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Letter from Canada: Alberta’s petchems strategy could backfire

The Kenney administration seems to be ignoring any warning signs on future demand growth

The Alberta government has tried numerous times to diversify away from oil and gas since the oil price shocks of the 1970s made the industry the mainstay of the provincial economy. Most efforts were dismal failures—including a mobile phone company, a hazardous waste treatment plant, a pulp mill and a magnesium smelter.

Those failures have led to recent administrations pursuing other avenues to diversify the economy within the energy sector itself, in particular the petrochemical industry. The provincial administrations of Premier Jason Kenney and his predecessor, Rachel Notley, have rolled out several programmes to encourage companies to build new plants in the province.

Edmonton appears to view them as ‘no lose’ projects, given tremendous growth of the global petchems industry over the past half century, and the expectation of continued strong growth in the future. For example, the IEA estimates global plastics production has increased more than tenfold since 1970, almost 60pc greater than global GDP, with this trend projected to continue through to 2050.

C$1.73bn – Cost of Petrochemicals Diversification Program

The Kenney government is so confident about the future of plastics that it has not even placed a spending cap on its latest programme, the Alberta Petrochemicals Incentive Program, a 10-year grant programme announced in mid-July. The cost of the first phase of the Notley government’s Petrochemicals Diversification Program was C$625mn ($435.5mn) and the second phase, which Kenney agreed to continue, was C$1.1bn.

Backlash

But what the Alberta government fails to consider is that the IEA may be wrong, and the global plastics industry may become a victim of its own success. As plastic waste volumes have soared on land and sea, a global anti-plastics movement has taken off. “The most astounding thing about the anti-plastic movement is just how fast it has grown [since 2015],” Stephen Buranyi wrote in UK newspaper The Guardian more than 18 months ago, more than enough of an interval to shake lawmakers out of any complacency.

Leading the charge is the Plastic Pollution Coalition, a growing global alliance of individuals, organisations, businesses, and policymakers working towards a world free of petro-based plastic pollution and its toxic impacts on humans, animals, waterways and oceans and the wider environment.

Based on research by NGO the Ellen MacArthur Foundation, 5-13mn t of plastic pollution ends up in the world’s oceans each year—where it is ingested by sea birds, fish and other organisms. By 2050, the organisation warns, the oceans could contain more plastic than fish, based on current trends continuing.

The first wave of action against petchems has focused on single-use plastics, which, according to BP, represent about 15pc of the industry’s output. A number of countries, states and municipalities have already banned the use of plastic grocery bags, including China as far back as 2008, while a number of organisations are beginning to ban single-use plastics on their premises.

If the government wishes to diversify the provincial economy within the energy sector, it may be better served supporting blue hydrogen

Plastic bottles used for water and soft drinks are also being targeted. Almost 482bn plastic bottles were sold around the world in 2018, and, despite being highly recyclable, less than half were collected for recycling and just 7pc of those were turned into new bottles. Most plastic bottles end up in landfills or in the oceans. In response, NGOs are promoting a so-called circular economy for plastics bottles – a 100pc rate of recycling and reuse.

A combination of bans on, at the very least, single-use petro-based plastics; substantially greater rates of recycling; and the potential for technological breakthroughs to substantially bring down the cost of biodegradable, non-toxic bioplastics could seriously retard global petchems growth in the coming years and decades.

Edmonton is to release a blueprint for the province’s natural gas and petchems industries later this summer. If the government wishes to diversify the provincial economy within the energy sector, it may be better served supporting blue hydrogen—produced through a combination of steam methane reforming and carbon capture, utilisation and storage—reported to be just a sub-component of the blueprint, than the petchems industry.

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