Meeting Kyoto: More Must be Required of the Oil Sector

Op-ed - Feb. 1, 2005 - By Matthew Bramley

Published in (Feb. 2, 2005)

In a couple of weeks, the Kyoto Protocol will become international law. Canada ratified the Protocol in December 2002, but whether we will actually meet our legal obligations under this treaty depends, more than anything else, on the Liberal government's willingness to require industry to do its fair share in cutting greenhouse gas emissions.

Meeting our Kyoto obligation is a major challenge. This is not, for the most part, because Canada agreed to too stringent an emissions target, but because our government dithered in taking action to reduce emissions.

Kyoto negotiations began in 1995, with the Protocol being adopted in 1997. As with most major international agreements, it took time to finalize implementation details and for enough countries to ratify and bring it into force. European countries spent those years laying the groundwork for meeting their targets. And so Europe was ready this month to launch its most important Kyoto-related policy: an emissions targets-and-trading system for over 12,000 industrial facilities.

BackgrounderWhile Europe has been moving forward on implementing Kyoto, Canada still seems to be arguing over whether joining this global effort is worth the trouble. That debate should have been over a long time ago, given the scientific consensus on climate change and the fact that we agreed to implement the treaty nearly two years ago. Now, on the eve of Kyoto's entry into force, the focus should be exclusively on how, not whether to fully meet our obligations.

Canada's stalling has made reaching our Kyoto target difficult, but by no means impossible. Individual Canadians will have to do their part, and the government finally appears ready to require auto makers to reduce tailpipe emissions. But there is one sector from which the government seems unwilling to require an appropriate share of emission reductions. Unfortunately, it is the sector responsible for most emissions.

Heavy industry, including oil and gas operations and coal-fired electricity generation, is responsible for nearly 50 per cent of Canada's greenhouse gas emissions. And so, as in Europe, a targets-and-trading system for major industrial emitters is an essential component of the Kyoto plan that our government is now finalizing.

But the government has been steadily caving in to the negative voices in industry, watering the system down to the point that it now imperils Canada's ability to meet our target. Despite industry's 50 per cent share of emssions, the government plans only 37 to 55 megatonnes of mandatory reductions from these sources out of a total reduction target of 240 megatonnes (a target that the government acknowledges will be going up as projections of economic activity rise).

With company lobbyists swarming the government on Kyoto, the Liberals would prefer not to ask more of industry. Yet for the oil sector, the government admits (and industry has confirmed) that the targets currently proposed represent a worst-case cost of no more than 25 cents per barrel. With oil prices hovering at US$45 (CAN$55) per barrel for the foreseeable future, this is an economically insignificant contribution to Canada's Kyoto effort.

Getting the targets right for the oil and gas industry is critical. Sixteen per cent of Canada's greenhouse gas emissions currently come from the "upstream" oil and gas sector alone, and the government's official projection shows these emissions doubling between 1990 and 2010, largely as a result of development of Alberta's oilsands.

Yet some oil and gas companies have provided a glimpse of the emission reductions the sector is capable of while still making solid profits. BP voluntarily reduced its emissions by 10 percent while adding US$650 million of value. According to the company's CEO, "we found that efficiency and emission reduction was good business." And Shell Canada has agreed voluntarily to a 50% reduction in the projected emissions of its new oilsands facility.

Evidence like this shows that the government should set targets for the oil and gas sector, under the targets-and-trading system, that are considerably tougher than those currently proposed. Tough targets would drive considerable reductions — many of them profitable — in actual emissions, while the industry could purchase the remaining mandatory reductions through emissions trading at a cost representing a tiny fraction of the sector's revenues.

The alternative to requiring more sufficient emission reductions from industry is either to squeeze even bigger emissions cuts from other sectors, or for taxpayers to be on the hook for buying huge amounts of "credits" either domestically or on international markets.

Both of these options would, in effect, represent a major disguised subsidy to industry — above and beyond those that the federal government already provides, especially to the oil sector. And neither option is a cost-effective means of meeting Kyoto. Addressing the global climate change threat will require everyone, including industry, to do their fair share.

Matthew Bramley
Matthew Bramley

Matthew Bramley was with the Pembina Institute from 2000 to 2011, serving as director of the climate change program and director of research.


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