UPDATE (Feb. 1, 2010): Ottawa has sent a shot across the bow of the companies operating in Alberta’s oil sands by saying they must do their part to help Canada shed its dirty image when it comes to greenhouse gas emissions. Speaking before a group of business leaders in Calgary on Monday, Environment Minister Jim Prentice said the rapid development of the oil sands has contributed to a negative international perception of Canada and is at odds with the “clean energy superpower” image that it aspires to project to the world.
Many had expected the government to give the oil sands a break in any climate change program, but Prentice said that operators will be expected work with Ottawa and Alberta to help the country meet revised emissions targets that are part of the Copenhagen climate change accord. Canada’s new emissions targets, announced by Prentice over the weekend, are to reduce greenhouse gas emissions by 17 per cent below 2005 levels. That’s less than the previous target of 20 per cent below 2006 levels, but in line with targets set by the U.S. government. Prentice added, however, that the federal government still supports oil sands development and won’t adopt any specific measures unless the U.S. does first.
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If Canadians learned anything from the bickering at the Copenhagen climate change summit, it’s that our outsized appetite for energy and the ugly image of the Alberta oil sands—sprawling open-pit mines, belching smokestacks, murky tailings ponds—has bestowed upon us the unfamiliar role of environmental villain. And, justified or not, the scrutiny is only going to get worse in a year when Canada will host G8 and G20 summits and the Olympics.
The federal government has so far dismissed the characterization as the work of a few fringe environmental groups, but make no mistake: the oil sands are fast becoming a political problem for Prime Minister Stephen Harper, and one that can’t be ignored indefinitely. “I think Canada is going to have to do something about the oil sands, not just because of the international pressure, but because the unconstrained growth will make it so difficult for us to reach the targets we’ve set for ourselves,” said a member of Ottawa’s climate change panel and Copenhagen conference attendee, who spoke on the condition of anonymity. (He was referring to the government’s stated target of reducing emissions by 20 per cent from 2006 levels by 2020, not previous Kyoto targets.)
Ottawa’s official strategy, and one that the industry supports, is to wait for Washington to figure out its own climate change legislation and then follow suit. But there’s no telling how long that could take. And while there’s a sound economic argument to be made for a coordinated approach—Canada is the largest exporter of oil to the U.S.—there may be a political price for a minority government. “The government is in a bind,” says Dale Marshall, a climate change analyst for the David Suzuki Foundation. “It probably wants to give a break to the oil sands, but it’s difficult politically to do so. And that’s because a Conservative majority doesn’t go through Alberta, it goes through Quebec and Ontario.” Indeed, a war of words has already broken out as Ontario and Quebec criticized Ottawa for taking a weak stance at Copenhagen while Alberta spent $120,000 to defend its environmental record in national newspaper ads. Going after the oil sands would require some deft manoeuvring—any crackdown risks causing serious harm to the Canadian economy and could open deep regional rifts.
So just how far might the government go to send a message? Much of the current discussion now centres on how big a break oil sands producers might get, mainly because proponents argue similar “trade-exposed” industries, like coal-fired electricity in the U.S., are likely to be let off the hook. But it’s looking increasingly likely that the oil sands industry will be asked to step up and contribute to any new climate change policy. That would likely come in the form of a national carbon tax or a cap and trade scheme, say observers. Both tools could be used to penalize oil sands firms that haven’t moved quickly enough to curb fast-growing emissions (the government estimates oil sands emissions will triple between 2006 and 2020). But even more direct taxes or regulations aimed squarely at the oil sands and firms that don’t hit emissions targets could still emerge as a viable option. Or the government could simply reach back to its 2007 “Turning the Corner” plan that advocated measures to limit the “intensity” of emissions in a given sector by requiring reductions on a per barrel of oil basis.
Marshall says the simplest approach would be to hash out our own climate legislation that’s based on the cap and trade system now before the U.S. Senate. A cap and trade scheme could zero in on the oil sands specifically by putting a higher dollar value per tonne on their carbon emissions, forcing the industry to pay a steeper price than others for emissions credits. Likewise, a carbon tax could penalize particularly dirty industries with a higher levy.
The industry, for its part, seems confident that the economic importance of the oil sands means that the current government is unlikely to make any rash moves. “The oil sands gets far more attention than it deserves in this discussion,” says David Collyer, the president of the Canadian Association of Petroleum Producers, noting that the oil sands produces just five per cent of Canada’s emissions and one-tenth of one per cent of global emissions. Others warn that a policy that singles out the oil sands would make little sense. “You could close down the oil sands tomorrow but the impact on overall emissions would be minimal,” says Jack Mintz, a professor of public policy at the University of Calgary. Picking on one industry doesn’t solve the problem, he adds. In fact, it would only fuel regional anger. “If you want to get Alberta separatism stoked, that would be the best way to do it.”
It’s true that the oil sands aren’t responsible for the country’s high per capita emissions—cars and trucks do far more damage in Canada, and coal-fired power plants are the biggest industrial emitter—but environmental groups are quick to point out that Fort McMurray is the epicentre of the fastest growing source of emissions in the country, with production expected to nearly quadruple by 2020 to four million barrels per day. This is a distinctly Canadian problem, they say, and there are ways to mitigate the regional divisions that dealing with it might arouse. Marlo Raynolds, executive director of the Pembina Institute, says Ottawa could still implement a polluter pays policy, aimed at a region or industry, so long as in return it does things like reduce income tax or pump revenue into technology funds.
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