Canada can hit climate target, but oil firms would pay – study

29 October 2009 19:41  [Source: ICIS news]

TORONTO (ICIS news)--Canada can meet its greenhouse gas (GHG) reduction target, but at a huge cost to the oil and gas industry in the Alberta province, researchers said in a high-profile study released on Thursday.

The joint study – by the Pembina energy institute and the David Suzuki environmental foundation, with sponsorship from Canada’s TD Bank – put forth policies needed for the country to achieve its climate goal, and at the same time bring it closer to international targets.

Canada’s federal government has set a GHG reduction target of 20% below its 2006 level by 2020, while the Intergovernmental Panel on Climate Change calls for reductions of 25-40% below 1990 levels by 2020.

To achieve the government's target, Canada would need to put a “significant price” on GHG emissions across the economy, the study said.

The Canadian carbon price would need to start at at least Canadian dollars (C$) 40/tonne ($37/tonne, €25/tonne) in 2010, rising to C$100/tonne by 2020 - much higher than the $16-32/tonne by 2020 expected under the US Waxman-Markey climate bill, it said.

The study called for broad reductions of emissions from the oil and gas industry and from landfills, as well as for capture and storage of carbon dioxide from the oil and gas industry and power plants.

Also necessary would be stringent energy efficiency measures throughout the economy, in particular tough fuel-economy standards for cars, it said.

At the same time, Canada needs to drastically boost production of renewable energy, with, for example, wind power accounting for 18% of electricity generated in 2020, if the country is to achieve its target.

Canadian commentators called the study an attack on the oil and gas industry in western Canada, devastating economies in the Alberta and Saskatchewan provinces.

The influential Globe and Mail newspaper even warned that implementing the proposed policies risked splitting the country, raising the spectre of Alberta’s secession.

Canada cannot take its national unity for granted,” the paper said in an online editorial, with reference to a 1995 secession referendum in Quebec that nearly succeeded.

“[Canada] must not, in the service of international obligations, allow itself to be immolated by a government policy of such wrenching dislocation,” the paper said.

Observers also noted that former Liberal party leader Stephane Dion, who strongly advocated a carbon tax, lost a federal election in late 2008 over the issue against the Conservatives under Prime Minister Stephen Harper.

Even though Canada signed up to the Kyoto protocol, it has come under mounting international criticism over rising emissions from Alberta’s oil sands industry, in particular from the US where President Barack Obama has highlighted the industry as a concern.

In California, officials have even talked about banning the import of oil from oil sands into the state, due to the large carbon footprint of the Alberta extraction projects. The US is the largest market for Canadian oil and gas exports.

Still, last week two of Canada’s largest chemicals producers – DuPont Canada and Dow Chemical Canada - joined a call urging an absolute cap on GHG emissions.

Also, the government recently committed to helping fund carbon capture and storage (CCS) projects in Alberta, including a CCS project at a Shell oil sands upgrader site, even though that technology is expensive and not yet commerically proven.

Meanwhile, Canada’s petrochemicals industry continues to look to off-gases from oil sands upgrading as a source of feedstock for plant expansions and new projects.

($1= €0.68; $1 = C$1.07)

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By: Stefan Baumgarten
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