“Engage in further consultation with all sectors of the Canadian economy to understand the social, financial, and regulatory impacts of the proposed emissions cap…” – letter to Environment Minister Steven Guilbeault, March 27
The oil sands has a dilemma. Extracting bitumen accounts for 12 per cent of Canada’s greenhouse gas emissions, a situation seriously at odds with nation climate commitments. But the cost of lowering those emissions is likely to bankrupt producers. Dirty oil or economic catastrophe, those seem to be the only two choices available. Is there not a middle way?
The sector’s emissions problem is top of mind because of the Calgary Chamber of Commerce’s March 27 open letter demanding that Ottawa’s proposed oil and gas emissions cap be abandoned.
The letter is scandalously dishonest. Nothing more than a recitation of oil company memes, really.
For example, the Chamber writes that “oil sands producers have continued to reduce the emissions intensity per barrel, achieving a 23 per cent reduction since 2009.” This is partly true. Average emissions-intensity fell from about 83 kg CO2e/b to the current 68 kg CO2e/b.
Accurate at the broadest level, perhaps, but averages hide the really bad actors. According to S&P Global calculations, some oil sands production is as high as 160 kg CO2e/b. If that isn’t the dirtiest crude oil on the planet, it’s a close second.
What is also conveniently not acknowledged in the letter is that oil sands production more than doubled during over the last 15 years from 1.5 million barrels per day to 3.5 million barrels per day.
As long as there has been oil sands production, improvements in emissions-intensity per barrel have been overwhelmed by growing output. The result is ever higher absolute emissions, which now sit at 83 megatonnes (Mt) per year. The only year that relationship did not hold was 2022, when emissions plateaued, probably because output rose only 50,000 barrels per day.
Another serious omission from the Chamber’s letter: the Alberta Energy Regulator predicts that oil sands production will rise another 600,000 barrels per day by 2032. If the historic trend holds, and given the current political and policy situation that’s a reasonable assumption, then absolute emissions will rise, too.
Imagine how frustrated Steven Guilbeault, the oft-vilified federal environment minister, must feel about that. He probably hears regularly from environment ministers in British Columbia or Quebec who are busy implementing climate plans, including entering into equivalency agreements with Ottawa, while Alberta has no climate plan and opposes most federal attempts to impose one.
No wonder he says he is determined to follow through with the proposed – or threatened, if you’re Premier Danielle Smith – cap. Why should other provinces pick up Alberta’s slack?
Ottawa’s oil and gas emissions cap design a mistake
Guilbeault is not entirely blameless. His preferred emissions cap is to impose a cap-and-trade carbon pricing system on top of the existing industrial emitters carbon tax. In Alberta, this tax is called the TIER (Technology Innovation and Emissions Reduction) Regulation. Critics have quite rightly pointed out that such a scheme would double reporting requirements, increase regulatory burdens, and be woefully confusing.
In the Chamber’s words, it would create a “punitive regulatory environment.”
It didn’t have to be this way.
In early 2022, Ottawa released a discussion paper about emissions cap options. Only two were discussed: tightening up industrial emitters’ carbon tax or cap-and-trade. Later that year, and already a year after Prime Minister Justin Trudeau unexpectedly announced the cap at COP26, the federal government re-negotiated the TIER equivalency agreement with Alberta, doubling the yearly increase in stringency (from 1%) of the carbon tax.
That isn’t enough. The Pembina Institute calculates that stringency has to increase up to five per cent per year to be effective.
Astute readers will be wondering why, with Alberta already at the table, the feds didn’t simply negotiate a tougher emitter’s tax when they had the chance. One system, one set of regulations, one cost.
Maybe Alberta wouldn’t budge any further on TIER. Maybe the Liberals are so disorganized that the TIER negotiators didn’t know what the emissions cap designers were up to.
Who knows? But here we are.
Now, two things are likely.
One, the oil sands cannot be allowed to continue growing absolute emissions. Oil industry talking points like that old chestnut, “Canada is only 1.7% of global emissions, why should it do anything to lower GHGS?” is, frankly, embarrassing. Canada has signed international climate agreements and as a G7 nation, behaving like a responsible adult is a condition of belonging to the club.
Two, if the global energy transition continues to accelerate, Canadian Energy Regulator modelling shows that oil sands production slowly declines after 2030 because of low prices.
If “Canada needs to meet net-zero by 2050 and manage those emissions, then Canadian producers are facing very real decarbonization costs and those costs are most acute for oil sands producers versus conventional producers,” Jean-Denis Charlebois, CER chief economist, told Energi Media (listen to full interview below).
This is the oil sands dilemma: the sector must decarbonize in the face of worsening climate change and the competitive threat posed by clean energy, but doing so probably puts it out of business.
Is there no middle way?
“The Calgary Chamber and its members are aligned with the federal government’s commitment to reducing emissions – recognizing the significant challenge climate change poses to our planet and economy,” the Chamber said in its letter.
Baloney.
If the Chamber was truly aligned with climate targets it would suggest a real resolution to the oil sands dilemma.
For example, Calgary is home to an innovative company called Acceleware that makes a downhole “heater” that replaces steam for in situ production (burning gas to make steam creates most of oil sands’ emissions). The Chamber could propose that the federal government “de-risk” (another word for subsidize) this emerging technology, which can be paired with wind, solar, and battery storage.
For those applications where steam is absolutely necessary, perhaps a Rondo battery powered by renewables might work. This American cleantech adapts 200-year old brick heat storage first developed by the British steel industry to modern industrial applications.
The Chamber could be an honest broker, proposing solutions like the Acceleware technology or the Rondo battery for the really dirty oil sands operations. Start there. Convince Ottawa, with its giant pots of clean energy funding, to finance demonstration and pilot projects, eventually the scaling up of a successful solution or two. Persuade both sides to make this an urgent priority.
The point here is that there is a conversation to be had about a middle way for the oil sands to decarbonize while remaining competitive after 2030. Such an approach would be a responsible and rational response to a very difficult situation.
That is not the conversation the Calgary Chamber is interested in having. No, instead it has taken the tired old approach of supporting the status quo in the face of unprecedented technological change, propping up oil and gas incumbents instead of lobbying for innovative solutions.
The best the Chamber can do is recommend “further consultation with all sectors of the Canadian economy,” which is nothing more than a tawdry delaying tactic. The worst kept secret in Calgary is that the business community is hoping to stave off federal climate policy change until the 2025 election, when a victorious CPC will presumably ride to the rescue.
Wouldn’t it be refreshing if bad faith actors like the Calgary Chamber of Commerce admitted what they’re up to instead of hiding behind sanctimonious letters asking for yet another round of consultation? Sadly, the letter reflects the thinking of much of Alberta’s business community.
The ultimate irony of this climate farce is that Alberta brags about its huge “innovation ecosystem,” yet when faced with what is arguably an existential challenge, advocates for that hoariest of Canadian delaying tactics, more consultation, instead of showing real leadership.
Sadly, a parade of Alberta business organizations co-signed the letter with Calgary Chamber CEO Deborah Yedlin. It is time for those organizations to stop being stalking horses for energy incumbents like the giant oil and gas corporations and to start proposing real solutions. The oil sands dilemma needs a solution. If the companies and the federal government can’t find one, then third parties like Alberta chambers of commerce and the Alberta Business Council have an obligation to help find a way out of the current impasse.
The whole lot of them should, frankly, be embarrassed that the best they can do is call for yet more talking. That’s not leadership.
Be the first to comment