June 12, 2006

Energy poised to become industry's next top-of-mind environment issue

By: Colin Isaacs

Canada's environment debate has shifted to an energy debate that promises to have an even greater impact on industry.

Recalculations of energy needs in Ontario, a poorly planned climate change strategy in Ottawa, a looming national debate over nuclear power, growing concern in Europe over the impacts of the oil sands developments, and energy shortages in the U.S. and Asia making export of Canada's supplies very attractive, will be among the multitude of factors that can lead in only one direction: much more expensive energy for Canadian industry.

Energy is in many ways a subset of the environment debate. The vast majority of our energy supplies today are non-renewable. Extraction, processing and use of energy causes most of the pollution about which global society is increasingly concerned.

Energy, once seen as being in almost unlimited supply, is about to become a major constraint to the growth of companies and economies. Industries that consume large amounts of process energy face a particularly challenging situation. Wind and solar sources cannot provide reliable process energy in the quantities needed by large users of electricity or fossil fuels.

Federal and industry projections show that natural gas supplies will tighten significantly over the next decade. There is substantial public resistance to increased use of coal, which is in any case a cumbersome and dirty fuel for an individual company to manage.

Biofuels, from wood and wood waste, agricultural products and wastes, and municipal wastes are a promising new source of energy but there are inevitable limits on supply and many of the technologies are still in the new and emerging category.

The most promising approach for any company is a re-engineering of its processes and operations to dramatically reduce energy consumption. Companies need to study every aspect of their operations to find any and all points where energy use can be reduced or eliminated.

New energy-efficient process technology quickly becomes cost-effective when companies are faced with a doubling of energy prices, as is likely to happen within the next three to five years. Use of recycled feedstock almost always reduces life cycle process energy requirements. Hence a company's plan for continued success in an energy-constrained future must not only look not only at processes, it must scrutinize the entire life cycle of its product system.

Individuals and families will quickly adapt to much higher energy prices, albeit with much grumbling. Industry, however, needs a far longer lead time to adapt.

If doubling of energy prices could put you out of business, you should already be investing in energy use reduction strategies. Energy prices triple those of today are not so far away.

Colin Isaacs, head of the CIAL Group and publisher of the Gallon Environmental Letter, reviews environment-related trends in policy (government and corporate) and legislation for ELW. Comments may be E-mailed to cisaacs@compuserve.com.

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