Securing Canada’s energy future – Part 4

Broader benefits of a Canada-Asia energy relationship

July 7, 2012

EDITOR’S NOTE: A recent study released by the Asia Pacific Foundation of Canada and the Canada West Foundation argues that Canada’s approach to energy should be more clearly based on its national interest, not a collection of private interests. It therefore calls for the establishment of a framework that will bring into play the interest of not only the private sector and federal and provincial governments, but also First Nations governments, communities and environmental interests. This backgrounder was written by Yuen Pau Woo, from the Asia Pacific Foundation of Canada and Roger Gibbins, with the Canada West Foundation.

A clear case has been made for the alignment of Canada’s interest in security of energy demand with Asia’s quest for security of energy supply.

The current misalignment can be seen most vividly in the price differentials that exist between North American and Asian oil and gas markets, which present an immediate opportunity for trans-Pacific oil and gas exports. Alignment of Canadian and Asian energy interests, however, should extend to all forms of energy cooperation, drawing on the diversity of energy assets and expertise across the country.

The opportunities for market development by Canadian firms in Asia are immense, whether it is oil and gas and/or its associated expertise in the Western provinces, Atlantic Canada, and the North; hydroelectric and nuclear expertise in Ontario and Quebec; uranium assets in Saskatchewan; coal assets in various parts of the country; or expertise in energy conservation, renewable energy sources, carbon capture and sequestration, and clean technology in all parts of the country.

While the benefits of energy exports to Asia are obvious for the regions and companies involved, there are broader benefits that can accrue to Canada as a whole. These include:

â–  Royalty payments that enable provinces to support health, education, and other social programs that Canadians care about.

â–  Tax revenue for federal and provincial governments to provide high quality public services.

â–  Revenue streams for First Nations communities to provide services to support economic development and new job prospects.

â–  Expanded energy trade with Asia could lead to a broader expansion of goods and services trade between Canadian firms and new Asia customers, given the extensive upstream and downstream linkages between the energy sector and other industries. Indeed, Canada is well known for its engineering, energy and environmental services expertise. The spin-off business from expanded energy trade would benefit every region of Canada and promote greater trade diversification in terms of both markets and products.

â–  Energy exports to Asia would help redress a very large trade imbalance, especially in the case of Canada-China trade. Although Canadian trade with China has grown in absolute terms over the past decade, Canada’s share of China’s total trade is around 1 per cent, well below Canada’s share of global trade.

â–  Commodity trade with Asia could encourage Asian investment in the future development of the Canadian resource sector, including renewable energy, and possibly in the infrastructure needed to connect Canadian resources to international markets. These kinds of long-term partnerships have the potential to extend well beyond resource extraction into technology sharing, research and development, and third-country cooperation. A recent example is the announcement by Hitachi to partner with SaskPower on a $60 million Carbon Capture Test Facility, building on the Japanese company’s longstanding investment in Canada’s energy sector.

â–  Given the strategic importance of energy, an expanded Canada-Asia energy relationship could be a game changer in Canada’s relations with Asia; it would provide a compelling reason for Asian powers to take Canada and Canadian interests more seriously, thereby opening the door to broader diplomatic, economic, and social/cultural benefits.

The magnitude of the Canada-Asia energy opportunity, the scope of its impact across many industries and regions of the country, and the breadth of potential economic and social benefits for all Canadians underscores one key message: the goal of a Canada-Asia energy relationship cannot rely solely on the efforts of individual firms and projects. There is truly a national interest in pursuing a broad-based Canada-Asia energy relationship, and hence an urgent need for national leadership.

Of course, balancing these benefits are risks that could manifest as costs, notably concerns over oil spills, both small and large, that could impair traditional, societal and economic values in sensitive and unique ecosystems. Project impacts during construction could also result in impacts on the ecosystem, leading to unintended economic costs. Finally, emissions associated with the production and transportation of oil and gas exports will increase both GHG and air pollutant emissions. Responsible development of Canada’s energy resources involves balancing the economic benefits of increased exports with the potential domestic environmental risks, including the health and well-being of affected communities downstream.

Yuen Pau Woo is the President and CEO of the Asia Pacific Foundation of Canada and Roger Gibbins is the President and CEO of the Canada West Foundation. To download a complete copy of their report click here.

This backgrounder is FREE to use on your websites or in your publications. However, Troy Media, the Asia Pacific Foundation of Canada and the Canada West Foundation, with links to their web sites, MUST be credited.

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