Reduction Act (IRA) is expected to generate US$1.2 trillion in clean technology (cleantech) investment, including cross-border renewable energy projects, carbon capture, and electric battery investments. In Canada, initiatives such as the Pathways Alliance has proposed a $16 billion carbon capture project, the largest in the world, though the first phase can be executed only with Canadian government financial support and by addressing some financial risks. While initiatives such as this are not nearly enough to correct these carbon intensive economies, they are positive longer-term efforts to decarbonize North America.

The energy transition and market shift

At COP28, hosted by the United Arab Emirates, the 7th largest oil producer in the world, the managing director of the International Energy Agency (IEA) stated: “The clean tech transition is unstoppable.”

According to the IEA Energy Outlook 2023, investments in clean energy and technologies surpassed investment in fossil fuels last year. Globally, over US$3 trillion was invested in energy in 2023, with more than US$1.8 trillion invested in clean technologies, including renewables, electric vehicles, nuclear power, efficient grids, storage, low-emission fuels, and heat pumps.

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This investment shift is influenced by geopolitical concerns and energy market shocks, pushing nations to prioritize energy security and reduce reliance on politically motivated fossil fuels suppliers such as Russia. There are also strong policy incentives such as the IRA and the European Union (EU) Green Deal to incentivize business to invest in decarbonization projects.

Canadian initiatives and investments

According to the federal government, the country’s climate investment gap is $120 to 140 billion annually to reach net zero by 2050. The sustainable economy researchers at Corporate Knights estimate that 80 per cent of the climate mitigation investment (roughly $126 billion per year) should come from the private sector by 2030. At a macro level, Canada has prioritized 470 large green-growth projects for an estimated investment of $520 billion. These projects are either planned or under development over the next 10 years, with 183 projects utilizing clean technology, representing potential investments of $116 billion.

On the Venture Capital (VC) front, Canada is leading in cleantech ventures, despite a global decline in VC investments since 2021. With only 0.5 per cent of the global population, Canada ranked fifth among nations for cleantech investment between 2021 and Q3 2023, surpassing the U.S., China, U.K., and Germany. The average investment was higher than global, with investment appetite geared towards growth companies such as Eavor, OMV, OYA Renewable, and CarbonCure, companies that have secured VC funding in the 71-200 million dollars range. This positive momentum is a strong signal of Canada’s commitment to sustainability and clean energy in the startup space.

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Next steps needed to power the transition

In the short term, both Canada and the U.S. seek to maximize their oil and gas natural resources, and in so doing, become the energy suppliers of choice. This is particularly important during this time of geopolitical tension in Central Asia and in the Middle East, where both countries are helping stabilize energy markets addressing EU supply deficits.

As these initiatives materialize, the U.S. will leverage its IRA to subsidize its own transition to a less carbon intensive future and attract hundreds of billions of cleantech investment. Canada should follow suit to ensure that its oil and gas revenues are reinvested towards the green transition and thus meet the net zero decarbonization targets by 2050.

Andrea Zanon is an Environment, Social and Governance (ESG) strategy and resiliency advisor who has advised ministers of finance and over 100 global corporations on how to develop more resilient countries and societies.

Featured image credit: Getty Images

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