Memo Warns of Economic Effects of Climate Change Initiatives

A recent memo to Natural Resources Minister Joe Oliver warned that “global climate change initiatives” might drastically lower the economic benefits of oil sands investments.

The four-page internal memo from Deputy Minister Serge P. Dupont outlined a study by non-profit research organization The Conference Board of Canada that made predictions about the economic impact of oil sands investments for different regions. The memo questions the long term viability of the tar sands, given the increasingly urgent need to address climate change – a concern also brought up by the International Energy Agency last fall.

The Conference Board study, entitled “Chains that Bind: The Economic Benefits of Oil Sands Investment for Canada’s Regions” (the title has since changed to the less ominous-sounding “Fuel for Thought”), assumes a continuation of current market conditions, meaning the level of demand and investment will continue to rise at current rates.

However, it points out that there are certain “risks” to the industry that would profoundly affect the accuracy of its predictions. “Forecasting which oil sands projects will proceed, when they will proceed, and what they will cost is an exercise fraught with risk,” it admits.

In a lengthy section on the environmental impact of the oil and gas sector, it points out that although the increased greenhouse gas emissions have been somewhat mitigated by rising efficiencies in the oil and gas industry, GHG emissions will continue to rise.

“The Conference Board of Canada estimates that emissions for the oil and gas extraction industry will reach 156.2 megatonnes of carbon dioxide equivalent (Mt CO2 eq) in 2035, up from 106.4 Mt CO2 eq in 2010,” it says.

“All levels of government and industry are very aware that they must address the environmental challenges of the oil sands. Indeed, growth will depend on this.”

The study then references a 2010 World Energy Outlook from the International Energy Agency, which takes into account different scenarios of government intervention to prevent climate change. Like the Conference Board report, the IEA concludes that growth in the oil and gas industry will continue “unless governments intervene to change it, through measures that lead to a shift in behaviour and/or in the way in which energy needs are met.”

The report’s lead author Michael Burt, the director of the industrial economic trends group at the Conference Board, told Postmedia that the report “isn’t suggesting that the oilsands industry would be harmed in a world that is addressing global warming.”

De Souza notes the report concludes "a combination of emerging global policies, including pricing schemes or taxes on pollution, an elimination of public subsidies for fossil fuels and new support for clean technology, would all factor in to projections for the oilsands industry."

However, it appears the most important section of the report is being ignored by both government and media. That is, the crucial question of whether development in the tar sands can continue while international governments and organizations work to prevent more than two degrees of warming. 

On his facebook page, De Souza wrote "the lead author on the Conference Board report told me that other media didn't really ask him questions about the climate change risks highlighted in his report."

Minister Oliver prefers to focus on the growth of profit from the tar sands, rather than the dyer warnings of their environment impact.

De Souza reports that, “Oliver told Postmedia News in an email that the memo highlights the critical importance of diversifying Canada’s markets to promote growth. He also said the International Energy Agency projects that, even under the most stringent climate change scenario, 63 per cent of global energy needs will still be met by fossil fuels in 25 years and require ‘every drop’ of growing production from Canada’s oilsands.”

Dupont’s memo to Oliver focuses on the usefulness of the report in terms of talking points about jobs, the Harper government's current favourite topic. It doesn't explicitly suggest policy, but it does offer a glimpse into the tenor of the discussion amongst policy makers. It shows a discourse that counts environmental risk only in terms of its impact on economic growth.

Since coming to office, the Harper government has developed an international reputation for stepping out of the fight against climate change. In 2011 Canada withdrew from the Kyoto Protocol, the United Nations convention to combat climate change. At the end of March, they quietly pulled out of the UN Treaty to Combat Desertification.

Image Credit: Rocco Rossi via Wikimedia.org