Economic analysis

Build pipelines or curb emissions? Canada can do both.

Mark Cameron argues for pipelines and, at the same time, a concerted effort to meet climate targets
Mark Cameron, Canadians for Clean Prosperity
A view of the pipe yard for TransCanadaÕs Houston Lateral Project in Mont Belvieu, Texas, about 30 miles east of Houston on Wednesday, March 5, 2014. The Houston Lateral Project, which will transport oil to Houston refineries, will become an integrated component of the Keystone Pipeline system. (Bloomberg Photo/Scott Dalton)
Bloomberg Photo/Scott Dalton
Bloomberg Photo/Scott Dalton

Like many environmentalists, David Suzuki asks why Canada is still considering the construction of pipelines after signing on to the Paris climate agreement that he believes would require leaving 75-80 per cent of petroleum reserves in the ground. On the other side, many oil industry advocates are urging government to help champion the construction of pipelines without delay, and caution that including climate impacts in regulatory hearings would further obstruct projects.

But there is plenty of room between the views that protecting the environment means shutting down our energy industry, or that promoting Canadian energy exports requires giving the environment short shrift. Canadians for Clean Prosperity believes that a clean environment can and must be reconciled with a strong and competitive economy. We believe that Canada can have a robust hydrocarbons sector, including new pipelines to bring Canadian oil to tidewater, while still fulfilling our environmental commitments and taking action to mitigate dangerous climate change.

The impact of oil sands development, and of building pipelines to reach world markets, must be looked at in the context of global greenhouse gas emissions. The emissions impacts of potential oil sands pipelines would actually be fairly small according to the most reputable studies. For example, a 2014 U.S. State Department study on the impacts of the proposed Keystone XL pipeline found that while Keystone would ship 830,000 barrels of oil-sands-derived crude to U.S. refineries, “approval or denial of any one crude oil transport project, including the proposed [Keystone XL pipeline], remains unlikely to significantly impact the rate of extraction in the oil sands.” Similarly, a study commissioned by the Ontario Energy Board analyzing the Energy East pipeline found that it would likely increase Canadian emissions by a maximum of 1.6 per cent (and global emissions by 0.1 per cent). Simply put, cancelling pipeline projects doesn’t mean less oil comes out of the ground. The reality is that even if crude isn’t transported by pipeline, it will get to market through other means, albeit at a greater cost. The main alternative is rail, which is both more dangerous and more emissions-intensive than pipeline.

However, the fact remains that pipelines like Keystone and Energy East (or TransMountain and Northern Gateway) would likely have small but real effects in increasing the overall level of production and thus emissions from Canada’s oil sands. Can Canada and the world absorb these new emissions and still hope to meet our climate targets? The answer is, if we are careful, probably.

The International Energy Agency’s “450 Scenario” published in 2010 indicated that the world could meet the goal of limiting carbon dioxide concentrations to 450 parts per million, enough to limit global temperature increases to two degrees celsius, if new policies, including carbon pricing, were implemented. Under this scenario, 78 million barrels of oil per day are expected to be produced in 2035, with roughly 3.3 million of those barrels coming from Canadian oil sands. This number is consistent with Alberta’s new 100-megatonne cap on oil sands emissions.

We think it is appropriate for the National Energy Board to take overall emissions projections for major pipeline projects into account, and we support the federal government’s new requirement that overall emissions impacts be assessed as part of the NEB’s reviews of the Energy East and TransMountain pipelines. Estimating the greenhouse gas effects of these projects, and doing our best to limit them, is important for increasing public confidence in pipeline assessment and regulation, and ultimately, for getting Canada’s oil to market.

Although the projected emissions effects for these pipeline projects are small, they can’t be ignored. Canada must do its part to reduce emissions and to mitigate the effect of those emissions that we cannot avoid. Ensuring that emissions across the economy are adequately priced would be a great start. Alberta’s recent move to bring in a carbon price is an important step in this direction. This price will be charged on all consumer emissions in the province, and oil and gas producers supplying world markets will have to pay the $30 per tonne fee for every tonne of emissions above the level of the best performing firms in their sector. This gives firms an ongoing incentive to improve their environmental performance so that Alberta industry can meet its goal of making oil sands production as clean as conventional petroleum.

With a strong regulatory process that takes upstream emissions impacts into account, and a commitment to carbon pricing that ensures that Canada is properly pricing externalities due to its emissions, there is no reason why new pipelines to carry Canadian oil to global markets shouldn’t be part of Canada’s energy future.

Mark Cameron is the Executive Director of Canadians for Clean Prosperity, an organization working to build a Canada where a strong, competitive economy coexists with a clean, sustainable environment.