Will North America Become the Next Saudi Arabia?

Yesterday, three American, Canadian, and Mexican energy experts discussed the potential for North America to become the world’s next major energy superpower. The event, hosted by New America’s Future Tense project, highlighted the unique advantages of the three North American countries to compete in a changing global energy landscape.

Hector Moreira, Director of the Energy Model for Mexico Initiative at Arizona State University and former Mexican Under Secretary for Energy, said that electricity generation will soon become the primary sector for energy usage, a trend that will accelerate with the shift to more electric vehicles. By 2040, the bulk of electricity generation will be dominated by renewables and natural gas.

As a result, Moreira argued, this new energy paradigm will favor countries with large natural gas reserves, a strong automotive industry, a solid research base, and entrepreneurial capabilities. North America is one of the few regions of the world with all four of these factors.

The U.S., Canada, and Mexico have similar natural gas reserves as Saudi Arabia, an integrated automobile industry, great research institutions and universities, and an entrepreneurial-friendly economy. Furthermore, natural gas in North America is a fraction of prices in Europe, Japan, or China, giving the continent’s economies, particularly their manufacturing sectors, a major competitive advantage.

But the emphasis on natural gas in the electricity sector creates a second layer of challenges for leaders of the three countries. How do you reconcile the temptation to exploit the continent’s significant hydrocarbon resources with the need to reduce carbon emissions?

Canada’s oil and gas sector accounts for 15% of the country’s GDP, but is also a major source of the country’s carbon emissions. In Mexico, natural gas fracking is seen as a “golden parachute” for the country’s economy, according to Moreira, despite the potentially significant environmental risks fracking poses. And despite the Obama administration’s emphasis on renewable energy, it’s been the increased production of unconventional oil and gas in North America that has allowed the United States to reduce its reliance on foreign oil, and what oil it does import has shifted away from countries like Saudi Arabia and towards more stable countries like Canada.

At the North American Leaders Summit earlier this year, U.S. President Obama, Canadian Prime Minister Trudeau, and Mexican President Peña Nieto pledged to get 50% of the continent’s electricity from clean sources and reduce methane emissions by 40-45% by 2025. This is an uneven challenge for the three countries. Canada, with its bounty of hydroelectric power, already gets 59% of its electricity from clean sources, while Mexico and the United States have a tougher task ahead to achieve that goal.

Laura Dawson, Director of the Canada Institute at the Wilson Center and a former senior advisor on economic affairs at the U.S. Embassy in Ottawa, highlighted the summit as an example of the need for U.S. leadership on climate. Though Prime Minister Trudeau has placed a greater emphasis on climate change mitigation than his predecessor, Prime Minister Harper, the United States remains the single country that can make the impossible possible. Dawson said that while Canada is very good at incremental policy making, the United States’s policy advantage is in taking giant leaps forward, meaning that progress on climate will be halting and slow without U.S. leadership in the next administration.

Sharon Burke, a Senior Advisor for Resource Security at New America and former U.S. Assistant Secretary of Defense for Operational Energy, highlighted the connectivity of North America’s energy sectors, in primary energy, refinement, and distribution to market - another reason cooperation between the three countries on energy is so crucial. The panel discussed ways to further improve this level of cooperation, including better integrating the continent’s electrical grids and gas lines, and setting a coordinated price on carbon emissions.

You can watch the full video of the event here.