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February 2011

Vol. 16, No. 6 Week of February 06, 2011

Canada won’t lead the way

Environment minister rejects call for independent climate change action, sticks with policy of harmonizing Canadian, US regulations

Gary Park

For Petroleum News

Canada is not prepared to “go-it-alone” on a climate change program, despite the urgings of an influential government-appointed panel that Ottawa should proceed independently of the United States by introducing a national cap-and-trade system and set a ceiling price for carbon.

A new report by the National Roundtable on the Environment and the Economy, or NRTEE, said a made-in-Canada approach would allow Canada to achieve significant greenhouse gas reductions over the next decade rather than waiting for the U.S. to act.

But newly installed Environment Minister Peter Kent refused to budge from his government’s commitment to harmonize its policies with the Obama administration, which he described as a “sensible and realistic” strategy.

Rejecting the panel’s call for a Canadian cap-and-trade system, he said Ottawa has “chosen to move ahead with regulation and we believe that we’re seeing early results.”

“We believe we will achieve our targets for 2020,” Kent said, referring to the federal commitment to lower 2005 emissions levels by 17 percent by 2020.

He said Canada is working with the U.S. on regulations to limit tailpipe emissions from vehicles and is continuing to develop regulations for trucks and is ahead of the U.S. in tackling emissions from coal-fired electricity plants.

Two previous NRTEE reports

The NRTEE, which has issued two previous reports examining the economic risks and opportunities of taking climate change action in Canada, has aligned itself with all three opposition parties in the Canadian Parliament which have criticized Prime Minister Stephen Harper’s determination to move in lockstep with the U.S.

Harper has insisted Canada should not make any moves that would weaken ties with its major trading partner.

The Canadian petroleum industry has been especially concerned that independent measures could damage the revival of plans to develop Alberta’s oil sands, which account for about half of Canada’s crude oil exports to the U.S.

“Harmonization, where possible and when feasible, makes sense for Canada,” said NRTEE president David McLaughlin.

“In the face of persistent U.S. uncertainty as to its own climate policy future, Canada will need to look to its own options, in the right way, at the right time,” he said.

NRTEE chair Bob Page said Canada needs to “understand how we can meet our environmental responsibilities as a sovereign state ... fully comprehending the unique economic ties we enjoy on this continent. We are looking towards conformity in purpose, not uniformity in detail.”

Call for phased-in approach

The NRTEE, in calling for a phased-in approach that would lay the groundwork for greater harmonization as U.S. policies take shape, has recommended action on four options:

• Setting a price collar that limits the Canadian carbon price to no more than C$30 per metric ton of carbon dioxide equivalent higher than whatever price may be set in the U.S.;

• A national cap-and-trade system with auctioning of permits and revenue recycling to cap emissions and address regional and sectoral concerns;

• Limited international permits and domestic offsets to keep domestic carbon prices lower for Canadian companies; and

• A technology fund of up to C$2 billion to stimulate investment in emission-reduction technologies.

The report said it will be more expensive for Canada to reduce emissions than the U.S., partly because U.S. industrial infrastructure and coal-fired power plants are older and will have to be replaced sooner.

Otherwise, if Canada and the U.S. set an identical price, Canada would fall short of matching the U.S. goal for lowering emissions by 2020, the NRTEE said.

Pembina: Report raises questions

Without an independent policy, greenhouse gas emissions would be 10 percent above 2005 by 2020, creating a gap of 178 million metric tons a year between Ottawa’s goal and projected emissions, it estimated.

The Alberta-based Pembina Institute said the report shows that Canada would see strong economic growth even if it led the U.S. in adopting a broad-based price on greenhouse gas pollution.

Claire Demerse, associate director of Pembina’s climate change program, said the report “raises some fundamental questions about the government’s long-standing policy of waiting for the U.S. before implementing strong climate policies in Canada.”

She said the NRTEE’s “detailed and credible analysis shows Canada would see strong economic growth across the country even if we lead the United States in adopting a broad-based price on greenhouse gas pollution.”

Demerse said the NRTEE has demonstrated that quick action to introduce stronger climate policies is “both affordable and feasible … (and) there are no credible excuses for delay.”





What comes down goes up

The drive by Canadian oil sands producers to reduce their carbon emissions has made headway with per-barrel output from in-situ projects dropping by 15 percent in 2009 from 2008 and from mining projects by 18 percent in 2008 from 2007.

That was the positive spin derived from figures compiled by Evaluate Energy, a London-based source of energy information.

The flip side showed that the rapid growth in production levels also boosted overall emissions by 45 percent in the 2004-2009 period to 44 million metric tons, a total that will continue climbing as production ramps up.

“On a micro level, they have been bringing (greenhouse gas emissions) down, but on a macro level the only direction emissions are going is up,” said Chris Wilson, an analyst with Evaluate Energy.

He said that despite the progress being made by producers on a per-unit basis “there aren’t going to be any emissions reductions now or realistically any time soon. I don’t think this will be acceptable to environmental groups.”

Wilson said further reduction gains are possible with the use of new thermal-recovery technologies such as solvent injection and large-scale carbon capture and storage.

Greg Stringham, vice president of oil sands at the Canadian Association of Petroleum Producers, told the Calgary Herald that, even in a worst-case scenario, the oil sands will account for about 9 percent of Canada’s overall GHG emissions, compared with 5 percent at present.

However, he said that technologies that are just being brought into full-scale use will continue to drive down the per-barrel intensity of emissions.

“Over the long term, it is wise policy to put a foot in the camp of an industry that is focused on performance enhancement,” Stringham argued.

A study by CanOils, the Canadian division of Evaluate Energy, estimated that integrated producers (those who both extract and upgrade bitumen) lowered their average carbon dioxide emissions to 123 kilograms per barrel of synthetic crude in 2009 against 150 kilograms in 2008, while in-situ emissions dropped to 93 kilograms in 2008 from 110 kilograms in 2007.

—Gary Park


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