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Climate Hustle

Justin Trudeau approves two big oil sands pipeline expansions

Posted on 1 December 2016 by Andy Skuce

In an announcement on November 29, 2016, Canadian Prime Minister Justin Trudeau approved two new major pipeline expansions for Canadian bitumen. Altogether, the two projects will add over a million barrels per day to Canada's export capacity.

At the same press conference, Trudeau rejected the application for the Northern Gateway pipeline, which would have provided 525,000 barrels per day of transportation from Alberta to the Pacific Ocean through the northern British Columbia coast, near Kitimat. 

Northern Gateway (map by Enbridge)

The proposed export route would have involved tanker transport through fjords and treacherous seas in an area of protected wilderness known as the Great Bear Rainforest. Trudeau promised a legislated ban on all oil tankers on the BC Coast north of Vancouver Island. The Northern Gateway project was fiercely resisted by First Nations.

Kinder Morgan Trans Mountain Expansion Project (TMX)

The Trans Mountain Expansion project involves the twinning and expansion of an existing pipeline that runs from Edmonton, through Jasper National Park, to the Pacific coast at Vancouver.

The project currently has a capacity of 300,000 barrels per day and will be expanded to have a total capacity of 890,000 barrels per day. Around 400 Aframax tankers per year will transport diluted bitumen from the Westridge Marine Terminal, through Vancouver's Burrard Inlet, then down narrow passages, with strong tidal currents, between the Gulf Islands, and finally through the busy shipping lane of the Strait of Juan de Fuca to the open ocean and markets around the Pacific. The project should be completed in 2019.

Chart by Doug Bostrom. Green line shows outbound tanker course, red overlay shows areas with strong tidal currents, in knots. High resolution PDF (big file)

The risk of a catastrophic diluted bitumen spill is a major factor driving opposition to this project. Climate-scientist-turned-politician Andrew Weaver articulated his concerns in a recent open letter to Justin Trudeau.

Line 3

This project will replace a 50-year old pipeline with a new, larger capacity one. The new pipeline will carry 760,000 barrels per day with potential to expand to 915,000 bopd. The old pipeline was restricted to 390,000 bopd for safety reasons.

The Canadian section of this line runs from Edmonton, across Saskatchewan to Gretna, Manitoba, on the US border. The operator, Enbridge will also replace the US portion of the pipe, which runs from Neche, North Dakota to Superior, Wisconsin. Because this pipeline is an existing one, no presidential approval is required, unlike for Keystone XL. The project is expected to be operational in 2019.

Altogether, these two projects will add 1.06 to 1.20 million barrels per day of export capacity. Additional export pipeline proposals include Energy East, a 1.1 million per day pipeline that will reach the Atlantic coast of Canada and the possibly soon-to-be-resurrected Keystone XL pipeline that will add about 800,000 barrels per day capacity to the US Gulf Coast. All in all, nearly 3 million barrels per day of additional bitumen capacity from the Athabasca oil sands, enough to more than double the current production of around 2.5 million barrels per day. 

This is a big win for Alberta's oil sands business. And it has been delivered by Canada's Liberal government, which is committed to ambitious greenhouse gas reductions.  This takes some explaining.

The politics

The political background is complicated. For the benefit of those who don't follow Canadian politics (and who could blame you for that), here is an outline. The shorter version, should you choose to skip this section, is that the pipeline approvals are part of trading concessions between Canadian jurisdictions and are designed to give political cover for new climate mitigation policies.

  • The oil price crash in 2014 provoked a severe recession in Alberta. Job vacancies have halved and unemployment has doubled. People are hurting badly after years of boom times.
  • In a political earthquake in May 2015, Alberta's voters elected a centre-left government under Rachel Notley. Justin Trudeau became Prime Minister of Canada later that year.
  • Alberta's government is dependent on revenues from resource royalties for a large part of its budget. Currently, the province faces a budget deficit in excess of C$10 billion. Royalty increases are not feasible during a downturn and large tax increases and/or spending cuts are deemed politically impossible. Global commodity prices are obviously beyond the control of any government. This means that the only way to achieve a balanced budget is to increase oil production.
  • However, it is widely assumed that increases in production are impossible without increased transportation capacity and access to markets other than the USA.
  • It is not just the Notley government that wants to expand production. So too does the Trudeau government and all politicians in Alberta, including the progressive mayors of Calgary and Edmonton. 
  • The Notley government, to its credit, introduced a Climate Leadership Plan, which among other things, imposed a carbon tax of C$30/tonne CO2e effective in 2018 ($20 in 2017) along with an all-time cap on upstream emissions from the oil sands of 100 million tonnes of CO2e per year (they currently stand at 72 Mt). This policy has proved unpopular in Alberta and, even though no tax has yet been imposed, opposition politicians are blaming Premier Notley's climate policy for the downturn. Notley has justified the emissions policy on the grounds that it is essential for earning social license for oil sands expansion.
  • The Trudeau government announced that the Federal government would be introducing a carbon tax, rising to C$50/tonne by 2022. If provinces have their own pricing, that would be deducted from the federal levy. Any money collected would be returned to the provinces to spend as they wish. The federal policy was rejected by Saskatchewan and accepted by Alberta on the condition that export pipelines be approved.
  • After the pipeline announcement, Notley immediately endorsed Trudeau's federal carbon tax proposal.

Trudeau claims that the pipeline approvals are determined by science, not politics. This, of course, is bunk, as Andrew Weaver testily explains in a radio interview. It's politics all the way down. The entire policy is designed to find a middle path between conservatives who are oblivious to climate change and environmentalists who, some allege, are indifferent to the economic fate of Albertans. Trudeau says that the economic growth of the oil sands is required to pay for climate policies. He does not explain how this money will be transferred from fossil fuel companies to environmental good works, nor is there any account of why the past oil boom did so little for climate progress.

The opposition to the TMX project in BC is very strong and has probably been underestimated by Trudeau. At hearings in BC for the pipeline, some observers estimated that 90% of the submissions were opposed. All of the coastal mayors along the pipeline route are fiercely against it. Well-funded environmental activist groups are already planning massive civil disobedience. Some predict that the protests in BC may be bigger than the so-called "war in the woods" in which activists successfully disrupted logging operations on Vancouver Island, in 1993.

It would be a mistake, however, to think that BC's opposition is limited to environmental activists. Opponents of the TMX project come from a wide cross-section of society who resent the imposed threat to BC's splendid coast.

BC Premier Christie Clark has stipulated five conditions for her to be able to endorse the TMX project. These include successful environmental reviews and consultations with First Nations. Another stipulation was having a world-class response for dealing with oil spills at land and sea. Trudeau has delivered on a $1.5 billion marine spill response plan. (Added later for clarity, following a reader's comment on Facebook: Trudeau's plan may satisfy Clark's condition to her satisfaction, but it will still be insufficient to deal with a spill of diluted bitumen that sinks, see Andrew Weaver's letter, quoted earlier.) The remaining condition is for BC to get more economic benefit. As things stand, BC takes most of the risk of a pipeline and earns few of the rewards. Only 90 long-term jobs are expected to be created in BC by the project.

Premier Clark has staked her political future on developing a Liquefied Natural Gas industry in BC. Recently, the Trudeau government approved a major project, the Pacific NW LNG project, which, if built, will be one of the largest single greenhouse gas emitters in the country. The project also has unresolved issues with First Nations. Cynical observers might well conclude that this approval was granted to earn a quid pro quo from Clark. We'll see if she endorses the pipeline soon or if she continues to sit on the fence.

Trudeau may well have made an expedient political calculation on TMX, trading votes in BC against votes in Alberta and Saskatchewan, but the decision was nonetheless a bold one, a choice that will likely define his premiership.

Of course, the physical world of climate change is indifferent to politics.

Emissions arithmetic

If the export pipelines work as intended and boost growth in oil sands production (there are doubts about this, see below) then, even with Alberta's new policies, the province's emissions will equal around 250 Mt CO2e in 2030. Canada's Intended Nationally Determined Contribution (INDC) pledge is to reduce the nation's emissions to about 500 Mt at that time. This means that Alberta, with about 12% of the country's population will be producing half of the emissions. The 200 Mt of reductions needed to meet Canada's 2030 goal will be borne entirely by the rest of the country.

 Alberta's emissions, from Alberta's Climate Leadership Report.

From Canada's INDC pledge. Note that the y-axis origin is not zero.

If the country meets its 2030 INDC commitments, the approximate average per capita emissions for Canadians outside of Alberta will be (assuming, for now, constant population) about 8 tonnes of CO2e. Alberta's will be about 60 tonnes, a factor of seven higher. Many Canadians might well feel that these burdens are not being shared fairly.

If Trudeau's $50/tonne carbon tax is applied, EnviroEconomics estimates that the policy will reduce national emissions by 18 Mt per year. Assuming that the pipelines are filled with new production, the upstream emissions of the TMX project (i.e., the emissions associated with the production, not the consumption of the bitumen) are estimated by Environment and Climate Change Canada at 14-17 Mt per year. Similar upstream emissions will be attributable to the Line 3  bitumen. Claims that approving pipelines is Realpolitik needed to get public acceptance of new climate policies is undermined by this consideration. Trudeau has replaced the important step forward of his carbon tax with two steps backwards from additional upstream emissions that result from his pipeline approvals.

Barry Saxifrage at the National Observer has a useful article showing the effects of other policies and infrastructure additions. He shows that all of the new fossil-fuel infrastructure swamps any benefits introduced by new mitigation policies. 

Economics

The main cause of Alberta's recession is the post-2014 crash in oil prices. Existing oil sands projects can still make a small operating profit on a go-forward basis at current prices of $50 per barrel, but new investments require a much higher price. If as many believe, global prices stay low for longer, there is little prospect of an investment boom in Alberta, regardless of any new transportation options. However, many commentators imply that recovery is being significantly hampered by lack of access to tidewater and world markets.

Bitumen is a low-quality oil that suffers a discount of somewhere around $20 per barrel relative to premium light oils like Brent. At present, nearly all of Canada's oil exports go to the USA. There is a perception that that Americans are unfairly discriminating against Canadian bitumen and enforcing low prices. This is not realistic, because the US refining industry does not, cannot by law, behave like a cartel by fixing prices. Some Canadian bitumen producers, like Cenovus, are equity owners of US refineries. 

With the TMX project, Canadian bitumen exporters are hoping to open new markets in Asia. The case for this is speculative and, even if Asian importers decide to build refineries capable of refining bitumen, there would be no guarantee that market discounts relative to light oil would be less than in the US. In a world that is currently awash with oil that is cheaper to produce and of better quality than Canadian bitumen, oil sands producers are fooling themselves if they they assume that Asian importers are going to strike favourable deals.

If global climate action is successful, then global demand for oil will be expected to fall. According to the IEA:

 Source: The Economist

 

Part of this decrease will be due to improved vehicle fuel efficiency. As The Economist wrote recently:

The IEA says that such measures [US CAFE standards] cut oil consumption in 2015 by a whopping 2.3m b/d. This is particularly impressive because interest in fuel efficiency usually wanes when prices are low. If best practice were applied to all the world’s vehicles, the savings would be 4.3m b/d, roughly equivalent to the crude output of Canada. This helps explain why some forecasters think demand for petrol may peak within the next 10-15 years even if the world’s vehicle fleet keeps growing.

World oil reserves are at an all-time high. The USGS has just announced a huge, multi-billion barrel discovery of light oil in Texas in the Wolfcamp Shale. It won't be easy for Canada to find new markets for its expensive, low quality oil in a world of shrinking demand and oversupply of cheap, light crude.

Of course, emissions policies may fail and the global oil market may be upset by geopolitical turmoil. Nobody can predict what future prices and demand will look like. There are just too many unknowns.

Independent economist Robyn Allen has harshly criticized the National Energy Board's economic analysis of the TMX project. You can watch a presentation of her argument here. The original TMX project was conceived when oil prices were higher. The project was underwritten by 13 producers who committed to "take or pay" agreements (they are obliged to pay for transportation, even if they do not have oil available). The operator, Kinder Morgan, is poised under such an agreement to make money even if there is no oil to transport or markets to ship it to.

Repercussions

The completion of the TMX project is far from certain. Lawsuits are planned by First Nations groups who say that they have not been adequately consulted. An OK from the BC government has not yet been granted. Although approval from Premier Clark is not absolutely required for this project to go ahead, a provincial government firmly opposed to a major project like this could cause delays in granting permits, if they wanted to.

The biggest obstacle to the pipeline proceeding is likely to be public protest on the BC south coast. Much will depend on how the protests unfold and how much sympathy the activists earn from the public in Canada and abroad. However, there is little room for the federal government to maneuver or compromise. The pipeline will either happen or it won't: Trudeau can't order a scaled-back version of the project. In his announcement on November 29, he made it clear that his decision was final and that he considered the risks to the marine environment to be acceptable. It is hard to see how the decision could be walked back without a massive loss to his reputation and authority.

Some argue that patriots should simply accept national infrastructure projects, as people did for the construction of the Canadian Pacific railroad. However, those living near to the railroad received direct benefits by being close to a unique transportation system. For oil pipelines, the risks and rewards are disproportionate: Alberta gets to reap nearly all of the profits of oil sands expansion, while BC gets to assume all of the risk of marine oil spills.

In Canada, resource royalty revenues accrue directly to provincial treasuries. Although the oil and gas industries are an important part of the national economy, they account for less than 10% of GDP, less than most people imagine. The often-claimed necessity to keep growing oil production as the only way to grow the national economy is exaggerated. 

If TMX does get pushed through in the face of west-coast public revolt, Trudeau will pay a stiff political price, losing parliamentary seats in BC, while probably gaining very few, if any, in Alberta as compensation.  The grossly unfair distribution of per-capita emissions in the country, should the climate pledges be honoured, will rankle. The result could be a bitterly divided country, which is unlikely to be the legacy that Justin Trudeau wants to leave.

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Comments

Comments 1 to 24:

  1. That's a fair report - it has a certain amount of 'political' content, though, so can I make a 'political' comment?. I'm dubious about the claim that Trudeau will pay a large political price for trying to 'square the circle'. Support for pipelines is not restricted to Alberta, nor are the positive economic benefits of pipeline construction and oil sales restricted to Alberta. In Atlantic Canada where I live, for example, polls have shown support for pipelines and plenty of Atlantic Canadians work 'away' in Alberta. National polls are not that different, and, like it or not, there are clear national economic benefits from the oil industry. Given that the NDP currently is in power in Alberta, Trudeau might think he does have a shot at picking up a few seats there. And the BC govt is supportive of the pipelines - that suggests the 'bitterly divided country' you are referring to might be some other country. Insofar as the carbon tax is concerned, that tax is expected to increase over time is it not? That would further reduce emissions over those you enumerate in your story. You can argue that the approach here is imperfect, but if the carbon tax does get implemented we are moving in the right direction.

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  2. "For the benefit of those who don't follow Canadian politics (and who could blame you for that)"

    Canadians. Canadians are betting on the wrong horse in terms of future economic development and returns on investment. Sooner or later fossil fuel stores must be written down in value. Oil sands bitumen has a lot of disadvantages:

    1. Huge up front infrastructure required with risks to capital sinks
    2. High cost of production
    3. Huge amount of CO² emission as input requirement
    4. Inferior grade oil with higher CO² emissions.

    Canadian oil can only be competive in a world short of oil. Once writing down of reserves starts (and CO² is taxed), Canadian oil will not be able to compete with cheaper sources (such as the Middle East, with huge stores of oil that is cheap to produce). Not to mention LNG from huge gas stores.

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  3. Just as in the nuclear industry, there is difficulty accepting and responding to the reality of rising energy retention in the earth system. A big issue is loss of secure, well-paying jobs. There is immense need to build and repair infrastructure, insulate homes, shift agricultural practices, and gear up more health- and life-friendly alternatives to GHG-producing power generation and transportation. So many jobs to be created, but planning must include a living wage.

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  4. It's worth noting that western Canadian bitumen is doubly discounted to Brent, not just because of its low quality, but because there's a lack of pipeline access to get that oil shipped outside western Canada, leaving rail as the only substitute, which is pretty pricy. This would only worsen without pipeline access to tidewater.

    So, if climate-change was used as a reason to stop building pipelines to tidewater, western Canadian producers wouldn't only have to pay whatever carbon price is leveled on their upstream emissions ($30/ton, $50/ton, $100+/ton, or whatever it'll be), they'd have to pay an extra penalty based lack of pipeline capacity. This extra no-pipeline discount would be on the order of $10/barrel, which probably works out to more than $100/ton or more (rough guess, but it sounds like what I've heard).

    In other words, Canadian oil and gas producers would get hit with a effective carbon price much higher than other Canadian sectors. From an economic perspective, it's not an efficient way to fix the climate. From an economic-fairness perspective, it's not really fair to pick on one sector while lowering the burden on other sectors. We all drive cars and should share the burden. Manufacturing and cement industries should share that burden too.

    Another way of looking at it is that the Canadian oil and gas industry with its higher effective carbon price would subsidize other Canadian emitters like the transport sector, industry, cement, home heating, etc... We do need to transform the car and heavy truck sector so electric vehicles are widely adopted, but a lower effective carbon price on gasoline because of this subsidization will slow that. Same with reducing the emissions in cement, industry, home heating, and other things.

    Also, government projections of CO2 emissions are useful, but often limited and neglect things like technological change and the impact of escalating carbon prices. Given that the oil and gas sector is already a large contributer to Canada's emissions, there are a lot of potential reductions if there's a price signal to encourage industry to do that. While, yes, escalating carbon prices would cause less production than without a price, there could also be significantly decreased emissions. Chances are, if companies can keep the costs of reducing emissions below whatever carbon tax there is, then they'll keep producing rather than not produce oil at all.

    I guess I'm arguing that using climate-change as a reason to deny pipelines doesn't have much merit. Pipeline safety is a whole other issue and is much easier to make that argument on.

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  5. rdr95, when I argue that the country is split over these pipelines, I acknowledge that there is support as well as opposition. People who have a stake in the growth of the bitumen business, in AB/SK as well as the Atlantic provinces are certainly strongly in favour, mostly regardless of their political leanings. Perhaps I have a bias living on the BC coast, but the many people here opposed to the pipeline are very pissed off.

    As I said, I know that the oil business is important to Canada and I disagree with the Leap Manifesto people who think we can quickly shut it down. However, I think that a sector that is responsible for less than 10% of GDP gets disproportionate attention.

    I wish that the "conversation" could turn away from, on one hand, those who argue that a rapidly growing oil industry is essential to economic health and those who simplistically call for it to be shut down. We need to find a way to a sustainable business that gets better rather than ever bigger.

    Currently, Alberta is producing more oil than ever in its history and projects under construction will add a few hundred thousand barrels more per day. An industry that is producing record volumes and that is still growing ought not to be in crisis. The problem is that the boom times have created a hangover, and the remedy for that should be moderation rather than more binge drinking. 

    I think it's far from certain that increased transportation will lead to more growth in today's market. To be sure, new pipeline transportation will save a few dollars per barrel over the rail transport that might have been necessary without the new infrastructure and that will help. Also, there will certainly be options for new markets, which should be worth something. Ultimately, though, the economics will be determined by world prices and nobody should expect the bitumen quality discount to vanish. Even Premier Notley said today that the new infrastructure will not lead to more production.

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  6. Miguelito, Trevor Tombe has a good article on the inefficiency of blocking infrastructure to reduce emissions. I mostly agree with it, although he should have acknowledged more clearly that the carbon price required to produce the emissions cuts that the government has pledged would probably be in the range of $200/tonne CO2e. While this would be effective and efficient, I doubt that it would be politically feasible.

    Mark Jaccard has a good piece on how, in practice, we will need both carbon pricing and regulations to get the mitigation job done.

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  7. Andy: I agree there probably needs to be a mix of carbon pricing and regulations. Carbon pricing doesn't work well to control fugitive emissions in gas production, so regulations will be needed if that share of Canada's emissions are to shrink over the long term (which we already have some commitments by Trudeau for). Renewable portfolio standards are good if done in a competetive and market savvy way.

    But, I think we're going to learn that regulations and greater market intervention by governments to achieve lower emissions could end up being high hurdles to public acceptance too, because these do come with higher costs that will be evident elsewhere. All I can think of is Alberta's recent GHG commission and all the testimony that essentially said, if you do anything, don't do what Ontario did. I agree with that.

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  8. I'll also point out that the Ontario Liberal government is really nose diving in the polls, a lot of which is because of what's happening in electricity markets from government tinkering and micro-management. If there's a lesson in that, it might be that excessive regulation by governments could have the same high political hurdles that high carbon prices will. That may bode well for high carbon prices in the long term, especially if voters fear government mismanagement more than they worry about what a carbon tax will cost them.

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  9. I hope this is cynical or calculated political gamesmanship on the part of the Canadian government rather than overt hypocrisy.

    In other words, it will issue permits for half or more of the pipeline projects applying for approval, let them be built with private capital if the companies behind them are willing to take the risk, and then let them sink or swim, unaided by any public funding or bail-outs, on the economics of the medium and long-term market for bitumen in a decarbonizing world economy. The effective outcome may be the same, but the expenditure of political capital less.

    And while that is happening keep raising the carbon tax on all sources of GHGs, from individuals heating their homes to the largest oil sands producers.

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  10. nanuk@10,

    Wow. I am very familiar with the history of Transfer Payments in Canada. Do some actual research regarding the history of transfer payments. Then come back and apologize for making a totally unsubstantiated claim.

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  11. Here is an interesting article referring to a report that directly addresses what needs to be done "responsibly" with potential wealth from any new or existing fossil fuel exploitation in Canada.

    CBC News item "Canada's stagnant, slipping national wealth overly reliant on oil and gas: study"

    It also highlights the tragedy of the failure of Canada's previous leaderhip to meanigfully advance Canada to a better future that actually has a future.

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  12. "the boom times have created a hangover, and the remedy for that should be moderation rather than more binge drinking"

    Exactly.  So the kindest, most responsible thing for a neighbour to do is to take away the keys, lest the serial drunk driver try to get behind the wheel again.  Sorry, Alberta!

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  13. Nanuk* refers indirectly ("sucking on the prairie teat") to equalisation payments. There is a myth in Alberta that the province props up the rest of Canada by transferring hard-earned cash to undeserving parasite provinces like Quebec. In fact, Albertans pay more federal income tax because they are richer. Wealthy Canadians in other provinces pay federal tax at exactly the same rates. There was a recent CBC radio segment that dealt with this myth.

    All resource royalty and leasing payments stay within the province. This is one reason why Alberta has the luxury of being the only province in the nation that does not have a provincial sales tax.

    Also, under the Trudeau carbon tax plan, all carbon taxes raised in a province will be retained in that province.

    Albertans, it needs to be said, often exhibit an unjustified sense of victimhood, despite being (still) the wealthiest province in Canada. This is not to minimize the real economic suffering being experienced there as a result of the sudden crash in global oil prices.

    *Nanuk''s comment was removed by the SkS moderator after I had written this response.

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  14. Economist Jeff Rubin makes arguments, similar to mine, against the economic case for the TMX project in a radio interview this morning on CBC

    Part of the transcript:


    One of the main selling points of the pipeline has been that it will give Canadian bitumen access to Asian markets. But according to Rubin, the economic advantage of selling oil to Asia has been over-stated.

    "The reality is that Asian markets pay less, not more, for the bitumen that Canada wants to sell than U.S. refineries," he told Crowe.

    Rubin pointed to Mexican Maya Crude, saying the product, which is similar to oil sands crude, sells for $8 per barrel less in Asian markets than American markets.

    At such low prices, the revenue that Canadian oil sands companies would gain from selling their oil to Asia wouldn't be worth the cost of extraction, he said.

    Not only is it economically unwise now, he added, but it never will be.

    "There's even less of a business case in the future than there is today," he said. "Not if Canada and 170 other countries come even remotely close to living up to their pledge to hold global climate change to one-and-a-half to two degrees."

    The notion of building an oil pipeline while trying to reduce greenhouse gas emissions, Rubin said, is "akin to having your foot on the brakes and the accelerator at the same time."

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  15. It is clear that there is a long history of incorrect business and political decisions being made, if the advancement of humanity to a lasting better future for all is the desired result of human endeavours. These decisions are the result of the development of unjustified perceptions of prosperity and opportunity, “winning any way that can be gotten away with”.

    And current leaders in democracies require popular support that is difficult to obtain by justifiably shattering the developed delusions of prosperity and opportunity. Defending unjustifiable perceptions is easier to do. Clearly, it is possible to get support through an unjustifiable excuse like 'the importance of balancing economic interests of a portion of current day humanity with consequences faced by others who will not benefit, particularly future generation'.

    It is common sense that it is unacceptable for anyone to benefit in a way that creates potential negative consequences for another person, including future people. The root cause of that lack of common sense in developed and developing societies needs to be addressed. It is almost certain to be an expected consequence of systems that allow a person to get away with actions that are clearly contrary to the advancement of humanity.

    And it is clear that an issue like climate change cannot be adequately addressed be 'those who choose to care' while those who deliberately try to get more benefit and any possible competitive advantage by caring less can get away with their deliberately less responsible behaviour.

    There is an escalating global war on climate change. It is part of the bigger escalating global war against pursuits that are understandably not going to sustainable advance global humanity to a lasting better future for all. And an aspect of any war is the propaganda war waged by those who actually understand how unacceptable their desires and interests are, but know how to temporarily Trump-up support. And like all activities that have to rely on propaganda (because they actually are understandably unacceptable), they can be tragically disastrously successful for as long as they are able to be gotten away with.

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  16. Andy, you might want to weigh in on this piece by U of Calgary economist in Macleans today 

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

    "...climate concerns around pipeline approvals should be off the table."

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  17. I don't know what is sadder.  A politician we thought would do the right thing or a politician that can't read the tea leaves sufficiently far into the future to know that oil from tar sands will be amongst the first to have to be abandoned as we make the rapid transition away from fossil fuel.

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  18. Stephen, I don't really have that much argument with Tombe's economic analysis: I accept that stopping infrastructure is a blunt and expensive way of slowing production. As I said in comment#6 earlier, it is all very well to run the numbers that show that a carbon tax is the best policy, but it needs to be set at a level of $200 per tonne to be effective, but that is politically impossible, at least until Canada's trading partners start to price carbon at those levels. So, Tombe is right in theory, but his ideas fail any practical test. Economists are not strangers to failing practicality tests.

    I find it frustrating that Tombe rather patronizingly calls for cooler heads on policy, all the while showing graphs that predict eternal growth in oilsands production, as if that were some ineluctible law of nature. Instead, many of us see those trends as Canada digging itself deeper into an emissions hole that we won't easily get out of. I would rather use a policy scalpel than a blunt instrument, but if that's all we have, that's what we'll have to use.

    Let me repeat, Alberta is producing more oil than at any time in its history. Production is still growing due to projects under construction. That the province is suffering an economic crisis now is not because of a lack of infrastructure. It is because even projects with sunk costs are barely making money at today's commodity prices and because the provincial economy needs to keep production growing quickly just to maintain employment and balance the books. Emissions aside, this rapid growth is not sustainable. Better to adjust to the consequences of slower or zero production growth now, rather than later, when the problem will be bigger and the fall harder.

    Let me say this, if Canada adopts a carbon price above $100, I promise to shut up about banning new pipelines for climate policy reasons. 

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  19. william@17, I hope that true leaders in business and politics will understand that in spite of 'legal approval' these pipelines, and their obvious boost to the success of attempts to expand an activity that needs to be rapidly curtailed, deserve to be losing bets for those who chooose to gamble on benefiting from them.

    Sadly, there are many unleaders in business and politics. And those are the type of people who will declare that once something gets started it has to be allowed to be as beneficial as possible for the ones who wanted to benefit from it (the push for new and larger pipelines is because of the unjustified recent expansion of oil sands extraction operations). Those type of unleaders are the reason that future Albertan's owe $1.1 Billion to those who gambled on building new coal burners in Alberta to let Albertans in the past undeservingly get some of the cheapest electricity in North America, attempts to profit that were understood to be unacceptable at the time they were pursued and are now needing to be curtailed by 2030.

    The investors in these pipelines and the extraction of tar sands that they support need to be told in no uncertain terms that real leaders will be fighting to make these activities losing propositions, with no public bail-out for the gamblers.

    The real problem is the way that these things get justified.

    • Some will say building a pipeline won't reduce global burning. However, they have to ignore the fact that reducing the rate of product delivered to the market definitely would help achieve that objective. And less ability to cheaply move the product for profit will knee-cap future interest in expanding these unacceptable pursuits of profit.
    • Some will say pipelines are safer than rail. The truth is that the safety of pipepline or rail transport is a function of the effort put into making it safer. There is no default superiority from a safety perspective. Higher safety can be achieved in either system. THe real problem is the way that globalized competition has resulted in 'reduction of standards for safety to be comepetive with the lower standards others can get away with'. That unnecessary reduction of rail safety, allowed for reasons of competitive profitability, was the reason for the Lac Megantic tragedy, a totally avoidable rail disaster that something as simple as full-time responsible observation of the train would have kept from happening.
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  20. Further to Trevor Tombe's article, here is a counterpoint by Jason MacLean

    An excerpt:

    Tombe’s argument is just the kind of economic thinking best left to classroom chalkboards. As a basis for Canada’s climate policy, it falls short in three ways.

    First, Tombe assumes without justification that Alberta oil producers’ implied costs—purely notional costs not actually borne by anyone—are relevant to a public policy whose purpose is to reduce emissions and the very real costs we’ll all actually have to bear if we fail to stabilize our climate.

    Second, the government’s estimated social cost of carbon might vastly underestimate the true cost. While most economists agree that pricing carbon is the ideal way to reduce emissions, economists also appear to agree that economic models seriously underestimate the future costs of climate change. Models of the social cost of carbon depend on modellers’ assumptions, including how much to discount future damages. Estimates vary, but many economists think the true cost is closer to $200 than Tombe’s $50.

    Think of it this way: if Canada’s proposed price of $50 by 2022 were really high enough to reduce emissions and stimulate “clean growth” by sending a clear signal to the market to shift production from fossil fuels to renewable energy, we wouldn’t even be having this debate! In a world where carbon is properly priced and not substantially subsidized, building new pipelines would be economically unthinkable. Which is kind of the point.

    But because $50 is almost assuredly too low, we can’t rely on it alone, no matter how economically ideal it may seem. Instead, we must pursue a mix of policies, including one Tombe agrees will work – blocking pipelines.

    The Minister of the Environment and Climate Change gets this—mostly—when she explained that “some people say just have a price on carbon. If you were to do that, the price would be so high it wouldn’t make any sense. So that’s why you have to have a variety of different measures.” Minister McKenna’s absolutely right, of course, if what she means is that a full carbon price wouldn’t make sense politically.

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  21. Andy Skuce, your comment@20 includes the following statement in the quote from Jason MacLean's counterpoint "Models of the social cost of carbon depend on modellers’ assumptions, including how much to discount future damages."

    It is very important to make sure that such thinking is limited to setting a price in an attempt to stop something that needs to be stopped (not just slowed). It cannot be allowed to be used to excuse the damage that is being done by the activity. Paying a price does not make such an activity acceptable.

    It is unacceptable for anyone to believe it is acceptable to calculate the costs being created that future generations of humanity (or other current day members of humanity) have to deal with and compare that cost to the reduced wealth and opportunity for those people if they had to stop creating trouble others have to deal with. It is even less than unacceptable, bordering on criminally insane, to deliberately "discount" the estimated impact others have to suffer or deal with, especially when those evaluations may miss major impacts.

    A business investor who will gain any benefit and suffer any and all impacts and consequences of their investment choice/gamble can use that method to compare 'their options for action that they will solely suffer any consequences of'. However, that type of thinking is irrelevant when humans other than the ones benefiting will be potentially suffering some consequences.

    It is simply unacceptable for a portion of any generation of humanity to benefit from an activity that can be understood to be creating costs or challenges or limitations or damages or risk of damage that other humans have to deal with, particularly future humans who have no voice today. That should be repeated at the start of any discussion of how this type of problem will be addressed, openly admitting the unacceptability of perceptions and activities that have developed.

    In a nut-shell, it is common sense that it is nonsense to claim that developed economies need to be protected from the changes and undoing that are required by better understanding of the unacceptability of what got away with developing popularity and profitability.

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  22. Andy Skuce @18: "Let me say this, if Canada adopts a carbon price above $100, I promise to shut up about banning new pipelines for climate policy reasons."

    I can't see any political way forward to a $100 price on carbon without those pipelines. It's a trade-off.

    From John Ivison (http://news.nationalpost.com/full-comment/john-ivison-liberals-strategy-of-pipeline-approval-with-carbon-pricing-a-winner-with-voters-poll-suggests):

    "But a more interesting statistic emerged when Abacus asked how people would feel if a carbon pricing plan that encouraged a shift toward greater use of clean energy was accompanied by a new pipeline to get Canada’s oil and gas to new markets.

    The result is a potential game-changer: three out of four Canadians would support or accept this shift, including majorities in every region.

    In Alberta, 92 per cent of respondents bought into the idea; in Saskatchewan, the number was 83 per cent. A large majority of Conservative voters was supportive (87 per cent) and 62 per cent of NDP voters said they could go along with this decision.

    Even in Quebec, which has traditionally been hostile to pipelines, two out of three respondents said they would back a shift to renewables accompanied by a new pipeline."

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  23. I have a quible with analyses like Saxifrage's: he counts the cost of burning Oil Sands oil, when most is destined for the export market.  Gasoline imported from the middle east and burned in Canadian cars counts towards Canadian emissions.  Nature doesn't care where the CO2 comes from, but counting fuel burned in export markets leads to double counting.  

    I echo Magma's sentiment, particularly with respect to  the Pacific NW LNG project.
    The analysis also doesn't relate the pipelines to each other; if all were to be approved, it would effect the capacity used of other pipelines.  I cannot tell if these estimates account for the displacement of oil that would not be shipped via rail or truck if the pipelines were not built.

    It should also be noted that Alberta government has also pledged a (admittedly ludicrously high) "legislated emissions limit on the oil sands of a maximum of 100Mt in any year with provisions for cogeneration and new upgrading capacity."

    Tombe has stated that a ~$130/tonne price will be necessary; $50 is the Trudeau goverment's 2020 target.

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  24. Saxifrage does breakdown the emissions from the projects as upstream (in Canada) and downstream (overseas in the case of export projects). So you can easily factor out the downstream emissions if you are just trying to calculate the Canadian emissions.

    Promoters of LNG projects like to refer to incremental downstream emissions, because if gas replaces coal, the incremental emissions would be net negative. The implication is that net negative downstream emissions can be credited to Canada, whereas net positive emissions in export markets should not be.

    A quibble with Saxifrage's calculation is that he basically assumes that all of the upstream emissions made to fill the pipeline will be new emissions that wouldn't have happened had the pipeline not been built. That could be true, but is not necessarily so. The counterfactual assumptions are not straightforward and are debatable.

    I heard Premier Notley in a radio interview the other day claiming that no pipeline would increase emissions because the growth in oil sands production will happen, pipelines or not. This strains credulity, particularly because she also claims that pipelines will add thousands of new long term jobs. You just can't claim both. I'm planning a post on my blog covering this and other stretchings of reality.

    In other news, Notley has agreed to debate Andrew Weaver on television. That should be interesting. Weaver has been very scathing lately about Alberta's Climate Leadership Plan. If I find out when this debate will happen, I will comment here.

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