Mark Milke on counterproductive efforts to stymie Canada’s energy industry
With the election of a new government in Alberta that is now ending that province’s carbon tax on consumers, one criticism will be that Alberta must yet “do something” about carbon emissions.
Some history here is helpful: The Alberta government, in 2007, was among the first jurisdictions to levy a carbon tax on major CO2 emitters at $15 per tonne. The new government plans to retain that early model by continuing with a carbon tax on large emitters at $20 per tonne. Major energy companies wanted to continue paying the industrial carbon tax; the new government was happy to oblige, as it will use part of the proceeds to balance the budget, while ending the carbon tax on consumers.
The bigger issue for Alberta and the rest of Canada is how to properly assess carbon emissions and action about the same. My suggestion: Put that and energy in a worldwide context. This would also help clarify why British Columbia should speed ahead on LNG development and exports.
When Barack Obama became president of the United States in early 2009, carbon emissions worldwide were just over 31,000 MT. During that period, and by 2016, effectively his last full year in office, worldwide carbon emissions rose by 7,403 mega-tonnes.
Broken down by country, emissions declined by 11% in the United States (due mainly to replacing coal-fired electricity with less CO2-intensive natural gas); Canada’s emissions rose by 15%, and Chinese and Indian emissions increased by 37% and 51%, respectively.
Put another way, Indian and Chinese CO2 emissions rose by nine and 33 times that of Canada. (Canada’s emissions were up 84 MT during the Obama presidency while India’s and China’s were up 731 MT and 2,796 MT respectively.)
The reality about oil
This is a key point. Alberta in particular has done much to mitigate the rise in emissions—a tough job given that it’s home to the majority of Canada’s largest export sector, energy. For example, as even the federal government acknowledges, greenhouse gas emissions per barrel of oil produced from Alberta oil sands have fallen by 29% since 2000. And carbon emissions will decrease further: By 2030, upstream greenhouse gas emissions from the oil sands are forecast to decline by 30% relative to 2009 levels.
In the wider view across Canada, there are multiple sources of the growth in emissions. Again, as the federal government acknowledges: “70 to 80 per cent of life cycle emissions come from a vehicle’s tailpipe.” In other words, all Canadians and all provinces contribute to carbon emissions, so a federal strategy that effectively asks Alberta to commit economic suicide is unhelpful.
This is particularly critical given that a worldwide look at energy and carbon emissions highlights “carbon leakage.” This is what occurs when emissions-producing companies relocate to another jurisdiction and increase their emissions in part because of less efficient extraction or manufacturing processes in the new locale.
This effect was chronicled In a just-released paper which examined Canada’s aluminum sector. Navius Research found that the carbon footprint of aluminum produced in Quebec was 19% lower than that produced in Russia; 67% lower than aluminum produced in the Middle East, and 76% lower than aluminum produced in China. That is why, as Navius recommends, if Canada has a comparative advantage in a sector on carbon emissions (i.e., versus Russia or China), “activity in that sector, at a minimum, should not decrease as a result of policy.”
The same advice obviously applies to oil and gas: as Canada’s energy sector seeks to reduce emissions, punishing it is counter-productive when it doesn’t reduce worldwide emissions, but relocates them at best – and most likely increases them. The result is actually higher CO2 emissions.
This isn’t just theory. While former President Obama blocked Keystone XL, oil and gas production in the United States and worldwide soared. By 2017, American oil production rose by 7.1 million barrels, to 15.7 million barrels daily, or nearly double the oil produced in 2008. Worldwide oil production rose by over 11 million barrels or 13% during that same eight-year period.
The reality on natural gas
Similarly, on natural gas, American and Australian natural gas production rose dramatically between 2008 and 2015, with U.S., Australian, and Chinese production up by 30%, 65%, and 70% respectively.
During the same period, Canada’s natural gas production dropped by 617 billion cubic feet, or 8%. That meant provinces such as British Columbia missed out on rising Asian demand for natural gas, and all the provincial tax revenues and jobs that went along with it. That was unfortunate given that LNG exports from British Columba to China would reduce both particulate pollution in China and CO2 emissions globally.
Meanwhile, oil and gas demand is increasing, not decreasing. The International Energy Agency forecasts that energy demand will grow 25% by 2040, with oil and gas consumption both rising until at least 2040 under any scenario.
There’s an old environmental adage that we should think globally and act locally. In previous attempts to mitigate local emissions Alberta and British Columbians have done the latter; we also have to think globally and take a realistic global look at carbon emissions and energy demand.
Any notion that Alberta, British Columbia, and the rest of Canada should sacrifice a natural economic advantage while energy production and carbon emissions increase in much of the world (and eclipse reasonable efforts to reduce Canadian emissions), is not only an unrealistic and unproductive national strategy, but will also do nothing for worldwide carbon emissions.
Mark Milke is an author, policy analyst, and columnist. His newest book is Ralph vs, Rachel: A tale of two Alberta premiers. Originally from Kelowna and now based in Calgary, he recently served as the principal policy advisor to Jason Kenney during the 2019 Alberta election.