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.