Cheap oil and climate change spell opportunity for energy giants: Don Pittis

This story is part of apackage of special coverageof climate change issues by CBC News leading up to the United Nations climate change conference (COP21) being heldin Paris from Nov. 30 to Dec. 11.

"They can makea silk purse out of a sow's ear" sounds like an admiring remark from your grandma. But when it comes to facing up to somethingostensiblybad and turning it into something precious,there is no one better equipped thanthe complex of Canadian companies and researcherscurrently suffering from plunging oil prices.

After another brief revival, there are new signs that oil will notbounce back any time soon. There also are signs that the world may be on the verge of actually taking climate changewarnings seriously.

But if it plays its cards right, the Canadian energycomplex is ideally placed to profitfrom the move from carbon fuels to high-tech, low-carbon energy. It should publicly celebrate the fact.

• Canadian dollar sinks below 75 cents US as oil flirts with $40 US
• Allegations ExxonMobileused Big Tobacco tactics on climate change

Until now, a large contingent within the North American oil industry has been playing a defensive game, dismissing the science of climate change and pressing for lax carbon laws. For a decade, they pressed for more and more oil development.

As a long term business strategy, that has turned out to be a dud.

Persistent glut

The oil glut persists. Profits are falling.The International Energy Association says oil prices may not start to rise till after 2020.New York investors are betting that oil will remainbelow $49US untilNovember next year. Others are betting oil will go muchlower yet.

It may be that our perceptionin Canada has been distorted by the recent change of government, but there is a feeling that the global moodonclimate changeis shifting. If industrialized countries really face up to the realitythat places such as the naval base atNorfolk, Virginia and large parts of the Netherlands are in danger of flooding, they may take action.

A significant tax on carbon will not only continue to hold down the price of carbon-based fuels, but it will boost the value of investments in non-carbon alternatives.

Unless some radical new science suddenly disproves the majority view on human-caused climate change, non-carbon energy is the future.And there is no one in the world with more ofthe skills and the smarts to profit from a low-carbon future thanthe Canadian oil and gas industry, largely centredin Alberta.

To many ofitscritics, oilpatch investment in wind and solar has seemed like greenwashing. That's when a known polluter uses advertising and public relations to make itself look clean and green.

• Remembering when BP was green, like its ads said?

But there is no question the oil industry has been investing in green energy. Iogen,an Ottawa-based leader in using enzymes to turn wood scraps and straw into alcohol fuel, was supported for years by Canadian taxpayers. It was bought by Shell and its operations moved to Brazil.

Edmonton's Capital Power has operations producing energy from solar, wind and coal. Suncorhas a stake in green power. In fact, according to a CBC investigation, it is hard to invest in Canadian green technology without investing in the industries that extract or burn carbon fuel.

• Difficult to invest in green energy in Canada without Big Oil

That makes it hardfor Canadian investors wanting to divest from coal, oil and gasto put their money into a pure non-carbon play.

New growth business

Whether that fossil fuel industry investment was originally part of some sort ofnefarious strategy or based on altruism, the move has given Canada's oil and gas sector an inside track ona new growth industry.

Different energy technologieshavemany points of crossover. Managing electricity from coal plants is like managingenergy fromsolar. After it is produced,electricity is all made of the same stuff.

A Calgary company that built its expertise in natural gas tanks transferred those skills to hydrogen fuel. There is no reason other Canadian companies, expert atproducing and transporting gas, cannot do similar things.

The current main source of hydrogen is natural gas. Who better to invent more efficient ways ofmaking the conversion than oil and gas engineers and chemists.

Government and industry could offer a series ofmore focusedprizes, similar tothe Carbon Xprize, to stimulate and reward breakthroughs. The Alberta university and research sector are already dense with energy expertise.

Piece of the future

Despite all the current gloom over the fossil fuel business, there's a lot of steam left in oil and gas. Even once Canada develops an effective way of pricing carbon, fossil fuels will remain crucial to the economy for decades. As in any business, the most cost-efficient producers will continue to be profitable. That depends on technology, too.

But if the Canadian energy industry wants to get a piece of the future, they must gently push the pro-carbon dinosaurs to the sidelines and celebrate their technological advantage.

In fact, Canadian oil and gas companies could turn an instant profit byspinning off green energy divisions into separate stock listings while retaining a major stake. In the age of carbon divestment, stocks in well-run, low-carbon businesseswill sell at a premium.

On the world's stock markets, the value of a company is not based on the boring pastbut the prospects of a brilliantfuture. If it can do the job right, Canada's energy industryfuturesparks withpotential.

Follow Don on Twitter@don_pittis

More analysisby Don Pittis