Saturday, February 24, 2007

Off target

The reported regulations which the Cons are expected to announce for oil sands production have received surprisingly little comment. But let's take a moment to look at just how weak they are:
New government rules limiting emissions of carbon-dioxide aren't likely to hurt Canadian oil-sands projects, according to Suncor Energy Inc., the world's second-largest producer of oil from the tar-like deposits.

The rules, which may be issued within a month, may require companies to reduce annual carbon emissions by 2 percent, Suncor spokesman John Rogers said today in a presentation at a conference in Whistler, British Columbia, that was broadcast on the Internet. Failure to meet the target might result in a penalty equivalent to about 25 Canadian cents (22 cents) per barrel, he said...

Suncor's understanding of the new rules is based on discussions with government officials, Rogers said without elaborating. The program will include per-barrel energy intensity targets, Rogers said at the conference organized by Canadian Imperial Bank of Commerce.
So just how toothless would that type of regime be, even leaving aside the inherent problems with intensity targets?

Consider first that one of Alberta's major producers has already been reducing emissions intensity by 1% per year over the past decade and a half. Which means that the required "reductions" are little different from a status-quo amount for the operators involved.

And even if the targets themselves were meaningful, the proposed penalty wouldn't be. After all, the current emissions in the oil sands are now in the range of 80 kg per barrel (which is linked to a 25 cent fine). Apparently in the Cons' view, when an oil sands operator is asked "would you rather reduce greenhouse gas emissions by 80 kg or buy a gumball from a mall dispensing machine?", the correct answer is "what flavour of gumball?".

Contrast that 25-cent-per-barrel penalty against the $1-per-barrel cost of reducing emissions in order to get Canada to its Kyoto targets - or $2.50 per barrel to entirely eliminate greenhouse gas pollution. It should be clear that the oil sands can remain highly profitable within a plan which meaningfully reduces emissions nationally - but it's equally clear that the Cons aren't interested in making that happen.

Of course, it's not too late for the regulatory regime to go in another direction - whether that's based on the leak being wrong, the Cons changing their minds, or the opposition parties teaming up to demand that the oil sands bear their fair share emission reductions. But if the Cons' "tough" plan really is structured with both meaningless initial targets and little cost to any violations, then there's every reason to think that Canada's current pace of emission increases will only continue.

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