We can’t build pipelines and meet our climate goals

Jason MacLean takes on those who argue a carbon tax will be enough to reduce Canada’s emissions, and lays out a path to meet the Paris climate deal targets


 
Emissions are released from a smokestack at the Teck Mining Company's zinc and lead smelting and refining complex in Trail, B.C. THE CANADIAN PRESS/Darryl Dyck

THE CANADIAN PRESS/Darryl Dyck

A physicist, a chemist, and an economist are stranded on a desert island. They’re starving. When a can of soup washes ashore, our lost professors are jubilant, until they realize they don’t have a can opener. What now? “We could drop it repeatedly from a tree until the impact forces it open,” suggests the physicist. “Or we could build a fire and heat the can until it bursts open,” offers the chemist.

“No, no, no,” counters the economist, that’s too inefficient. “Instead, let’s assume a can opener.”

Get it? Assume it’s funny, and read on.

University of Calgary economist Trevor Tombe argued recently that we can build new oil pipelines and still meet our climate goals under the Paris climate agreement by relying on carbon pricing alone, which he argues is cheaper than blocking new pipelines. However, Tombe’s thoughtful and good-intentioned economic model rests on a number of critical—and highly questionable—assumptions which, once brought out into the open, can’t be sustained or relied on.

MORE: Policy, not pipelines, will determine if we meet our goals

Before critically examining Tombe’s assumptions and then setting out a proposed path to Paris without new pipelines, a brief word of clarification is in order. I’m not against economic models per se. But as Harvard economist Dani Rodrik explains, “it is perfectly legitimate, indeed necessary, to question a model’s efficacy when its critical assumptions are patently counterfactual.”

Tombe’s first critical assumption is that the implied opportunity costs of oil producers—which are purely notional, and not actually borne by anyone—can fairly and meaningfully be compared to the very real costs of carbon pollution and climate change that we’ll all pay—and pay dearly—if we make the wrong climate policy choices. When the oil and gas industry’s foregone opportunity costs are included in the policy mix, blocking new pipelines certainly appears expensive. But major oil producers can and should look after themselves by mitigating their potential losses in a carbon-neutral future. Say, by investing in alternatives to fossil fuels. Yes, costs matter in policy-making, but not all costs matter equally. When it comes to crafting a Canadian climate policy in the public interest, the public’s real costs matter. The oil and gas industry’s hypothetical costs due to foregone opportunities and imprudent investments do not.

Tombe next assumes that whatever carbon price is actually required to shift production and consumption away from fossil fuels to renewable energy (Tombe doesn’t say what he thinks that price is, he merely cites some “random numbers”), political leadership will be sufficient to implement it. This assumption flies in the face, however, of decades of woefully insufficient political leadership on the environment in Canada. This problem has been firmly established, time and again.

RELATED: No, carbon pricing alone won’t be enough to lower emissions

Tombe’s suggestion that Conservative leadership candidate Michael Chong’s advocacy of a carbon price of $130 per tonne (likely still too low) is evidence of sufficient political leadership isn’t especially compelling. Ask Liberal supporters what campaign promises are worth, or Trump supporters in the United States, who are about to find out. We can’t simply assume a high enough carbon price in Canada any more than we can assume a can opener on a desert island.

Nor can we simply assume it will be possible to successfully “advocate for more international action.” Would that it were so simple! Remember Kyoto? Copenhagen (i.e., Brokenhagen”)?

Tombe further assumes that without a new pipeline to tidewater, the climate-friendly Alberta NDP government will fall to its anti-climate rivals. But what does this say about Tombe’s faith in the sufficiency of political leadership to implement an efficient carbon price? And what are we to make of the fact that even the federal Minister of the Environment and Climate Change doesn’t think a carbon price alone makes sense? Our governments are more likely to pretend their policies are sufficient than confront what’s really required. They will have to be compelled to do what’s necessary. Unfortunately, that’s easier assumed than done.

Tombe proceeds to effectively assume that the Paris climate agreement will fail—that’s the only way to make sense of his claim that all forecasts “point to substantial increases in Western Canadian [oil] production.” But this simply isn’t true. The International Energy Agency (IEA) models the global oil market under a number of conditions, including the scenario in which governments implement policies consistent with the Paris agreement’s objective of keeping global warming below 2° C above the pre-industrial average and stabilizing the atmospheric concentration of carbon at 450 parts per million. In this “450 Scenario,” the IEA forecasts a peak in oil demand as soon as 2020 and a permanent decline thereafter, in which case we’ll have little need for new pipelines.

Finally, Tombe rightly acknowledges that climate change “is a problem.” But he maintains that blocking pipelines is not the solution. “Such efforts,” he argues, “may distract from good policy at best, and jeopardize it at worst.” Like most economists, Tombe assumes that “good policy” is ideal, efficient policy. But climate change is not merely a problem, it’s “a global emergency.” In an emergency where we have little-to-no margin of error, and where ideal solutions are not realistic, we have to pursue a precautionary mix of second-best policies whose goal is not economic efficiency, but real-world effectiveness (more on this below). The second-best solution to the can of soup problem, after all, is not the most efficient, but it nonetheless succeeded in actually opening the can.

The path to Paris without pipelines

Okay, then, what is the path to Paris if we say no to new pipelines—including Kinder Morgan’s Trans Mountain pipeline—and thereby imperil the political life of Alberta’s climate-friendly NDP government? The following five steps will be critical.

First, per article 4.4 of the Paris agreement, we have to undertake “economy-wide absolute emission reduction targets” by imposing a moratorium on new pipelines while implementing a national carbon price and a suite of flexible, clean energy regulations of the sort adopted with success in jurisdictions like California and Norway as convincingly advocated for by economist Mark Jaccard. This is far preferable to an incoherent sector-by-sector approach to implementing Paris that allows Alberta’s oil sands production and GHG emissions to expand while saddling the rest of the economy with making drastic, unrealistic emissions cuts.

Second, we must convince our political leaders to explain to Canadians once and for all that we have to phase out fossil fuels, but also make it perfectly clear that while this does not mean going off oil overnight, it does mean that we can no longer afford to build—and lock-in for decades to come—new oil pipelines.

Third, we must also compel our political leaders to make it clear to Canadians that just as municipalities and First Nations do not have a veto over particular natural resources projects, neither do provinces have a veto over national climate change policies. Whether Alberta’s climate-friendly NDP government survives the next election is of no moment. Even if an anti-climate provincial government emerges in Alberta, it won’t be able to prevent the federal government from moving forward on this file. As University of Ottawa law professor Nathalie Chalifour’s clear and comprehensive legal analysis shows, the federal government has ample authority under the Constitution to pursue pan-Canadian climate change policies, with or without the provinces’ consent.

Fourth, we must immediately make good on our 2009 G20 commitment to eliminate subsidies to the fossil fuels industry, which exceed $3 billion annually in Canada and which surpass subsidies to the renewable energy industry by a perverse ratio of four to one. This is critical to jump-starting the transition to a decarbonized future, and would create the kinds of good, green middle-class jobs that will be key to winning elections, particularly if this reinvestment strategy were paired with a comprehensive federal strategy aimed at achieving sustainability.

Finally, we need to heed the cool-headed advice of The Economist, which in its latest special report on oil argued that “the world needs to face the prospect of an end to the oil era.” To do so, we will have to answer The Economist’s existential question: will we “deal with climate change by researching and investing in alternatives to fossil fuels,” or will we “fight with gritted teeth for an oil-based future?”

Jason MacLean is an assistant professor at the Bora Laskin Faculty of Law at Lakehead University.


 

We can’t build pipelines and meet our climate goals

  1. Yeah, we can have it both ways. Those who are not in support, sell your cars, turn off your furnaces and stop buying merchandise that is oil based. Put your ideology where your mouth is and it will all balance out.

    • We have other fuels The oil age is over.

      • Komarade E1 would that be Unicorn Farts or Pixie Dust….Oh just so you know Trump announced today He’s Pulling out of the Paris Accord….

      • Right….so what are they? Not only would I dearly love to know what those other fuels are, that will replace oil on a one to one basis, but what will replace the extremely significant contribution oil and gas make to the national economies?

        So what gets cut when oil revenues go down? With oil prices down, all of a sudden mighty Ontario, (a so called have not province since 2009), will be paying transfer payments.

        Alberta has donated 200 BILLION dollars to the Canadian coffers since 2000. So what replaces that money? What do you give up? Health care? Welfare? Infrastructure? Education?

        I think it’s time for Alberta to really turn off the taps to the money pipeline and give the rest of Canada a real taste of what a pipeline free Canada buys.

        • Appreciate the reasoned and passionate debate, Jason MacLean… but seriously, move to the U.S… where the real battle lies

    • what is so bizarre is that none of the analysis talks about the impact on the economy, immediately or in the near future. Where is the transition strategy if oil is so bad. We know people are going to be very upset when they see health care, education, and other gov’t programs reduced significantly because there is severely reduced revenues to support current programs. Few will be happy when the airports are shut down and food supplies are severely limited…at least in Canada. Lets start putting the whole picture together..not just carbon counting…What govt study is talking about freezing in the dark?

  2. I have actually worked out what the subsidies are to the oil and gas industry and they are nothing like $3 billion. Most of those $3 billion are from the tax treatment of Canadian Exploration Expense, Canadian Development Expense and various Royalty deductions. There might be $1 billion in support to CDE – I’d argue there is nothing for CEE and with oil prices at $50 it is tough to argue that our royalty rates are too low. $1 billion sounds a lot until you compare it to the amount industry pays on development and exploration every year. It amounts to white noise and even if you got rid of it, there would be no measurable impact on future production and therefore GHG emissions.
    Pipelines are an indirect and not particularly honest way to get at the issue either.
    Imho, we need to stop thinking that our future prosperity is tied to increased oil sands production. We should tie it off a 4.0 mmbd and leave it at that level. Which might be the case anyway, if prices stay stuck at $50/barrel.

  3. Regarding a $130 carbon tax, I would have thought that would pretty effectively kill the proposed LNG development as well as future in situ oil sands development. I don’t really get the argument that we don’t have the political will to implement that but we do have the will to have a NEP II over fossil fuel development and pipelines while implementing a series of regulations targeting various fossil fuel consumers like refining, mining, pulp and paper, iron and steel, smelting, electricity production and so on. The issue for me is that we are talking a major overhaul of every aspect of our economy. And this overhaul is to be guided by government, which has trouble purchasing fighter jets and can’t implement an overhaul of its pay system. I don’t mean that in any partisan way – government bureaucracy has not shown itself to be very effective. And I am a retired bureaucrat.

  4. http://www.sciencemag.org/news/2016/09/hundreds-new-dams-could-mean-trouble-our-climate

    Are we going to get rid of hydro dam energy as well? Are we going to stop consuming petroleum products as well as stop producing them? Are we going to stop building jet planes and cars that run on fossil fuels? To promote the use of fossil fuel consumption is pretty hypocritical in light of the terrible outcome of global warming. If we are going to walk the talk, let’s go all the way. Take the leap.

  5. Why would anyone want to eat out of a floating can of food? That would mean that the bacteria is growing inside and would surely kill you from eating anything that came out of that floating can. We as humans need 3 basic necessities to survive, clean air, clean water and clean soil. We have to control carbon and methane output and it’s up to individuals and how they spend their money, either on low or no emission products (including the entire process to make the product) or products that spew carbon or methane into the atmosphere throughout their evolution to make the product and throughout the lifetime of the product. However, the government needs to lay out a climate friendly infrastructure in order to make these goals achievable with as minimal a phase in period as possible. Even if everyone turned to eating beans, you still need to plant, cultivate and harvest enough beans to feed everyone on the Earth. What happens when they start farting from all the beans? How will all that methane be processed by the atmosphere without creating global warming?

  6. None of you folks keep up with the news much do ya….

    Actually all you ever do is repeat the same old oil mantra.

    Sorry, it’s over

    • http://globalnews.ca/news/3119035/extreme-cold-weather-snap-contributes-to-3-electricity-records-in-alberta/?campaign_id=A100

      Really? It’s over. I say thank gawd we have natural gas given this lovely Canadian winter we are experiencing. Otherwise, we would be like those in Northern Ontario….paying so much for heat that we could not afford to eat. Has it occurred to you EM that Canada is still a cold winter country despite global warming and none of you folks have figured out a way to store that wind or solar energy….hence the reason you are selling to the US on the cheap. Given that everyone in southern Ontario is using Natural Gas to heat their homes, your claims are absolute BS. We do keep up with the news…right here on this blog.

      • Well Gage…..I gave you a second chance….but nossir you’re too busy attacking me to understand the topic

        You wouldn’t know ‘reality’ if you fell over it.

        Bye bye
        .

  7. Alternate energy will only do a partial job until the battery storgae problem is solved. Problem is, greenies do not understand technology. No one wants windmills in their back yard because they cause health problems. Windmills cost 2-3 million each installed and you still must connect them to a grid. Solar panels will not work at night and they also must be connected to a grid. Anyone who understands technology knows you do not shut down one engine unless another is ready to roll out as soon as the initial one is shut down.

    • In fact, Emily One has it correct, and you are dead wrong. Large integrated energy networks solve the down-time issue, and renewables are already cheaper than oil (check last week’s Economist). And argh, the old saw about wind turbines having health impacts…not true.
      For someone supposedly versed in technology, you seem strangely adverse to seeing the future and planning for it. Oil is done. We should be implementing the transition.

      • https://en.m.wikipedia.org/wiki/Petroleum_product

        Oil is done? What about the 6000 products we make from it that don’t include fuels? Are they done as well? Meanwhile, you have not explained how jet planes will be flying? How hydro dams are environmentally friendly with methane emissions. How it is that Trump will turn his back on 20 billion barrels of oil under Texas shale? Could we deal in reality vs. You and Ms. Wynne’s fantasy?

  8. Instead of speculating why do you not ask McKenna what the plan is and then review the plan to see if it is feasible. The goal should be to wean ourselves off carbon but a realistic plan needs to be formulated and followed.

  9. Idiots!
    A “Carbon Tax” is NOT intended to reduce pollution.
    It is, and always has been, an opportunistic cash grab, by a cynical government.

  10. My goodness, what a load of drivel in the comment section of this article! I found the article a much needed dose of fresh air.

    While we are clearly in the beginning of end of the oil era, nobody’s going to starve or freeze, if we play our cards right and energetically (pun intended) start moving on the transition NOW. Yesterday would have been better, but people resist change, making the change more difficult when reality takes over and forces the issue, as we’re now starting to see.

    Strong investment by the private sector, coupled with support from governments will make this transition happen, but only when industry finds it is blocked from the old habits and easy money associated with the old oil-investment paradigm. When this realization filters into the market place through repeated blocking of oil pipeline projects, investments in oil sands failing due to inability to get product to market, arctic drilling moratoriums, local governments blocking fracking, blocked tanker port projects etc. the private sector will start to look on the huge opportunities elsewhere in the sustainable energy sector with increasing favour. As was pointed out in reader’s comments, we all need energy, and if industry can’t make money selling us petro-based energy without incurring huge risks of failure, whey will increasingly find a way to develop and sell us energy from acceptable sustainable sources. This all will take time to develop, but what kick-starts the process is cutting off the old paradigm.

    Currently sustainable energy sources are under-developed and the technology is in its infancy. However, these technologies are rapidly improving with significant reductions in cost and increases in efficiency, even without the major investments in research required to really turbo-charge development. There is no single silver bullet technology that is going to replace oil; it will be a mix of new technologies that over time will increasingly replace petro-energy. These investment opportunities also provide huge opportunities for quality job creation, so it pays the individual to anticipate this inevitable change and start to retool skill-sets to take advantage of this coming trend, and get job experience with the early innovators in the sustainable sector. These are the companies of the future. Jobs in the sunset oil industry will increasingly be subject to salary freezes, reductions, layoffs, and regions relying on these industries will increasingly be subject to economic busts.

    We also need to leverage the ability of emerging new energy systems to sustain our lives with major consumption reductions. This process involves life-style changes which can improve, not diminish quality of life. With initial success, I have worked to make this an ongoing personal priority, and I urge readers to use their personal energies to make these commitments as well. You really can make a significant difference both personally and as a leadership example to others.

    Get with the future folks, or be left behind. In a climate of change, you will either thrive or dive. Make it a personal commitment to be in the former not the later camp!

    • I agree with almost everything you have written except for one vital fact. The oil sector represents 30% of Canada’s economy so anything that interferes with this industry is going to severely limit funds available to fund green energy research and development (and education, health care etc etc). Of course it will be a mix of new technologies that replace oil, however I am sure you have noted, possibly with exception of solar, that the green fringe is opposed to almost all viable alternatives (nuclear, dams, windmills) – so it won’t be a walk in the park getting any of these projects approved. Oil will have to be around for a few more decades while the transitions take place. In the end it will make no difference if the rest of the planet, specifically China, India and the US) does not buy in to green energy.