Franke James http://www.frankejames.com/do-not-talk/

Stephen Harper’s government does not want Canadians to talk about climate change when considering the environmental impact of new pipelines to move bitumen from Alberta to foreign markets. Buried in the provisions of the Omnibus Bill C-38, the  Conservative government has placed clauses that restrict citizens’ rights to make submissions on climate change when testifying at environmental impact hearings.

We should contrast this with the consideration being given to climate change in the evaluation of the Keystone XL pipeline in the United States. In June 2013, President Barack Obama said:

“The net effects of the pipeline’s impact on the climate will be absolutely critical to deciding whether this project goes forward,”

It is astonishing that an environmental  impact considered “absolutely critical” in the US decision-making process, is not even allowed to be mentioned at hearings  within Canada.

Fortunately, this restriction is being challenged in the courts by the environmental advocacy group  ForestEthics and by author Donna Sinclair,  The legal team is being led by civil rights lawyer Clayton Ruby. He is quoted as saying:

“Through legislative changes snuck into last year’s Omnibus Budget Bill C-38, the Conservative government has undermined the democratic rights of all Canadians to speak to environmental issues that impact them,” explained Mr. Ruby. “We’re challenging the legislation because it violates fundamental free speech guarantees enshrined in the Canadian Charter of Rights and Freedoms.”

The Government may argue that climate change impacts of oil transportation projects are not relevant to National Energy Board (NEB) hearings, because these effects are not the direct and local environmental effects of the pipelines and tankers themselves. However, as noted energy economist Mark Jaccard has pointed out, building new oil infrastructure does indeed have a direct effect on climate change. Pipelines facilitate and accelerate the production and consumption of petroleum, that’s the whole point of them; connecting producers to consumers, enabling both.

As Jaccard noted, global effects like climate change are just local effects that occur everywhere.

Jaccard has submitted a sworn affidavit on behalf of ForestEthics and Donna Sinclair, which details how further development of the  Alberta oil sands will contribute to climate change. He concludes:

I understand that the NEB [National Energy Board] has refused to hear submissions about “the environmental and socio-economic effects associated with upstream activities, the development of oil sands, or the downstream use of the oil transported by the pipeline.” It is my view that the exclusion of these issues skews its regulatory assessment in favour of pipeline approval and ignores the most important costs and non-costed impacts that every responsible and honest society should be considering on behalf of people living today and in future.

If the Government prevails in the court case, testimony on the climate effects of oil pipelines will be considered inadmissible at NEB hearings.  This undermines the legitimacy of the hearing process. The granting of social licence to development projects extends beyond the rulings of a single federal regulatory board. Municipal, Provincial and First Nations governments likely will not accept development projects that have not earned broad public consent.  The Conservative Government may not want the public to raise climate change concerns within the NEB hearing rooms, but they can do little to shut us up elsewhere. So let’s talk about it.

Upstream, downstream

The oil and gas business is conventionally divided into three “streams”:

• upstream (production and on-site upgrading);
• midstream (transportation: pipelines, tankers, trains and trucks) and;
• downstream (refining, distribution and retailing).

The biggest emissions by far come from consumption at the very downstream end. Emissions of greenhouse gases in the midstream section are relatively small for oil projects and come mainly from the fuel burned by the tankers and the pumps that drive the oil through the pipelines.  (For gas midstream projects the emissions may be more significant, due to leaks from pipelines and pump stations, as well as by consumption of fuel used to liquefy the natural gas for marine transport).

Generally speaking, upstream emissions are small relative to consumption emissions, but, in the case of the oil sands, emissions associated with the production of the bitumen are much higher than for conventional oils. This means that oil sands oil has overall (well to wheels) emissions some 17% greater than for typical crude oil and most of these extra emissions are due to energy needed to extract bitumen from the ground. (See pages 43-44 of this report).

Let’s take the proposed Kinder Morgan project as an example. The expanded pipeline is expected to transport an additional 590,000 barrels of oil per day: 890,000 after the expansion, compared to 300,000 today (Kinder Morgan website). The fluid to be transported, called “dilbit“, is bitumen diluted by a lighter oil which allows it to flow.  Roughly speaking, the proportion of bitumen in dilbit is about 75%. This means that the new pipeline will transport—beyond what it transports today—about 440,000 barrels of bitumen per day to Asian markets, where it will be refined and used as fuel. This amounts to about 22 million tonnes of bitumen per year that, once combusted, will yield about 78 million tonnes of carbon dioxide that will be dumped annually into the atmosphere.  These are the downstream emissions. To give a sense of scale, these are larger than than all of BC’s greenhouse gas emissions in 2010, which amounted to 62 million tonnes of carbon dioxide equivalent (BC Ministry of Environment).  Let’s state that again more clearly:  just one of the two proposed bitumen pipelines through BC will add more greenhouse emissions per year than the entire Province produces now.

That is not all. Producing bitumen requires huge amounts of energy  just to free it from the sandstone it is found in. This is either done by mining it or by heating the sandstone underground with steam. Both processes require huge amounts of fuel, which, of course cause emissions. The amount of these emissions varies depending on the methods used, but a reasonable average is about an additional 17% of the downstream emissions of the fuel. This would produce about 13 million tonnes of carbon dioxide per year. Therefore, the extra emissions, in Canada, resulting from one pipeline amounts to about 20% of BC’s current emissions. BC’s interim emissions reduction target for 2016 is 16% below the 2007 emissions level (which was  65 million tonnes/year). If the Province succeeds in meeting this target (54 million tonnes/year in 2016). this progress will be more than undone by extra emissions in Alberta due to the Kinder Morgan pipeline that is scheduled to start in 2017. Let’s state that again: the emissions in Alberta that result from just one of the two proposed pipelines through BC will undo all of the contribution that BC might make towards reducing Canadian greenhouse gas emissions later this decade.

The next paragraph anticipates an objection from economists. Feel free to skip it.

An economist might argue that it is not fair to count the downstream emissions, because adding extra supply to the planet’s markets will not add much to global demand.  In other words, if supplying an extra 440,000 barrels a day does not reduce oil prices much (which it probably will not), then demand will not be affected and the market’s invisible hand will adjust matters by reducing supply somewhere else by the same amount. If we look at the marginal effect of the new supply, we should, according to conventional practice, count only the net additional emissions. But, as I have argued elsewhere, we do not have to look at the marginal effects this way. By building new infrastructure and enabling investment in new  development projects in Alberta, resources get converted to reserves, which will greatly increase the asset values on the corporate balance sheets and ensure eventual development.  If that development has the effect of only temporarily shutting in reserves elsewhere, until demand rises, then the effect on cumulative production—and thus emissions—over the longer term will be equal to the total new  flow through the pipeline.  What climate scientists have demonstrated (e.g., Allen et al 2009) is that what matters for climate change are the cumulative emissions, not the timing of those emissions.  Once we consider that, and if we acknowledge that all developed reserves are very likely to be produced eventually, then we are justified in estimating the incremental climate effects of new projects by calculating their absolute rates of production.

Carbon taxes

In 2008, BC introduced a carbon tax. This was one of world’s first economy-wide taxes on combusted carbon emissions and has been widely praised. The tax started at $10 per tonne of carbon dioxide, rising by $5 per tonne every year until 2012, when it reached $30 per tonne. The re-elected BC Liberal Government decided to cap the tax at this level indefinitely. In concert  with other BC emissions reduction policies, the tax seems to have been successful in reducing fuel use, which has fallen by 19% relative to the rest of Canada on a per-capita basis. Also, per-capita greenhouse gas emissions have fallen  by 9%.  The BC economy has not suffered relative to rest of Canada, with GDP growth slightly higher than average.

There are limits, though, and the BC tax may be starting to cause some changes to cross-border trade. There is evidence that since the tax was introduced, British Columbians made more cross border trips to the USA and probably bought more of their gasoline there. This may account for as much as 2% of the 19% reduction of fuel purchases in BC since the tax was introduced, although the tax was not the only factor that drove the increase in cross-border shopping trips. Also, there have been complaints from BC greenhouse farmers  (ironically) that the tax was making their business uncompetitive and the government felt compelled to provide them with some tax relief.

Although the whole point of a carbon tax is to penalize emissions-intensive businesses relative to low-emissions businesses, the incentives no longer work as intended if the high-emission businesses move outside of BC. For example, if BC cement manufacturers were to move their businesses to carbon-tax-free Alberta, the BC economy would suffer losses and  Alberta would benefit. Yet, global emissions would not be reduced one bit. In the same way, BC manufacturers are at a disadvantage relative to Chinese competitors. For a carbon tax to work effectively at a global level,  all trading partners need to play by similar rules.

At present, Alberta has no economy-wide carbon tax. The Province does have a levy on certain levels of “emissions intensity” from oil sands operations, but these taxes effectively limit the cost per tonne payable by the emitter at $1.80 per tonne. There are proposals to increase Alberta’s carbon levies according to the so-called 40/40 plan, but these seem destined to remain as proposals.

China also has talked about instituting a $1.50 per tonne carbon tax, perhaps rising to $7.90 in 2020, but this proposal has yet to be implemented.

Targets

The only greenhouse gas emission target that really matters for climate change  is the global emissions target. Carbon dioxide is a well-mixed gas: this means, for example, that carbon dioxide emitted in the Northern Hemisphere can be observed by instruments at the South Pole within just a few years. Global climate change is influenced by the average concentration of greenhouse gases in the atmosphere and it does not matter where the carbon dioxide was emitted. However, since every country, province and municipality must do its bit to help solve the problem of climate change, national and local targets are required in order to measure and manage progress.

Unfortunately, Environment Canada’s latest report shows that the country is on track to miss its own emissions targets for 2020 by a wide margin.

Note that the red line shows what Canada’s emissions would be under an imaginary  government that had even less climate-friendly policies than the current Conservative government. In language that even George Orwell would not have imagined possible , Federal Environment Minister Leona Aglukkaq has described the Environment Canada report as showing “significant progress”, even as the projected emissions trend moves in further way from the 2020 target as a direct consequence of government policy of encouraging growth in the energy sector in Western Canada. The actual performance looks good plotted against the red line, but that line represents the emissions resulting from the actions of a hypothetical federal government with even more reckless policies than our present one.

The main reason that Canada will not meet its 612 million tonne target in 2020 is because of the oil and gas sector.

And the reason that the oil and gas sector is increasing emissions so much is because of the expansion of the oil sands.

Note how the emissions from the oil sands rise dramatically between 2011 and 2020, even as the emissions from other parts of the oil and gas sector fall or stay flat.

If oil sands production were not expanded beyond today’s level,  the future emissions for Canada would look something like the green line in the graph below.

Even though Canada would still miss its 2020 target, at least emissions would be falling over the coming years if oil sands expansion stopped. If there were a national price for carbon emissions, then other sources of greenhouse gases would also diminish more quickly than shown.

Fair play, free rides

Although BC is leading the world in climate policy, its trading partners are doing very little. If the oil sands were located in BC, operators would be much more strongly incentivized to reduce their emissions than they are in Alberta. If the products that BC imports form Chinese factories were produced in BC, there would be charges on those products that would more closely reflect the damage done to the planet’s climate. In many ways, because of their inaction on climate policy, BC’s trading partners are getting a free ride at BC’s and the planet’s expense.

In an interview on CBC Radio on November 2nd, 2013, Alberta Premier Alison Redford is reported to have said:

“In Alberta, we’re not looking to increase our price on carbon unless there’s going to be a move from the United States. There has to be a quid pro quo.”

Clearly, Ms Redford has no problem making her decisions on environmental policies contingent on the policies of her neighbours. BC should not hesitate to do the same, by linking its approval of the proposed pipelines to the environmental policies of the jurisdictions that the pipelines serve. There should be no neighbourly obligation for British Columbians to allow the transport of bitumen across its mountains and waterways, when both the producers and the consumers of that product are getting a free ride on their greenhouse gas emissions. If Alberta producers and Asian consumers were taxed for their emissions at the same level as they would be if the bitumen were produced or refined in BC,  we could then start to focus on the other, serious and local risks that arise from transporting bitumen through our province.