Thank you, Mr. Chair.
I'd like to thank the committee for inviting me.
Before I give my opening remarks, I'd like to make clear that my expertise is mainly in Canada's energy system. I'm not an expert in international relations or the Ukrainian or European energy system. That said, as we all know, energy systems are obviously interconnected. In that sense, I think I can contribute to the committee's study in a useful way. I should also say that I didn't get the committee's invitation until just recently, so my presentation may not be as well-thought-out as it could be.
Russia's invasion of Ukraine has had a profound impact on the global energy system. First, it created uncertainty. Then, embargoes were put in place, somewhat rebalancing fossil fuel distribution. For many countries and many regions, the situation underscored the importance of reducing their reliance on Russian fossil fuels, as well as their overall reliance on foreign energy.
At the end of the day, this crisis may not have led to a significant reduction in overall demand, but there was a reduction in the fuel produced by Russia in 2022‑23. Nevertheless, a major reduction was not observed globally. Instead, the world saw a redistribution of resources. Countries that had imposed embargoes turned to new suppliers, leaving oil for countries that had not imposed embargoes and could therefore access Russian oil at a discount. Production levels remained more or less unchanged owing to the shift in costs and energy reliance relationships, if you will.
In North America, the direct impact of the crisis on the price of fuel, other than oil in the rather short term, was limited. However, it allowed North America, especially the U.S., to position itself as the world's top exporter of liquefied natural gas, or LNG. This had a transformative impact on international trade since the U.S. had not been a major player in the sector prior.
Canada, for its part, didn't really benefit from the transition. Canada actually has few LNG terminals in the works, and most of them aren't very far along. A witness said earlier that the LNG Canada project would be going ahead soon, so in about two years. Canada's situation is such that it wasn't able to take advantage of or support the transformation. The details have yet to be laid out.
Europe is in transformation. In reducing its reliance on foreign energy, Europe has accelerated its energy transition measures. The focus is shifting to more reliable countries. The European countries are turning to Morocco for solar energy and green hydrogen. The push is also on to find other sources of fossil fuels, like LNG in the U.S. Nevertheless, the European Union is still Russia's number one customer for natural gas.
Finally, access to cheaper fossil fuels in China, India and other countries that are benefiting from Russian oil could have the opposite impact that we're seeing in Europe. With cost pressures being more limited, the energy transition could potentially slow down.
How are these issues impacting Canada? LNG import infrastructure is a bit late to arrive. I think it's too late to increase the number of export locations because LNG terminals present certain challenges. We're a bit behind other countries.
As for producing and exporting green hydrogen, Canada has some agreements in place. The structural work is still at a very preliminary phase. Could Canada position itself in that market? Potentially, yes, but it's not clear whether the revenue would be worthwhile. In a landscape where everyone is trying to increase their renewable energy independence, the same supply chains are likely to come under the same pressure in these infrastructure sectors around the world. Since Canada produces relatively little renewable energy infrastructure, it will have a hard time meeting its own climate targets.
Europe is working to decarbonize its energy system and paying a lot to do so. That pressure will lead to Europe's carbon tax on imports being deployed sooner. Unless Canada moves quickly towards decarbonization, it could be impacted.
Thank you.