On carbon pricing, the Tories aren’t just battling Mulcair

In fact, on this issue the government stands against some of the biggest players in global energy

Recently I had the interesting experience of sitting across a board table from a formidable expert on energy and environmental policy as he confidently predicted that putting a price on carbon is an inevitable, indispensible tool in combating climate change.

This expert was neither NDP Leader Thomas Mulcair, who is vilified by the Conservative party in a new attack ad this week for espousing carbon pricing, nor David McLaughlin, head of the National Round Table on the Environment and the Economy, the federal advisory body the Tory government is summarily disbanding for having had the temerity to advocate carbon pricing.

No, the confident, Swiss-accented voice I listened to in that Ottawa hotel meeting room overlooking the Rideau Canal belonged to Peter Voser, the chief executive officer of Royal Dutch Shell, the world’s second biggest company (after only Wal-Mart in revenues, according to Fortune, and, in case you were wondering, a notch above Exxon Mobil).

Among other things, Voser was telling me about Shell’s plan to embark on a fairly ambitious project at its Alberta operations in what’s called carbon capture and storage, or CCS. With CCS, instead of releasing carbon dioxide from oil and gas operations into the atmosphere, where the emissions contribute to global warming, that CO2 is converted into liquid and pumped underground to be sequestered indefinitely in porous rock formations.

It’s not a climate-change panacea, but a promising concept. “The technology could—,” says the International Energy Agency in this report, “if governments commit to specific policies—account for nearly one-fifth of the emissions reduction required to cut [greenhouse gas] emissions from energy use in half by 2050.”

But why would any company go to the considerable expense of CCS when it could just continue releasing CO2 up smoke stacks for free?

Voser’s answer is that carbon emissions won’t be free forever: governments must put a price on them. Shell is so certain of this, he told me, that the company already assumes that a $40-per-tonne price will be imposed within three decades, and therefore doesn’t proceed with any project that wouldn’t remain profitable when that extra price is imposed.

I included part of his answer in a Maclean’s interview published earlier this month. But given the renewed debate around Ottawa these days—especially with the release of that anti-Mulcair ad— thought more might now be interesting. “If you want to achieve certain climate change goals, CCS has to be part of that solution,” he said. “Therefore I think it is up to industry and to the governments to make this happen, and you need the right frameworks to actually do so. So you need a carbon price mechanism.”

I asked why Shell would press ahead with emissions reduction projects before actually being forced to by binding regulation. After all, he has shareholders to worry about and profits to maximize, right?

“As with many other research and development initiatives which we have, we want to push this early to gain the experience,” Voser said. “There are not many places in the world where you have [effective carbon pricing] now. But we think in 30 years it will be part of the business model.”

His viewpoint is widely shared. The logic behind carbon pricing—most likely either a tax on fossil fuels or a cap-and-trade system that allows companies to sell emission permits back and forth—is powerful. Government would make it expensive to pump out CO2, but leave it to private-sector players to figure out the cheapest ways to cut emissions. All other regulatory approaches look clumsy by comparison. This is basically the case argued for several years by the National Round Table on Environment and Economy, much to the annoyance of the Conservatives.

They are now taking a surprisingly rigid position against any form of carbon pricing. Based on what Environment Minister Peter Kent recently told CBC’s Evan Solomon, the Tories no longer oppose only the broadest form of carbon tax (as proposed Stéphane Dion is his disastrous 2008 election run as Liberal leader), but also the cap-and-trade option, which use to be in the Conservative platform (it’s on page 32 here).

I should stress that Voser did not wade in on Canadian politics, and did say he supports the federal government’s push to streamline environmental approval processes for energy projects. Still, on the fundamental question of carbon pricing, it’s worth noting that the government isn’t just scrapping with opposition politicians and environmental policy wonks—they’re also standing against the corner-office perspective of at least one of the very biggest players in the global energy business.




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On carbon pricing, the Tories aren’t just battling Mulcair


  1. Shell is so certain of this, he told me, that the company already assumes that a $40-per-tonne price will be imposed within three decades, and therefore doesn’t proceed with any project that wouldn’t remain profitable when that extra price is imposed.

    JG, this is spin. If you were undertaking an investment decision today (2012) and you were forecasting prices for oil/gas 40 yrs out as well as operating costs and NOW a $4o/tonne carbon tax in 2042, it will have NO impact on the investment decision, due to discounting and NPV.

    It’s purely PR.

    Recommended reading – Private Empire, ExxonMobil and American Power.
    http://www.amazon.ca/Private-Empire-ExxonMobil-American-Power/dp/1594203350

    I personally think it portrays EM in a favourable light, but the latter chapters focus on the change in CEO/corporate strategy on Climate Change from “Iron Ass” Lee Raymond to “Boy Scout” enthusiast Rex Tillerson (who embraces a carbon tax knowing the Congress is in no mood now to pass anything related).

  2. The thing is that CCS is not an adequate solution as the oil still gets burned and emits GHGs – better to switch to clean energy as quickly as possible

  3. The Feds are again coming to the defense of Alberta on CCS. Here is an index to the graphics and project overviews on Alberta’s CCS
    dreams:http://albertathedetails.blogspot.ca/2012/03/ccs-carbon-capture-and-stodrage-index.html

    Alberta’s plan for CCS is much different than the popular graphic of slugging CO2 into the lower aquifer!

    One project, Trans Alta was the only one on the board who
    was going to attempt to put carbon dioxide into the lower, un-potable aquifer.
    I supported them on the net in their efforts. They have since cancelled the
    project leaving none to date who are trying to do what the graphic indicates!

    It is difficult and expensive to capture the pure carbon
    dioxide. Because of this it is best done during the build of the plant rather
    than a partial dismantling and rebuild at a later date.

    Albert has said they would use the gas to augment the
    recovery of oil from mature fields. As it is there is about 30% of the oil left
    in the ground that is said to be uneconomic to recover.

    This 30% is what they want to use the captured CO2 for. CO2
    is a solvent which will suspend and/or thin oil and leach it from the strata.

    Because of this excellence it is being looked at for as a
    solvent for the shale drilling.

    What is wrong, is articles like this that put forward the
    idyllic graphic as if it were the only way things are being done.

    Weyburn Saskatchewan used carbon dioxide captured in North
    Dakota. It was piped to the Weyburn oil fields where it was tested as a solvent
    to augment the return of oil to the surface. There was talk of it being
    sequestered but that was short lived.

    In the Alberta scheme the carbon dioxide will be collected
    (taxpayer expense) transported in pipelines (taxpayer expense) and pumped down
    hole into the existing oil where, being a liquid carbon it will mix with the
    oil allowing both to be brought back to the surface.

    In the Weyburn experience the gas boiled off the oil as it
    was brought to the surface. This resulted in reports of gas escaping from the
    line for hours sounding like a jet engine before the oil appeared, still
    boiling off CO2.

    In Alberta’s plan the taxpayers will pay for all the
    infrastructure and the oil companies will take the profits.

    If however, the Feds can put a price on C02, they can “invest” in the Alberta CCS project selling it on the idea it all stays down hole which is simply a lie!

    You will recall the Saskatchewan family who’s livestock died probably because of CO2 exposure. At that time Alberta brought in its laws governing CCS. Neither the Government or the Oil Companies can be sued for any mishap having to do with CCS; perceived or otherwise.

    The whole deal is still another Conservative Scam balanced between two levels of Government. You can’t do any thing about the Alberta Conservatives but you can do something about Harper and his crew.

    • Yeah it’s nothing more than a pipe dream: an unfeasible technology being developed (using truckloads of taxpayer dollars) to give the appearance action is being taken to stall the progress of real action.

      The price to capture a ton of CO2 using this process would cost more than a carbon tax. So when the bugs are eventually worked out and the technology is ready to roll, oil corporations will reverse their position and begin to fight tooth and nail against CCS (based of its prohibitive costs.) Red herring.

      • Not all CCS technologies are very expensive. Biochar is low-tech, low capital way of sequestering carbon in soil.

  4. Good point. Harper’s despicable strategy is to demonize environmental responsibility. So its up to New Democrats and Liberals to boil down and communicate economic realities like these to Canadians to kick-start a rational debate on the issue.

    They also need to point out the folly of Harper’s “economic action plan” which is to go all-in on bitumen and make Canada a dirty-energy safe haven. This backwards and shortsighted vision is doomed to fail on many levels: a) in this century developed nations are forging ahead with innovation-based economies; we risk getting left behind; b) although we are presently in a commodities boom, this could easily turn to a bust like in the mid-1980s; the price of oil only needs to stay below $80/barrel to make oil-sands oil unprofitable; c) countries that move ahead on greener-energy economies will punish dirty-energy ones with tariffs; d) as the world moves forward on greener energy sources, the price of oil will drop; in fact, new green-energy technologies could emerge (like thorium reactors) that would make oil irrelevant.

    Canadians need a balanced, forward-looking economic strategy. Putting all our economic eggs in the resource-extraction basket is a very dangerous move.

  5. Clean energy? Obama put laws in place that demand imported energy has a substantial green element. This prompted oil companies to buy up windfarms or make them if none were for sale. Prices of our electricity jumped to make all this wonder profitable.

    On the other hand, Obama extended the Operating Licenses for their Nuclear plants by 10 years with options to extend their life beyond that depending on safety inspections. I happen to agree with all this.

    What it did was allow the US to increase their green ratio on their power as Nuclear energy counts heavily on the Green side, as it should.

  6. The operators in our oil sands have known for years that some kind of carbon tax would apply to them. Conservatives are not totally opposed to this, but know we have to match whatever the USA does. Their EPA won today on CO2 emissions.

    “The court in Washington, D.C., gave the Environmental Protection Agency almost everything it wanted in the 82-page ruling on Tuesday. A three-judge panel unanimously upheld the EPA’s central 2009 finding that greenhouse gases such as carbon dioxide endanger public health and likely have been responsible for global warming over the past half century.”

    The problem with cap and trade:

    “A lawyer for a Maryland man accused of selling $9.1 million in fraudulent renewable energy credits says his client isn’t guilty because buyers knew they were fake.”

    http://www.abc27.com/story/18817522/defense-buyers-knew-renewable-credits-were-fake

    • Sure sounds like the government is totally opposed to carbon pricing.

      Agreed that carbon tax is the way to go. Cap and trade is just too easy to defraud, game or lobby your way out of.

  7. I think The National is on now so I think I’ll go watch some addies with
    Oilcos pretending to be Greenpeace. So nice.

  8. So the CEO of Royal Dutch Shell thinks a carbon tax is a good thing. Do you think that means RDS would make more or less profit after a carbon tax is applied? They get to add another “cost of doing business” into the price of their product, and thus increase the price their selling it for. The government collects more taxes on the increased value of sales.

    A carbon tax will be very profitable for energy companies, and governments. It will only negatively effect consumers and small-medium sized business.

  9. Business model???
    The business model is that 100% of any carbon tax will become a business expense that will be passed along in full to anyone purchasing the product. That is the business model being used in Australia which will institute a carbon tax on July 1/ 2012. The difference is companies will be collecting it on behalf of the government. Electrical rates have already been approved to jump @ 30%, fuel is expected to have a basement price of $1.50/ liter and so on.
    The carbon tax scheme is entirely a new tax class designed to be passed on to the consumer, another government gouge out of citizens pockets. To look on it as anything else is to be deluded. To expect it to reduce carbon production is also delusional with ONE exception, and Shell has found it.
    Shell may well be planning to exploit a new methodology to ‘clean up’ it’s enormous footprint in the tar sands and it is designed to improve the public perception of the truly ‘dirty oil’ produced in the tar sands.
    The really cool ‘you owe me’ part of it all is that the company has added a twist that makes it look like they are voluntarily stepping up to reduce their carbon footprint. You can rest assured your stock investments are safe with Shell though, 100% of the costs will be passed along to the end use consumer.
    In the end, 100% of any expense to mitigate carbon production and 100% of any tax will be passed along to end use consumers, the ‘cool twist’ part is that using some of those costs to actually reduce the carbon footprint in places with a horrible public image will make the product seem more presentable… A huge bonus for a company like Shell in a place like the tar sands.
    The bottom line is that ALL costs will be paid for by average citizens anyway.

  10. Did anyone miss the fact that he expects the tax to be around in 30-40 years? That does not mean rit now, as Mulcair is pushing for. . .

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