Environmental imperative has arrived once more at its inevitable intersection with economic realism. For the rest of the world, navigation through the impasse in Canada will be instructive.
Canada’s federal government has set ambitious targets for lowering emissions of greenhouse gases (GHGs). In a policy statement called “Turning the Corner,” it pursues cuts during 2006-20 of 20% and through 2050 of 60-70%. The program requires emission reductions at the company level. Companies can lower emissions at their facilities, invest in emission-reducing technology, trade emission allowances, and use the Kyoto Treaty’s “clean development mechanism,” which credits a company in one country for lowering emissions in another.
‘Low-emissions society’
The National Round Table on the Environment and the Economy recently elaborated on this federally specified “transition to a low-emissions society.” It recommends that the government “implement a strong, clear, consistent, and certain GHG emission price signal across the entire Canadian economy as soon as possible.” It calls for an emission tax or cap-and-trade system or both. For parts of the economy that don’t respond to the price signal or “where market failures exist,” it suggests “complementary regulatory policies.”
Governments proceed this way when they let the environmental imperative of GHG reduction supersede other interests. The approach follows that of the Kyoto Treaty, embraced most enthusiastically in Europe. Its emission targets are aggressive, as they must be for any program trying to stabilize atmospheric concentrations of GHGs. In fact, as the Kyoto experiment shows, they’re futile. When the high costs of aggressive emission cuts become clear, economic realism awakens to breed political resistance. A lurking political complication is the lack of assurance that lowering human emissions of GHGs can alter global average temperature.
The conflict is fully developed in Alberta, where GHG regulation falls heavily on an eminent generator of wealth. The oil sands industry already faces a full menu of problems, including leaping costs, Alberta’s newly increased royalty rate, labor and material shortages, questions about fuels and electric power, limits on water supply, and a range of environmental issues other than GHG emissions. Even with crude oil prices high, profit margins of the oil sands industry remain under pressure. New costs from toughened GHG regulation can’t help.
Refusing to let environmental imperative supersede provincial interests, Alberta’s government recently steered away from the federal path on GHG policy. It calls for a 14% cut in emissions of carbon dioxide against 2005 levels by 2050, with all reductions coming after 2020. Allowing emissions to rise until then accommodates expected increases in production of bitumen and heavy oil. It also angers all-or-nothing environmentalists. But Alberta’s modified approach makes room for economic realism. In January, Alberta Premier Ed Stelmach told reporters, “It would be very difficult to bring in real reductions, immediate reductions, without devastating the economy and the quality of life of Albertans.”
Alberta’s GHG program further differs from its federal counterpart by eschewing new emission targets for companies and concentrating instead on CO2 capture and storage. Critics of the approach naturally argue that the method hasn’t been widely employed. That’s true. But the technology is at hand. A task force with representatives from the Albertan and federal governments has just published a program for using it.
Capture and storage
The EcoEnergy Carbon Capture and Storage Task Force calls for total cuts in GHG emissions of 5 megatonnes/year from three to five capture-and-storage projects by 2015. Oil sands projects are obvious candidates. The task force further recommends that federal and provincial governments supplement industry investments in the initial projects with funding of as much as $2 billion. And it calls for follow-up work and funding for subsequent capture-and-storage initiatives. Ultimately, it says, projects of that type might reduce Canadian CO2 emissions by 600 megatonnes/year—40% of the projected cuts for 2050.
CO2 capture and storage can’t eliminate the costs of GHG reduction. They do, however, represent a high-volume option that might keep costs under control and align environmental imperatives with economic realism. Alberta and Canada have a chance to show the world how to make such an option work.
