Recession benefit: Alberta can pause and rethink the oil sands
COMMENT: Jeffrey Simpson argues that Alberta (and the companies) should use this opportunity to clean-up tar sands production. Not for moral or environmental reasons, but because if they don't do it, the US will impose carbon charges on tar sands bitumen anyway.
But will China? Or does Enbridge's Northern Gateway (and Kinder Morgan's Trans Mountain Expansion) find itself with a new "business case" whereby tar sands producers, Alberta, and Canada can duck carbon liabilities and still find a market for the stuff without cleaning up their act at all?
BC, too. Gordon Campbell's "energy corridor" which is essentially the Northern Gateway pipeline route to the west coast, is being heavily promoted by his government, most egregiously being government purchases of equity in these projects for first nations (which not surprisingly were announced mid-election).
This shouldn't be a provincial decision. It belongs in Ottawa, the only place where national energy policy and national environmental policies can be harmonized.
Simpson asks whether anyone in government or industry will seize the day. Not willingly. With Harper, and before long, Ignatieff, at the helm, this ship of state appears destined to avoid real carbon action for some years to come. Obama's carbon policies may be the only force great enough to make us behave.
See also:
Kitimat project could be worth more than $1b to first nations
The Waxman - Markey Bill - Will the US and Canada go Head to Head?
China's environmental hot air and hypocrisy
Jeffrey Simpson
Globe and Mail
Wednesday, May 27, 2009
Any new approach should be based on the simple premise that reducing emissions is the cost of doing business
Alberta has an extraordinary opportunity, one it did not wish or seek, but one that could revolutionize the province's future.
The opportunity, paradoxically, is being provided because the recession has slowed down, or halted, oil-sands projects, previously the fastest-growing source of greenhouse-gas emissions in Canada.
Instead of rushing toward exploiting the sands as quickly as possible, with all the attendant environmental problems, Alberta can now reconsider the pace of development and, more important, establish a new set of rules that will reduce emissions.
When former premier Peter Lougheed suggested a go-slow approach several years ago, the industry and government paid him no heed. It turns out he was customarily prescient. The recession is giving the government the chance to do what he recommended: pause and rethink.
If Alberta takes this unexpected opportunity, the province can shield itself from the various threatening environmental measures now being developed in the United States. Instead of responding belatedly to U.S. actions, the province can get in front of those actions and be a leader, rather than a follower, in the fight against global warming.
At the moment, Alberta's principal policies against greenhouse-gas emissions are a $2-billion investment in carbon capture and storage (CCS) and a $15-a-tonne tax paid into an investment fund by emitters of more than 100,000 tonnes of greenhouse gases a year. (There are also incentives for renewable energy.)
These two policies are inadequate for the province with the most emissions in Canada. The CCS projects, the first of which will be announced shortly, will not soak up many emissions, and the per-tonne cost will be sky-high. The $15-a-tonne tax is far too low, because companies would rather pay it than reduce emissions.
The result, pre-recession, was that Alberta's emissions were set to rise 14 per cent by 2020, while everybody else's in the Western world were set to decline. The province would be a sitting duck for retribution under those circumstances, even if the government didn't believe it, preferring to waste $25-million on a public-relations campaign in the United States.
Alberta's new approach should be based on a simple premise: Reducing emissions is the cost of doing business. It's not an afterthought or what economists call an externality, but a bottom-line cost to companies that will be passed on to consumers. Put another way, the afterthought becomes a bottom-line cost of production. If Alberta (and Canada) doesn't do it, the Americans will, through carbon tariffs, a cap-and-trade system or barriers to selling oil from the sands.
The aim should be what the Canadian Energy Research Institute, based in Calgary, calls “green bitumen.” CERI is not a wild-eyed environmental group, but rather an institute funded by private companies and governments.
The CERI report is both simple and complex. The simple part says the status quo is not sustainable. The oil sands cannot continue to be developed as they have been, and as they were going to be developed pre-recession. The environmental costs of business-as-usual are too high; the disincentives to pollute are so low.
The complex part is setting a price for carbon that will make it more economical for companies to comply with regulations (or carbon caps) than avoid them by putting money into a technology fund. That will certainly mean a per-tonne price above $15, rather something like $60.
And it will mean using technology, much of it expensive, to provide power for oil-sands development, including small nuclear plants, more carbon capture and storage and other technologies. The costs for these technologies will be high, but no higher than the cost of reducing emissions, if those emissions are properly priced as a cost of doing business.
Maybe CERI's cost estimates are too optimistic; maybe its modelling is based on shifting, and therefore unreliable, assumptions; maybe by mentioning the word nuclear the report will wax ears.
But the objective is right: to revolutionize policy so that emissions become a real cost of doing business, a bottom-line factor, with the objective of bringing about real reductions, not slowing down increased emissions, the premise of existing policy that leaves Alberta so exposed.
The cliché saying that from crisis - in this case, the recession - comes opportunity was never more true than today in Alberta. Will anybody in government and the industry seize the day?