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Trading Carbon : November 2011
won't drop anytime soon. That wouldn't necessarily be a problem if other sectors, or other parts of the economy, were going to pick up the slack -- but that's a hard case to make, either to other industry sectors or to Canada's consumers. What is the likely result of weighing these political tradeoffs? One option would be to show real leadership by adopting policies strong enough to hit the GHG target. But, in a world where the oilsands are encouraged to keep growing, a more likely result is that the sector's "needs" set a low bar for the rest of Canada's industrial sectors. In the real world, intensity targets for all heavy industry sectors is exactly what every federal government climate plan in Canada has proposed. Each time, environmentalists dismiss the plans as flawed as soon as they are announced; so far, none of those plans has actually gone into effect. It looks like we're now stepping back on to the same merry-go-round for one more ride. Canada's Environment Minister Peter Kent plans to set intensity targets for the oil and gas sector, although he has yet to provide any details about the timing or design of these regulations. As a second thought experiment, let us imagine if we had put our eggs into a different basket. Instead of pouring billions and billons of dollars into oilsands, picture a Canada that had invested in engineering, manufacturing and selling solar panels. Rather than fearing the green choices other countries make, we would celebrate them. The more jurisdictions decided to tackle climate change, the more potential customers our solar panel makers would have to sell to, and the more engineering and sales jobs we create. In Canada's solar-panel-driven economy, good climate policy wouldn't just be the right thing to do; it would also become a premiere way to enhance Canada's competitive advantage. 35 OPINION of weakness even before that extra oilsands growth begins: all of the current announced federal and provincial climate policies cover just one quarter of the gap between projected 2020 emissions and that year's target. Environment Canada's projections showing the gap between policies and target are shown in Figure 2. If Canada does miss its target in 2020, emission growth in oilsands will probably be a big part of the reason. But the oilsands' influence doesn't seem to end with its direct impact on the country's emission profile. The oilsands, a small but mighty slice of Canada's emissions, seem to disproportionately influence our government's overall approach to global warming. As a thought experiment, let us assume Canada's federal government wants to see oilsands continue its rapid growth indefinitely. What would that mean for climate policy in Canada? For starters, it would need an approach that allows for increases in emissions from oilsands, at a time when climate science tells us that overall GHG emissions from countries such as Canada need to be dropping quickly. To reconcile growth in oilsands with Canada's 2020 target, the government could ask other sectors to pick up the slack. In the case of regulations, that would mean tougher standards in other sectors so that absolute emissions fall. If we're talking about a price on emissions, it means a higher price than the non-oilsands sectors would otherwise need. If this approach was unsuccessful, then the government's most likely fallback position is to drop the idea of capping pollution altogether and resort to intensity targets, which are also known as performance standards. For oilsands, that would mean targets set in emissions per barrel of oil, not in absolute GHG emissions. The problem is, if oil production keeps growing rapidly, real pollution will keep rising, even if each barrel becomes cleaner. In fact, that's exactly the trajectory we've seen in oilsands since 1990. The currency that matters to the environment is absolute emissions over time, and intensity targets for fast-growing oilsands almost certainly mean that the oilsands' emissions If Canada misses its 2020 target, oilsands will probably be a big part of the reason 140 120 100 80 60 40 20 0 Emissions (Mt CO2e) Oil and gas (excl uding oilsands) Ground freight and offroad Electricity (total) Emissions-intensive trade-exposed industries Agriculture Ground passenger transportation Waste and others Residential buildings Commercial buildings Air and other transportation Oilsands 2005 2010 2015 (linear) 2020 Figure 1: Projected emissions by economic sub-sector November 2011 SOURCE: ENVIRONMENT CANADA
December - January 2011