Four Lessons Canada Needs to Learn from the Oil Crash

It’s easy to assume the plummet in energy prices will be a boon for the fight against climate change as emissions-intensive oilsands projects are cancelled or put on hold, but experts say that will only be the case if we learn some lessons from the current downturn.

Here are the four key factors that will determine whether Canada cuts emissions during this downturn or simply moves from “heroin to methadone,” as one expert puts it.

1. Cutting oilsands emissions

Suncor, one of the biggest players in the oilsands, recently announced that it expects its emissions to increase by 28 per cent within five years.

To be sure, oilsands production — which the Pembina Institute dubs as the fastest growing source of emissions in Canada — is certainly suffering as of late: the Canadian Association of Petroleum Producers slashed 1.1 million barrels/day from its 2030 projection, while Goldman Sachs forecasts that conventional crude prices won’t breach $50/barrel for a decade-and-a-half.

And as Bloomberg reports, oilsands producers require $60/barrel to build a new in-situ project and $100/barrel for a new mining project (which helps explain why oilsands operations accounted for three-quarters of the barrels Goldman cut from its prediction).

But Amin Asadollahi, oilsands program director at Pembina, says the challenge of meeting national emissions targets (611 Mt in 2020 and 515 Mt by 2030) will remain unless the sector is “decarbonized” with the implementation of emissions-intensity improvements (vacuum insulated tubing or flow control devices for in-situ sites).

Despite cuts to projections, the sector is still anticipated to grow by close to one million barrels by 2030 (and many megatonnes of emissions with it).

Even though the per-barrel emissions have declined by close to one-third between 1990 and 2013, the overall increase in oilsands production pretty much cancels out those reductions.

Allan Fogwill, president and CEO of the Canadian Energy Research Institute (CERI), says technological innovations such as using solvents instead of water for heating bitumen prior to extraction could dramatically reduce emissions over the next 35 years, with the caveat that CERI hasn’t yet explored how many of those technologies are economically feasible.

“There’s a significant amount of opportunity to reduce emissions in the oilsands and maintain or in fact increase production,” Fogwill says.

2. Cleaning up transport

While emissions from the industry will likely be cut due a temporary drop in oilsands-related emissions, pollution from other sectors — transportation, most notably — may neutralize such gains given that car usage increases with lower gasoline prices, which also boosts sales of vehicles like SUVs and Hummers.

But Anthony Perl, director of the urban studies program at Simon Fraser University (SFU), notes that record-low interest rates may be improperly harnessed to construct or repair car-centric infrastructure such as bridges or highways, pointing to the replacement of Vancouver’s George Massey Tunnel as an example.

Perl, who co-authored Transport Revolutions: Moving People and Freight Without Oil, calls for the “future proofing” of such investments, which would require looking 50 or 60 years in the future and anticipating technologies like shared or autonomous vehicles, electric buses and better rail systems while avoiding investments in “stranded assets” like new highways, airport runway expansions and coal port infrastructure.

After all, Canada has committed to become a “post-carbon” society by 2100, which will require an array of new infrastructure.

Perl says: “Right now, that investment is not going into the oil infrastructure — which is not a bad thing — but it’s also not going into the alternative infrastructure because people say ‘oh well, that’s expensive and oil is cheap so let’s just party on.’ This would be the time for real leadership to factor the cost of future energy and collect the money that’s needed to build that green infrastructure going forward. But that requires policy leadership: some places have more of that than others, let’s say.”

Perl argues transport projects like Vancouver’s massive Port Mann Bridge will depreciate over time, unlike green infrastructure like rail and other forms of public transit projects.

3. Making energy renewable

Prime Minister Stephen Harper has frequently taken credit for a two per cent decline in emissions between 2006 (when the Conservatives first assumed leadership) and 2013.

However, the only two years emissions dropped were in 2008 and 2009, during the worst portions of the Great Recession, and have increased since (commentators have noted the brief decline may have been entirely neutralized if Ontario hadn’t phased out coal-fired power).

The United States experienced a similar recession-led trend with a 9.9 per cent drop in emissions between 2007 and 2009. But while the replacement of coal-fired power plants with natural gas for electricity generation has historically been credited for the decline, a Nature Communications study published in July found that per-capita consumption played a far larger role.

Klaus Hubacek, an ecological economist at the University of Maryland and co-author of the study, says that he and the three other writers have since re-analyzed the data, breaking the “fuel mix” segment into individual parts to find out which source of electricity generation contributed most to the decline in emissions.

One of the biggest findings they’ve encountered, Hubacek says, is that renewables accounted for far more of the emissions decline than originally thought and that the rise of natural gas may have actually crowded out the growth of renewables.

“If you translate it into CO2 emissions then you see renewables has a much more important role, as renewables have low CO2 emissions — almost zero — versus gas which has some CO2 emissions,” he says.

A March 2015 report published by Sustainable Canada Dialogues predicted that Canada could achieve 100 per cent low-carbon electricity generation by 2035, which would result in significant emissions reductions. A Clean Energy Canada study noted investments in renewables rose by 88 per cent in 2014, but that the federal government needs to do far more to promote the sector that it currently is.

4. Pricing carbon

The very first policy recommendation listed by the Sustainable Canada Dialogues report, which featured contributions from 60 scholars, was the adoption of a carbon tax or cap-and-trade program. It’s an idea that Pembina’s Asadollahi and SFU’s Perl both support.

In a recent poll conducted by EKOS Research on behalf of Pembina, it was found that half of Albertans would also support an economy-wide carbon tax (in contrast to the levy the province currently features, which only taxes large emitters).

“Part of the reason oilsands emissions are high is because of high energy use,” Asadollahi says. “When you price carbon, it will automatically incentivize more efficient and more lean management and practices, making operations become more competitive.”

Perl adds that now is the time to be deploying such mechanisms, suggests politicians should take the ongoing oil price plunge as a lesson, one that shows we need to consider more moving parts — from carbon pricing to alternative infrastructure projects to renewable technology — to plan ahead.

Similarly, economist Margaret Walls argued in an April article for the Wall Street Journal that now’s the time for such action as “a carbon tax might help to avert some capital investment decisions that would lock in higher emissions.”

“The volatility is becoming greater,” Perl says. “If you think of it in relative terms, the spiking of oil prices and then the collapse of oil prices is a sign to me that the system is becoming less sustainable. We should expect that to continue. Right now, even if we don’t do anything else for sustainable development in the future, we’re laying the groundwork inadvertently for an even bigger spike the next time.”

Prime Minister Stephen Harper has adamantly refused the option. NDP leader Thomas Mulcair and Liberal leader Justin Trudeau have both committed to emissions regulations.