Thinking through Canada's climate change position - Macleans.ca
 

Thinking through Canada’s climate change position


 

Yesterday I posted remarks from Environment Minister Jim Prentice at a news conference, in which I thought he framed the Canadian government’s position on climate change with admirable clarity. Prentice made three key points:

1)    Canada’s population and economy have grown too much since 1990, the benchmark year for the Kyoto climate change treaty, to expect steep emissions reductions in this country from that starting point;
2)    Compared to the European countries that are leading the push for tough emissions-reduction targets this week in Copenhagen, Canada is bigger, colder, and faster-growing—and therefore EU aims don’t make sense here;
3)     Canada’s government is not willing to sign on to any target that could only be achieved with “inordinate economic costs.”

Having let Prentice’s explanation, which sounded reasonable enough, stand for a day or so, here are some observations about his argument.

On rejecting 1990 as a starting point, I’m inclined to cut Prentice and the Conservatives some slack. After all, it was the Liberals who signed the Kyoto accord that made that Year 1—and then they didn’t do anything to fulfill Canada’s commitments under the deal. So it seems a bit much to blame the Tories who inherited the obligations much later.

Yet Prentice isn’t making exactly that point. Instead, he’s suggesting Canada’s population and economic growth since 1990 would have made cutting emissions impossible no matter what party was in power.

But I don’t see how growth rates over time are the issue—it’s per person output of greenhouse gases today. The average Canadian pumps out about three times as much as the average Swede—another cold country with a fair bit of geography. Are basic conditions here so different that a Canadian has no choice but to burn two or three times the fossil fuels of a rich European?

On the matter of “inordinate economic costs,” it’s hard to know exactly what level of emissions reductions would really hurt in terms of Canada’s standard of living. Depends how efficiently the cuts are achieved (a carbon tax would promote the lowest-cost cuts, but, unfortunately, that option has been deemed politically impossible).

But maybe looking at what’s economically palatable isn’t the way to go about this. Maybe we should consider what’s environmentally necessary. To prevent dangerous climate change—limiting global warming to no more than two degrees above pre-industrial times—most climate scientists call for emissions cuts of between 25 percent and 40 percent by 2020 compared to 1990 levels.

Based on that science, the EU parliament, for example, backs a 30 percent reduction by 2020 from 1990 levels. No doubt, agreeing to that sort of target would pose an extraordinarily difficult challenge for Canada—as Prentice warns. After all, emissions here are already about 30 per cent higher than 1990 levels. Thus, the Conservative government’s much less ambitious target of 20 per cent less greenhouse gas output by 2020, but down from a far higher 2006 baseline.

Under the Tory scenario, then, Canada’s per capita emissions gap compared to rich, northern European countries continue to widen. At the same time, a gulf would open between what science tells us we must do and what we’re willing, based on a calculation of economic self-interest, to try.


 

Thinking through Canada’s climate change position

  1. "But maybe looking at what's economically palatable isn't the way to go about this. Maybe we should consider what's environmentally necessary."

    Absolutely we should. That's what this is all about. But Stephen Harper has made it clear that he cares more for short-term economic concerns than medium-to-long-term environmental disaster: http://www.bloomberg.com/apps/news?pid=20601082&a

    It looks like "leadership" but it's a coordinated plan to do nothing for as long as possible.

  2. I have a question:

    We've heard lots of politically expedient statements about building "green infrastructure" and promoting "green energy" that allows for the creation – and continuity – of thousands of "green jobs".

    But taking drastic steps to reduce our carbon emissions (etc) would potentially destabilize our economy, the way that it is currently structured (being a resource-rich country and all…)

    Am I the only one who sees an inherent contradiction in those two statements? I understand that wind and solar power are markedly less efficient and more expensive than our current resources, notwithstanding current and near-future developments in the technology. But if we're able to create lots of jobs by developing infastructure that will ultimately lead to reduced emissions, how is that destabilizing our economy?

    • Where to begin?

      LynnTO. Canada's economy is almost exclusively export based. Most of our exported products are competive because they are energy intensive, we have abundant cheap energy. Think aluminum. massive amounts of electric power required to smelt aluminum, many high paying jobs as a result. In many of these industries, one of our biggest competitors is Brazil. Brasil is "developing", so for years gets a free pass under the Copenhagen deals under consideration. Substantially increasing the price of electricity, renders our aluminum industry uncompetitive, ergo bye-bye the jobs, consumption and taxes which that industry generates. If all our economy was domestic, your theory might not be so shaky, but it isn't. This is one tiny example. There are dozens.

  3. Remember, destablization means change, not ruin.

    In any period of change there are people who do very well, and people who do very poorly. And unfortunately, in any period of destabilization there will be a period when things are very bad — as the old way becomes non-viable and before most people have made the required adaptation — before they get better.

    Personally, I hold no illusions about that. Going to a green economy will benefit us. It will make our economy stronger, and it will place us in a better position in the long run. But it will be by no means painless.. not by a long shot.

  4. Except the oil sands are not the primary driver of the economy for Canada. Alberta maybe, and our fault for making it so, but not Canada.

  5. My gut reaction is that saying oil sands emissions should be separated from Canadian emissions as a whole is like saying Alberta, Saskatchewan, and Newfoundland should be separated from Canada as a whole – or that the portions of Canada that rely on oil heating for their homes should be separated from Canada as a whole. That's an entirely different sack of potatoes.

    That said, I agree with your point that the geography isn't quite comparable: Our population density (2006) was 3.4 people/square km and Sweden's 20.7 per same.

  6. So you think Alberta should be permitted to continue to belch out pollution, while the rest of us pay extra to offset the mess? What is so special about the tar sands that they deserve special treatment?

    Imagine for one second that your proposal was reversed: Canada plans to go slow on reducing carbon emissions nationally, except in the tar sands where we will crack down hard. Think about the caterwauling from Alberta politicians. Why would your scheme be acceptable to the rest of Canada?

  7. I think the practically reality is that any emissions strategy that demolishes the oil industry won't happen.

  8. A Canadian economy that is devastated cannot afford to implement "environmentally necessary" cuts even if it wanted to. This is not a political argument; it is an economic argument.

  9. But I think if you look at the concentration of Canada's population in the south, we're quite comparable in terms of density. There's much more to it than simple counts of population divided by area of land.

    And certainly nothing to explain why we produce triple the greenhouse gases per capita.

  10. Ok, but 1) you're assuming the oil industry must be "demolished" in order to cut greenhouse emissions

    2) you're assuming that a plan to favour the tar sands at the expense of the rest of Canada's economy and standard of living is somehow going to be acceptable.

  11. Well put.

    And of course, destabilization is going to happen to us via climate change. We can work now to mitigate its effects or we can go into it unprepared and reactive.

  12. And our economy assumes a stable climate as a foundation.

    You want to see economic devastation? Sit back and let climate change happen. See what happens to the global economy then.

  13. And if what Prentice meant by "inordinate economic costs" was "economic devasation", I'd be agreeing.

    However, I expect what he means by "inordinate economic costs" are a pissed off Suncor board of directors.

  14. I also think that separating the oilsands from everything else would allow something to be done instead of doing nothing for another ten or twenty years as it would impact on the oilsands. I agree that once we've started making an effort elsewhere, we can look to what can be done regarding the oilsands. The oilsands, alone, don't cause Canadians to produce three times the greenhouse gases as our Swedish counterparts. Nor does our geography, alone, account for the discrepancy. I'd say if we got to where the Swedes are today without the geography and oilsands in the equation, we'd be making a responsible improvement. As it is now, we're doing squat besides justifying our inaction.

  15. Separating AB, SK and NLfrom Canada as a whole has neatly described the basics of the Bloc position on Canada's environmental policy.

  16. I'm not sure how to interpret your comment.

    You do realize that I wasn't seriously proposing harsher standards for the oil sands. I was flipping YYZ's proposal on its head to demonstrate its political difficulty.

    I don't harbour resentment of my fellow Canadians and I think it's tragic that such resentment has been nurtured in Alberta by callow politicians looking out for their own self-interest.

  17. Why not have a plan to excempt the oil industry all over the globe…sure that'll work…i can hear China saying coal is our oilsands, we want ours too. What might help is if Canada was to agressively attempt to eliminate coal as a fuel souce[ still used extensively in AB] There are other issues with the oilsands, such as water quality. For folks like me who live downstream of Fort Mac it's a growing worry…there are new studies that show[ claim] the AB govt's record on this is a very sorry one indeed.

  18. I think the provinces are already making that separation happen. We'll see how serious they are, but there is some movement at the provincial level toward reducing greenhouse gas emissions.

    I think it's politically impossible for a politician to tell Canadians that Albertans get a special pass because they make so darn much money from their pollution. So Harper is either going to put special rules in place by stealth, or he's going to stall the whole effort for his entire political career.

  19. 1) Canada's population and economy have grown too much since 1990, the benchmark year for the Kyoto climate change treaty, to expect steep emissions reductions in this country from that starting point;

    So has the world's population grown since 1990. Canada (2005-2010) is ranked 134th out of 220 countries according to wiki at 0.9% per yr, below the world average of 1.17%
    http://en.wikipedia.org/wiki/List_of_countries_by

    The growth in the economy argument is way too simplistic. It depends upon in what sectors growth is occuring. If commodity prices double overnight, GDP from that sector essentially doubles. The corollory of high growth in income from specific industries (energy resources), reflected in GDP numbers, is that more money is available to abate emissions through new processes, technology, and the introduction/enforcement of regulations.

    2) Compared to the European countries that are leading the push for tough emissions-reduction targets this week in Copenhagen, Canada is bigger, colder, and faster-growing—and therefore EU aims don't make sense here;

    Most population growth in Canada occurs in big cities – therefore the per capita consumption should trend downward, all other factors remaining constant. And this concentration of population should lead to economies of scale – not economies of sprawl.

    3) Canada's government is not willing to sign on to any target that could only be achieved with “inordinate economic costs.”

    More weasel words – inordinate. To whom? Shareholders?

  20. Agreed. Part of the con strategy on this [ helped along by folks like TY] is to portray change as a zero sum game…it's intelletually dishonest.

  21. This is not a political argument; it is an economic argument.

    It's just gibberish based on the fallacy that one economic input cannot under any circumstances be replaced by another. That happens all the time. In fact, you reading this on a computer monitor instead of a sheet of newsprint is a perfect example of it. It's inarguable that the internet is killing off the dead tree versions of media and that is having an impact all down the line, but it hasn't resulted in any sort of devastation to our economy as a whole. The same will apply as we move beyond fossil fuels.

  22. i'm not at all familiar with how the Copenhagen negotiations are structured so bear with me:
    Would it have made more sense to have different categories of negotiations. Set one hard target for the first world and have them horse trade on how it can be reached…each country say getting appropriate consideration for its curcumstances…yet the target must be binding. In other words think of the industrial world as a whole, and not treat Canada just like Germany.
    Have the developing nations abide by different critera that they have established…again with an eye to hard targets. I'm not necessarily advocating purely statist solutions…but i wonder if having everyone negotiate under one umbrella is the way to go? I realise that
    In all probability these sorts of questions are already being addressed at Copenhagen

  23. Well, I think we're going about it the wrong way. Give every Canadian carbon-dollars, as it were. Instead of targeting the industries, target the individual. An Albertan gets the same number of carbon-dollars, except they also get a special heating allowance or whatever since their province doesn't have the hydro resources other provinces have. Same with northern residents who have to fly in everything. But you're going to have to plan your trips in the car, (if you want to fly somewhere maybe taking a bus for a few weeks ahead of time will give you the carbon-dollars you'll need) put a sweater on, turn off the lights when you leave the room, that sort of thing. And your hairdresser might find more eco-friendly hairdryers so she can charge you less carbon-dollars, as your lawyer will have to turn off his computers and most lights at night, etc. Oh yes, it will create a whole new industry as each individual household will be required to know exactly how much greenhouse gases they are actually using–but don't we want to increase employment? Anyway, just a thought.

  24. That wouldn't work because not all the developed countries accept the premise that the developed world should bear the brunt of the costs. That certainly isn't the position of either of the North American countries. At any rate, this is really a negotiaion between the US and China (and maybe India). Since everyone knows the EU is going to regulate anyways and Canada will ultimately have to do at least as much as the US agrees to do they don't really matter in terms of negotiating. Really, they should just send everyone home and lock the Americans and the Chinese in a room until they reach an agreement.

  25. Oil companies in Alberta are completing globally as part of an international market. If we chop them down at the knees, it will or at least could cripple Alberta's economy.

    Meanwhile, individuals have a lot of choice around how they heat and cool their home, and most people can be a helluva lot more efficient than they are today with a minimal (if any) sacrifice in lifestyle.

  26. So I didn't make the argument too well but I'm not proposing that we ignore the oil sands emissions – just that they need to come down at a different pace.

    Further — the solution to reducing the global demand for oil is entirely based on demand. Global solutions focused on renewable power, electric cars, etc. etc. are the longer term answer to get us off oil.

    I actually wouldn't have a problem with a phased in Cap and Trade or Carbon tax that still penalizes oil producers but gives them time to figure out how to emit less CO2.

    As an aside, I found it a bit mysterious that a so-called Conservative government favoured intensity targets but not a carbon tax which was effectively a market-based solution.

  27. Absolutely agree with both of your points. I think we have different levels of pain tolerance…I'd slow down (not eliminate) the pain for Alberta's Oil Industry.

  28. All my comments above by the way are spoken as a Torontonian…

  29. "Really, they should just send everyone home and lock the Americans and the Chinese in a room until they reach an agreement"

    From a strictly reapolitic pov that seems eminately sensible. But do you have any faith that they would hammer out an agreement the much of the rest of the world could live with? Any one getting the US and China to come to an amicable and effective agreement gets my nod for a noble or something like it. Hmmm, wonder who that person could be. Right now i believe he's busy riding on the US's coattails.

  30. Nobel…pun unintended.

  31. Actually the overall economic cost would be twelve dollars.

  32. well, I meant to nest this under the Crit_Reasoning [irony] but for some reason it didn't work. Perhaps he put a firewall around his comments.

  33. McClelland managed to figure it out.

  34. Say, speaking of 1990 base line, do you know why Suncor (flagship of the oil sands) uses that year when it makes claims about how it has improved its GHG emissions rate to date?

  35. Shutting down the oil sands entirely, even if such a self-destructive and unlikely thing could be done, would reduce Canada's greenhouse gas emissions by perhaps 5%. That would still leave us about 25% above the 1990 baseline.
    Eastern Europe managed to lower their GHG emissions dramatically in the 90's – by allowing most of their industry to go bankrupt. That isn't a route any Canadian government can, or should, follow. I agree with you – the notion of shutting down the oil sands isn't going to fly.

  36. Because that's the baseline in the Kyoto Accord? Or is their some evil plot afoot that only you have had the cleverness to discover?

  37. The oilsands are Canada's single largest economic asset. 230 billion barrels in recoverable reserves is a lot of oil. Total capital investment in the oilsands already tops $100 billion.

  38. Nope. Please, enlighten us.

  39. Yes, and all thanks to the brave governments demonized paper and subsidized the computer industry.

  40. Darn it. Forgot the 'that" after government.

  41. Great point about Sweden. But then again Sweden isn't the second largest producer of oil in the world. We face monumental challenges and if we continue to grow the oil sands we will not be able to meet reachable targets. But sending Mike Holmes to the Copenhagen conference is a great distraction from the real problems we face.
    http://envirogy.wordpress.com/2009/12/09/holmes-o

  42. 1990 was a production nightmare. The plant was constantly freezing and shutting down. The company as a result was losing money – ie it was not economically viable.

    When you have freeze ups, shut downs, start-ups with little production going through, guess what happens? The GHG emissions per barrel goes through the roof.

    In fact, around this time (not sure before or after) Rick George (current Suncor Pres &CEO) was dispatched from the parent company, to sell off Suncor. Eventually, through retaining McKinsey and company (or other strategic advisors) and through the valiant efforts of their chief Ops engineer, Dee Parkinson-Marcoux, they streamlined operations, switched to shovel and bucket, and the operating times /throughput of the plant increased. And hence the GWG/unit throughput decresed significantly.

    So, when Suncor uses the 1990 baseline to claim they have improved energy intensity so many percent, it is not because of Kyoto – but rather they are using a false baseline – when the plant was not sustainable, and profitable, soon to be sold off/shut down. Had they used say a 1992 baseline, the numbers would not ne nearly as significant. Of course, on an absolute basis, their GHG emissions have gone through the roof.

  43. Mr. Prentice's remarks are, quite rightly, comparing us not with the developing world, which has its own challenges, but with western European nations – who are urging us to adopt their targets. He is right to point out that this creates an apples to oranges comparison. Sweden's population growth is 0.15% per annum compared with our 0.8%. Their net immigration is 1.66 per 1,000 compared to our 5.68. If we simply reduce our per capita GHG production as much as the Swedes to, we will still increase our overall production. Barring a decision to ban all immigration, Canada has to have different targets than those nations with static populations.__As well, Sweden may be cold, but its population is concentrated in a relatively small area in the south. Canada's population is increasingly divided between the Quebec-Windsor corridor and the population centres of Western Canada. That distance adds to our transportation needs, and our GHG emissions. __I don't think Mr. Prentice is saying anything other than some basic home truths. The nature of our country and its economy means our solutions to the GHG problem have to be crafted with our particular characteristics in mind.

  44. Dee Parkinson-Marcoux, of Gibsons, British Columbia, is currently a Director on the Boards of SNC Lavalin Inc. and Placer Dome Inc, and chairs the committees responsible for environment on both of these boards. She also serves as a director on the Sustainable Development Technology Canada (STDC) and Ensyn Energy Corp. She has over 25 years experience working as an executive for such companies as Imperial Oil Ltd., PetroCanada, Ontario Hydro, Suncor, CS Resources and Gulf. She is best known for leading change and for the transformation of Suncor Oil Sands Group from being a marginal operation to a highly profitable business. Ms. Parkinson-Marcoux was educated at Queen's University, graduating with an engineering degree in 1970 and a Masters of Business Administration in 1976; she received a Honourary Ph.D. in 1997.

    http://www.exec.gov.nt.ca/currentnews/prDetails.a

  45. So what, the tarsands don't need to be shut down. They only need to be cleaned up.

  46. Interesting, although I would have thought that if they were constantly freezing and had little production their release of GHGs would have been correspondingly lower.

    Anyway, of course parties to these arguments tend to cherry pick their statistics. Such is life. The use of the 1990 baseline by Suncor, however, makes eminent sense if you are trying to keep the comparisons with other industries reasonable. After all, we let the Europeans use 1990 rather than, say, 1999, although that lets them include the GHG emissions of the monstrously inefficient eastern European heavy industries that collapsed soon thereafter for reasons unrelated to the environment.

  47. So Dot, what is your personal opinion on what should be done with the oilsands? Shut them down? Cripple them economically and restrict future growth through hard caps and penalties?

  48. True, the absolute GHG releases would be lower, but the intensity would be higher (GHG/barrel) The GHG emissions mostly come from gas used to heat up the oil sands slurry. And, aside from the wasteful heat up/cool down/freeze/thaw usually heaters have optimal efficiency at a given design rate (throughput).

    Just making the point – the O&G sector uses 1990 when it is to their advantage, and discards it to their disadvantage. Prentice is doing the same thing with general statements and false analogies.

  49. I think your idea here is a useful thought experiment for people to conceptualize a Carbon tax, which would work on very similar logic and produce very similar results. If you want to use a more carbon intensive form of transportation that carbon-intensity would be reflected in the price (in real dollars) and you would have to be willing to spend the extra money to justify that; or if your hairdresser wanted to lower their prices one viable option would be to do what they could to be paying less carbon tax and then pass those savings on. Though on the surface the idea of having these transactions represented in a market with a separate currency seems psychologically desirable, it wouldn't be able to actually work like a regular market in that your hairdresser wouldn't be able to turn around and spend those carbon dollars you paid her (be they the same or lower than they were last time), she would be passing them onto the government which would recirculate them to people who saved emissions by using less heat or whatever, and so it ends up being essentially the same as the carbon tax. The carbon tax does carry the same benefit of being able to incorporate exemptions and rebates that you propose here. Finally, yes I do realize that the carbon dollars idea is essentially just like individual cap-and-trade, but, again, I think that at the individual level a carbon tax is easier, more sensible, and more efficient, while preserving the exact same logic in each transaction.

  50. Kyoto/Copanhagen targets are relative to your own baseline – so if Canadians, through access to cheap energy /taxes are wasteful, build huge houses, live in suburbs, and regularly fly-off to go skiing, visit the Carribean, and drive big cars, relative to the Swedes the reduction is much easier to accomplish.

    So, if Canada has per capita GHG emissions of 17.4 tonnes CO2, and Sweden has a very efficient 5.1, which country do you suppose has the most fat for cutting?
    http://en.wikipedia.org/wiki/List_of_countries_by

    The argument that we are too rich to cut emissions (our GDP has grown too much since 1990) is perverse.

  51. Prentice and Harper are continuing to play for time on this subject, and I interpret everything they say in that light. There is no intention to do anything beyond the bare minimum to maintain a viable relationship with the US economy.

    By quietly shifting the criteria as he had done, and by pointing out the logic behind it, Prentice has made it tough for any domestic critic (beyond the extremists) to mount a criticism. Canada is a big country with an extreme climate that is also a major oil producer – does anyone really think we are going to turn down our heating and stop the tar-sands for the increasingly uncertain goal of reducing CO2 emissions?

    None of this will be implemented, and what we see here is just some political posturing.

  52. Impose a significant carbon tax on them (say $100/tonne) as with the rest of the economy. We already know that relatively speaking, the O&G companies invest diddly squat in Canada on R&D (we had this discussion before on a wells blog some time ago).

    Calgary, in particular, has all the engineering skill and expertise to figure out how to produce/develop the resource in a more sustainable and responsible way. All you need is the financial incentives/penalties. It's the politicians and CEOs who are responsible short term to their shareholders who are preventing the renaissance.

    • If innovation is so easy, why don't we all have our own personal flying saucers by now? We should all have personal nuclear reactors that produce no waster. And perhaps we could have robots to do all our housework. All we need is the right incentives and penalties.

      • Have you ever been involved in a company where you have done project economics, s_c_f? If not, I'll take the time to explain to you the concept of diminishing returns when one is ranking options.

        • I understand the concept of diminishing returns. In fact, I expect that the oil sands producers are experts at it, and are trying at all times to improve the efficiency and productivity of their operations without sacrificing their bottom lines excessively.

          I expect that in many cases, imposing a tax on their operations will not necessarily cause them to find previously unknown efficiencies. I suspect that they have always been looking for such efficiencies, and that a tax would actually reduce their competitiveness, and in some cases, drive their operations into insolvency. They already have many incentives to reduce carbon output, because the amount of carbon emitted is proportional to the amount of resources consumed, and that in turn is a major cost for them.
          Unlike the situation with the auto industry, there currently is no magic bullet, like the catalytic converter, that can provide immediate results.
          I like the concept of reducing pollution, but to me taxation is not the vehicle. I prefer taxes to be applied fairly and equally (as is the case with income, sales and corporate taxes) rather than the government attempting become a central planner and to dictate behaviour as is the case with liquor, gas, and carbon taxes.

          • Let's say a new oil sands plant costs $10 billion and has a rate of return of 35% (based upon forecast prices and production rates). A go project as it meets the corporate hurdle rate of say 30%.

            Now, assume regulations are passed that for new plants, all emissions need to be capturd and sequestered. For argument's sake, assume it costs an addirtional $1 billion, and when you run the revised economics (including higher operating costs) the revised rate of return is 30.5% . Still a go project as it beats the corporate hurdle rate.

            Now, look at it a different way – you build the plant, first option, and the company makes a 35% rate of return – and the stock price goes up accordingly. Now, management recieves an AFE (approval for expenditure) to spend $1 billion to retrofit the plant for carbon capture and sequestration. It has a negative rate of return (a cost with no revenue)- essentially a tax. In the absence of regulation forcing them to install this equipment the investment won't be made.

            Now, in the absence of regulation, suppose a carbon tax is imposed. The economics change again. The business case becomes : pay the tax, purchase offsets at a lower cost than the tax, or invest in CCS and avoid the tax. If the economics are favourable enough (the tax is high enough), the company will invest in the CCS equipment of $1 billion.

            A case of using tax policy to drive investment that would not occur in the absence of regulation/tax.

            Got any specific examples where a company would be insolvent as a result of a carbon tax of $100/tonne or any other level?

          • or invest in CCS and avoid the tax

            You can't avoid the tax, there will always be a level of emissions. Secondly, CCS is totally unproven and experimental technology. Thirdly, he cost of CCS could very well exceed the tax, even if it does work somehow. You are simply assuming that these magic bullets exist, such as CCS, and they do not. CCS is still experimental and unproven.

            It's quite easy to give an example. All of these oil sands operations exist only because of the price of oil, which rose from $25 years ago to the higher price now of $70. At $25, none of these operations would exist. For every one of them, revenues would not meet costs at that price.
            There is a value of the price of oil, somewhere between 25 and 70, at which point the projects become economical. With a carbon tax, this value rises, due to increased costs, whether it is for the magical CCS or it is the tax, or both. You are increasing the risk. Because of this increase in risk, some projects will never get off the ground.

            Others that do pay these increased costs have less money for investments to reduce emissions, less money for new technology in general, less money to hire new workers, and are generally less likely to survive in the long run.

            This is all very basic economics.

          • 1. Alberta's Environment Minister was on CBC's The Current this morning claiming that the Canadian oil patch was the world leader in CCS, the technology was proven by virtue of the PanCanadian/EnCana operation in Saskatchewan. CO2 is produced from a coal fired generation plant in N. Dakota. You can't have your cake and eat it too.

            At $25, none of these operations would exist. For every one of them, revenues would not meet costs at that price.

            Nonsense. Suncor operated profitably for years before the price of oil shot up, and there were billions and billions of dollars of planned investment on the books. The reason capital and operating costs shot through the roof was a direct result of inflation due to out of control development. THAT is the principle reason companies took a timeout when the recession hit. You'll note money has started to flow again now that wages/costs have declined significantly.

            Yes, I agree, costs go up with added costs. The question is will it kill off ALL development? Nope. Not a chance. Will some marginal projects get delayed? Undoubtedly, therefore more incentive.

            Don't give me the predictable NEP b.s. talking points. Do you have any firsthand experience living in Alberta at that time, or experience in the oilpatch? Also, do you have the source for your quote?

            Here's my reply to properly put things into perspective for you:
            http://www.youtube.com/user/DotDunster#p/a/u/0/Op

          • Nevermind scf, I've found your source – the wiki entry for the NEP – obviously the western bias is showing through in the text. I can now see why you didn't provide a source.

            Your reference for bankruptcies was footnoted with a Statistics Canada report National and Regional Trends in Business Bankruptcies,1980 to 2005
            http://www.statcan.gc.ca/pub/11-624-m/11-624-m200

            Now, go have a look at the raw data , figures 3 – bankruptcies by region (notice how Quebec is way up there, as is Ontario relative to the Prairie provinces). Now, move onto figure 4-2. The NEP was repealed completely in 1986. So, why does the trend line for Alberta start rising in 1989 and peak in 1995, well above the height of the NEP years?

            Could it be that the price of oil and gas plummeted, and there was a recession?

            DUH.

          • If you depress an economy, the results will linger for years after. Have you noticed the state of Russia these days?

            The trend line rises because the business investment of the mid 80s never happened. This had a ripple effect on the entire economy that was not felt immediately.

            It's just like the fact that unemployment if peaking today, at the start of 2010, more than two years after the recession started at the end of 2007. It till be another two years before the effects of the recession are over.

            It takes time to recover.

            Additionally, all your talk about the peak of the bankruptcies misses the point. The point is that when compared to the rest of Canada, it is obvious the NEP had an effect.

          • I don't want to get into a detailed analysis of the NEP. Almost all Canadian economists ACROSS CANADA agree that it had a severe impact on the Western economy.

            The fact that you refuse to admit this shows how partisan and regionalized you are.

            DUH.

          • Well, you should have told that to the oil companies that were recruiting en masse at the engineering schools across Canada after the NEP came into effect.

            But, I suspect you've only read about that.

            btw, if investment is postponed on a finite resource (conventional crude/gas – both of which are in decline in Alberta) it is made up at a leter time when economics are more favourable.

          • it is made up at a leter time

            If the economics are never more favourable, it is never made up.

            What a preposterous statement – even if conditions improve in 50 years, that does nothing to help people who will be plunged into poverty today, and that does nothing to alleviate the permanent economic damage that occurs.

            And frankly, the money that is collected in taxes is never returned directly to the people that earned it. It is thrown into general revenues and disbursed to a thousand different interest groups.

          • s_c_f

            We appear to have a different level of understanding of the economics of resource development. Let's just agree to disagree.

          • Sure, that's fine with me. Regards.

          • Here's lots more examples…

            http://www.businessgreen.com/business-green/news/


            With the price of a barrel of oil dropping from almost $150 (£103) last summer to around $41 (£28) a barrel yesterday, many of the oil giants are having second thoughts about multibillion-dollar investment programmes designed to extract oil from tar-soaked sands or shale deposits in North America.

            According to a study undertaken by The Times, over $60bn worth of projects have been delayed in the past three months alone, while a number of planned projects have been shelved indefinitely.

            The paper claimed that with the cost of oil production from some tar sands standing at around $70 a barrel, companies including Shell, Petro-Canada and SunCor have all decided to delay projects which could prove economically unviable.

          • These projects have been delayed or put on hold indefinately. Yes, that's what happens IN THE SHORT TERM when commodity prices collapse, or costs get out of control, as both occured in Alberta. Many had warned about runaway inflation for quite sometime .

            On a 40 yr oil sand investment, the project economics are MOST sensitive to upfront capital costs – that is why the projects were shelved. Long term oil price forecasts are less affected by a 2-3 yr global recession.

            Yes, with a carbon tax, coal plants (those that are not designed for CCS – the so called "Clean Coal" plants suffer, whereas low CO2 emitting electricity generation such as nukes benefit. That is what the taxes are designed to do – reduce carbon emissions.

          • You fail to see the point. As far as the companies are concerned, a carbon tax is no different than a permanent drop in oil prices.

          • So, that's the bottom libne is it? You and the companies want a free ride. And to justify the free ride, you discount the science.

            Thought so.

          • That's quite a non-sequitur. Escaping bankruptcy by closing an operations is not a "free ride". It's certainly not a "free ride" when workers are not forced off their jobs.

            As for the science, which is a completely different topic of discussion than the one we've been having (that's one heck of a non-sequitur)… I know more about it than you'll ever know in your lifetime. Those who know about the science understand the uncertainties involved and the questions that remain open.

          • You seem to be losing sight of the whole issue.

            The whole point of the carbon tax is to reduce emissions.

            Therefore, you are either conceding that there will be less production of oil, or you are hoping for a miracle (like CCS) that will somehow magically cost nothing and therefore allow the same production with no emissions (which is a pipe dream). Of course, this ignores the whole issue of emissions that will result form the oil itself.

            Finally, if you are conceding there will be less production of oil (which is almost inevitable), you are conceding damage to the economy, both for the sellers and also the buyers (prices will rise, and local supply will be lowered).

          • I am suggesting that the current level of oil sands expoitation ultimately hurts the economy – it leads to boom/bust cycles, and crowds out investment in other sectors (for example natural gas exploration/development). this is due to the inflationary effects of having inadequate skilled people (trades – welders in particular). It also leads to less investment in high tech sectors (Calgary is a good example – the excessive rents and lack of availability of capital – all flowing into the oil sands) leads to concentration of industry – not diversification.

            The cost of any tax, in most if not all oil sands development will be borne principally by the shareholders/investors who may not see their assets appreciate at quite the same exponential levels as in the past – when they had to pay for little environmental regulation/enforcement.

            Ok, all for me.

            thx

  53. The GDP argument may be flawed, although I don't actually think it is. The point that a country with an increasing population is in a different category than one with a stable or declining one is not. Even if we made the same reductions in GHG emissions per capita as the Swedes (to keep harping on them) an increasing population would mean our emissions would rise, despite our efforts.
    Recognizing the challenges we face because of our unique circumstances does not mean we are ignoring the issue. It does mean the solutions are much more complex than shutting down the oil sands or having everyone in Edmonton switch to riding bicycles all winter.

  54. YYZ, Toronto produces virtually nothing. it merely is home to the head offices, bankers, accountants, lawyers etc. that are also necessary for the production to take place. Diminish the oil industry, and all your banks suffer. Less lending syndicates, underwriting of securities, international export agreements etc. Our energy is the lifeblood of our economic success, remove it and we are much closer to eastern europe in terms of our economic strength. Think of it. No tire industry, no value added forrest products, no metals industry, no fertilizer, no agriculturual exports. The NHL is not enough.

  55. Actually nuclear plants as a substitute for natural gas inputs is a sensible notion, and one that will probably be part of the approach that will clean up the oil sands projects. As nuclear power becomes a larger and larger part of the global warming solution the economies of scale should help bring the price of new nuclear plants down.

  56. Uninformed blather.

  57. Follow Lougheed's advise. Slow the pace of developement down…it's happened anyway with the recession. There's too much high minded talk of not interferring in provincial politics…and not enough honest reflection on why it all has to come out of the ground right now…greed is a major driver here…too many vested interests on the line and gravy trains at risk.

  58. First there are 350,000 manufacturing jobs in the GTA. Declining industry for sure…but I'd hardly call it producing "nothing."

    Second if you read my comments, you'll notice I'm VERY concerned about crushing the oil industry.

    3rd, only a small fraction of Toronto's financial services industry is reliant on the oil industry. A relevant fraction but if the industry shut down tomorrow, the FS sector here would still be massive.

    4th, you implicitly assume that oil financing won't be replaced with other types…who do you think finances wind farms? Cleantech? How do you think a cap and trade system will be operationalized (hint: it will be in the financial services industry)?

    • YYZ, Government finances windfarms, because the power costs 19c per kwh, as opposed to the 4.5c OPG currently expends to produce power.

  59. Is there any way geo thermal could play a factor in this? Or is the area unsuitable? Short term investment has an awful lot to answer for in this whole mess…surprise.

  60. …stop the tar sands…you know as well as i do this isn't a zero sum game. If we can simply shift the goal posts at will…no matter how credulously…how on earth are we ever to convince China not to do likewise?Political posturing is a game anyone can play..

  61. I always make sense.

  62. There is no justification for having per capita emissions at more than 3 times those of Sweden….also while we do have more challenges than them in terms of geography…our pop is every bit as concentrated in urban centres. We have to face the unpleasant reality some time that are a profligate nation…i imagine it stems from an attitude that resources are [were] unlimited.

  63. That sort of argument "Stop the tar sands" is both impractical (as well to ask the Chinese to "stop the coal mines") and pointless. The oil sands contribute perhaps 5% of Canada's GHG emissions. "Stopping the tar sands" would simply impose a huge economic liability on the country, put tens of thousands of Canadians out of work and leave us with no means to pay for actual long-term GHG solutions. And the impact on the global climate change problem would be miniscule.
    Blaming the oil sands for our GHG emissions challenge is a cheap and ineffective way to address the problem.

  64. Oil sands emissions should be separated from Canadian consumption emissions. Canada should then focus on meeting aggresive non Oil-sands consumption reduction targets and working with the oil sands to reduce their emissions without trashing the economy.

    Also on your geography point: Sweden is about 2/3 the size of Saskatchewan. I'm not sure geography is really a factor, but Sweden does not have a "fair bit of geography" relative to Canada.

  65. There's no doubt we have not particularly cared about energy efficiency – probably because, as you said, we had an attitude that resources were unlimited. But the issue of how to adopt responsible enviromental policies without stopping population or economic growth is not an easy one. The government can only do what people are willing to allow it to do. A proposal to radically re-shape society by stopping growth and reorganizing our economy is simply not on the cards.
    I think Mr. Prentice's remarks simply make it clear the government understands that any response to the climate change issue has to operate within that reality.

  66. The problem of climate change is important but it is only a consequence of a larger problem: our entire economy is dependant on a non-renewable resource (oil & gas) that is fast running out. Solve the energy problem and you also solve the problem of climate change. Those who claim that it would cost to much remind me of those industrialists at the end of the 19th century who argued that it would cost too much to convert a coal-based economy to an oil-base one!
    Put a real price on carbon and use the revenues to subsidize the research, development and startup costs of alternative energy sources and you will see how quickly the market is able to bring on new energy generation.

  67. Admittedly my assumption has three parts: 1 – We become much more energy efficient (better heating and cooling efficiency, windows, insultation, HVAC systems etc.). 2 – Cleantech moves up the experience curve and becomes more affordable and better (ranging from Energy to Alt Fuel Sources for Cars to smart grid technology so that electric cars don't just cause more coal fired power generation). 3 – Leap of faith.

    The 3rd part of my assumption worries me the most.

  68. You can substitute any other economic activity for "stop the tarsands"; we will need to stop doing something in order to meet these absurd goals, and it is certain political and economic death to do so. No-one will agree to this. It is pure fantasy.

    • Funny how the nothern European countries don't share your pesimism. In anycase you're wrong, even the Harper crowd will be forced to do something.

  69. The developing world and burgeoning BRIC economies are building power plants and buying cars as more of their populations seek the services, amenities and advantages of first-world standards of living. They want energy and they will get it. If they get energy by burning stuff the way we have for the last many decades, we'll all choke. We might make some short-term cash by selling coal to China and tar sands oil to Americans, but we'll choke on their emissions (in addition to ours) nonetheless. If we fail to take the lead in converting our energy infrastructures to less polluting methods — and also fail to help/encourage/incent developing/BRIC nations do the same — we'll be screwed. Our economy, quality of life and health will suffer if we do nothing. I'm pro-business and shudder at the thought of a 21st Century Canadian companies having to rely on early 20th Century energy infrastructures.

  70. Your idea seems reasonable enough.

    Besides, if I'm not mistaken, the Kyoto accord excludes airline emissions. (although I could be wrong?…)

    So why not create another exclusion for tar sands (not just in Alberta, but across the country), and tackle that problem separately?

  71. Your scheme seems like a reversal of the old "let the eastern bastards freeze" mentality. Nice.

  72. Oh, you wrecked it. I was trying to get the concept across without using the words "carbon tax". The old repackaging trick, if you will, because I think it is the concept that would actually make a difference.

  73. Not my point.

    But they are a significant driver of Canada's greenhouse gases.

  74. (1) A report by the Pembina institute and Suzuki foundation funded by TD Bank found this.

    (2) I have made an assumption but it's not the one you described. I do not believe that there will be a widesrpead standard of living decrease — if any at all — based on restricting/regulating individual emissions. There is LOADS of room to be more effiicient in power consumption/generation and transportation, by far the biggest cause of non-Oil Sands Greenhouse gases in Canada.

    • Interesting, I'll look for that report, thanks.

      I don't see how the first world can avoid a decline in standard of living, between the effects of global warming and the increasing rarity of cheap oil… but that's a conversation to be had over many beers.

  75. Any return to the 1990 baseline would require Canada to shut down the oilsands in order to meet targets. That just won't fly. Harper doesn't want it, Iggy doesn't want it, and I'm pretty sure that Canadians don't want it. The overall economic cost would be in the hundreds of billions.

  76. Essentially you're right. An awful lot of peoples livelihoods depend on them now. I think Lougheed has the right idea…slow the pace of developement down…give us time to work out the problems. We need the revenue in any case to help pay for the new solutions. This could all have been done so much smarter…when the real story is written on this episode…Ralph is not going to be looking so good.

  77. sigh…eminently

  78. Fear mongering 101. Based upon zero credible arguments.

  79. How? Massive investments in nuclear power near the oilsands? As you well know, the costs would be exorbitant.

    CO2 sequestration? Alberta has already initiated a $2 billion pipeline/sequestration scheme to do this, but at best it would only sequester a fraction of total oilsands GHG emissions.

  80. (This was in reply to the strangely faced Robet McClelland, not crit-reasoning, who is making sense today for some reason.)

  81. YYZ, the pain to Alberta's oil industry will be bad, yours will be worse. Cap and trade, carbon tax or whatever is by necessity, consumption, not production based. Alberta's oil industry will not pay….you will. The opil industry does not produce much in the way of GHG's, you do when you consume the energy. The largest single producer of GHG's in Canada is Ontario Power Generation, since they burn the coal. The company that digs it up does not.

    • "The oil industry does not produce much in the way of GHG's, you do when you consume the energy'

      Isn't that rather like saying Macdonald's products is not responsilbe in any way for making you fat…it's your fault for eating it? At least you do have a choice not to go to McDs. In any case you're wrong. The oil sands consumes enormous amounts of energy.

  82. There is little on earth less fun than trying to explain numbers to the innumerate. Oh well, once more unto the breech. Yes kcm, it is exactly like saying that. McDonalds products are not responsible for making anyone fat, stupidity is. Last time I looked you can't pass a law against stupidity. Lord knows, the judicial system couldn't handle the volume if you could. The oil sands do consume energy, but only a fraction of the energy they produce, which is then consumed elsewhere, otherwise, it would cost more to produce than you could sell it for, and you would simply sell the energy used instead.

  83. Of course, Canada should be using 2006 as the benchmark year as that's when the Conservatives were elected. The voters have to assess the Conservative government and blame them for the failure of the Liberal government.

    Second, climate change does not happen per capita and we have to look at which country is effecting things and by how much. Canada emits about 2% of global GHGs. If we determine we need to reduce global emissions by "x"%, then every county must reduce their emissions share. It's about the GHGs, there are far too many other agendas interfering with the task of reducing emissions.ment.

  84. All average global temperatures since 1895 are accurately predicted with no consideration whatsoever needed of change to the level of atmospheric CO2 or any other green house gas. Without human caused global warming there is no human caused climate change.

    The research behind this discovery, with an eye-opening graph showing predicted and measured temperature anomalies, is in the pdf dated Oct 16 at http://climaterealists.com/index.php?tid=145&…

  85. The other aspect about the 1990 base year is that it was when the former Soviet bloc was dominating by dirty production facilities that were about to shut down. Hence the targets were already reached when Kyoto was signed and they stood to gain by selling credits to other countries.

  86. We don’t need to shut down the oil sands. Phase in a carbon tax. The oil sands are profitable enough to handle it, though it may affect expansion decisions. It will also give powerful incentive to invest in better plant and equipment to improve energy efficiency of refining the oil sands, creating thousands of jobs for Albertans.

    There have been several economic analyses done, and none indicate that we need to shut down the oil sands or cause a recession to begin improving GHG intensity. A carbon tax let’s us focus on manageable, predictable change in costs that allow companies to plan for reductions. Hard caps are a bad idea, but we should adopt a general path our emissions should follow, and adjust the tax rate depending on how well we are progressing against the target.