This is a guest post by Sarah Petrevan, senior policy adviser at Clean Energy Canada, a program of Simon Fraser University’s Centre for Dialogue.

The big energy story this week in Canada is pipelines. Yet again. 

Why? There’s controversy, for starters, but it’s also the fact that energy exports — especially oil — make up a big chunk of Canada’s exports, and we’re an export-driven economy.

Fair enough. But it’s time we started focusing more attention on our opportunity to export energy technologies and services, not just raw energy. As UN Environment Programme chief Achim Steiner said recently on CBC’s Power and Politics, "Whether you build the next pipeline or not… the economy of Canada will not be centred around a fossil-fuel based extractive economy."

That’s in no small part why Ontario Premier Kathleen Wynne is in India this week.

There are always domestic politics tied to these trade missions, but there is both need and value for Canadian leaders — from government and clean energy companies — to travel abroad, seeking out new business opportunities. If Canada is going to play in the increasingly competitive global clean energy marketplace, we need to sell our industry and the climate solutions they offer.

Let’s unpack this.

Not two months ago, the world raised the bar on climate action by signing an agreement to replace fossil fuels and build a clean global economy. An unlikely leader at the forefront of that charge is India, with a commitment to install 175 gigawatts of renewable energy by 2022. A top-three player according to Ernst & Young’s Renewable Energy Country Attractiveness Index, it’s not surprising that clean energy businesses are flocking to India, including those based in Canada.

Why? The size of the prize.  

The reality is, for Canadian companies, prospects at home are looking lean, especially in the near term. While we’ve seen sizable renewable electricity targets from both Alberta and Saskatchewan, policy details have yet to be unveiled and even then it will take time for projects to ramp up.

And while Ontario has held the top spot in renewable electricity for the last few years, topping out at $12.7 billion in investment by the end of 2014, there are many unanswered questions as to what’s next for clean energy as the province considers its supply strategy.  

For companies looking to grow, there is little choice but to look beyond our borders.

Enter India — with the right mix of commitment, investment and policy — the next clean energy frontier.  

With a formal target of 100 gigawatts of solar capacity (and 60 gigawatts of wind) by 2022, India is a giant market for clean energy companies. According to Bloomberg New Energy Finance data, the dollars are matching those commitments. In 2015, India saw $10.9 billion of clean energy investment, a 22 per cent increase over 2014, with nearly half ($5.2 billion) in solar. This is not to say that the clean energy revolution in India is easy; finding land and the state of power transmission infrastructure have posed challenges for the country. But with policy approaches ever evolving to meet the country’s power needs, there’s no sign India is slowing down on its commitment any time soon.

In fact, many Canadian companies have already seized business opportunities in India. When Prime Minister Narendra Modi visited Canada last April, solar power deals — one with AMP Solar Group and the other with Canadian Solar, a big player on the Indian market — comprised more than $1 billion, or 63 per cent of the value of the total agreements signed.

Another success story for Canadian solar in India is Sarus Solar, a joint venture comprising of three Canadian firms that is planning a series of 500 megawatt solar parks, the first of which will be built in Maharashtra. According to Sarus Solar’s head of operations India, Arun Agarwal, "The Canadian firm saw huge potential in the solar sector in India, especially after the government announced its target.”

Finally let's point to Canada’s SkyPower Global who, last summer, made the lowest bid of INR 5.17 per kilowatt hour (equivalent to USD$0.081) as part of the 2 gigawatt solar tender in the Indian state of Telangana. Subsequent actions have secured even lower bids, yet Canadian companies are clearly in the game in India.

Exporting clean energy solutions reaps benefits for Canadians and Canadian companies.

While the ongoing pipeline controversies make headlines, an important Canadian success story is being written outside our borders. And it’s a story worth telling here at home.

Image: Canadian Solar installation in India.

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Canada’s rapidly developing green energy industry has seen investments of more than $24 billion in the past five years while employment in the sector increased by 37 per cent during the same period, according to a report released Tuesday by Clean Energy Canada.

According to the report, impressive growth in the emerging sector has been achieved despite frustratingly inadequate federal support on things such as tax incentives and research promotion.

Surging employment growth last year in the clean energy sector — encompassing manufacturing, power production, energy efficiency and biofuels — accounted for more direct Canadian jobs than in the oilsands, the report added.

The 34-page Tracking the Energy Revolution — Canada report noted that there were 23,700 total direct jobs in the green energy sector in 2013, compared to 22,340 jobs in the oilsands.

“The global clean energy revolution isn’t a future scenario. It is underway right now, and it presents huge potential benefits for Canadians,” Merran Smith, director of Clean Energy Canada, said in an accompanying media release.

Image from Tracking the Energy Revolution report.

Remewable growth and investment in Canada, 2009-2013. Image from Tracking the Energy Revolution report.

The report’s release comes during the annual United Nations climate change conference taking place in Lima, Peru.

Wind power, solar, run-of-river and biomass have grown by 93 per cent since 2009, the report said, and in 2013, Canada jumped from 12th to seventh place in the G20 countries for clean-energy investment.

As an example of the rapid growth, the report added, one new wind turbine was installed in Canada every 10 hours last year.

In all, the report said, investments in clean energy in Canada totalled $6.5 billion last year, with $3.6 billion going to wind power and $2.5 billion to solar.

Giving credit to Ontario, Quebec and British Columbia for tapping into the benefits of the booming renewable energy sector, the report noted the industry needs stronger federal backing to meet its tremendous potential across the nation.

“Despite that incredible track record, in some respects Canada is still swimming upstream,” Smith said. “Unlike our American friends, where the clean-energy opportunity is clearly a national priority, our federal government’s approach could only be described as indifferent.”  

Canada has more than enough renewable energy to provide all the energy needs of its citizens and industry, added the report.

“Like virtually every national government around the world, Ottawa could be doing more to support clean energy and cut carbon pollution,” the report said. “But unlike some of our peers, the evidence shows that Ottawa needs to be doing a great deal more. So far, federal efforts on climate and clean energy simply aren’t getting us where the government said we would go.”

To help promote Canada’s clean energy transition, the report recommended Ottawa provide the green sector with the same sort of tax incentives and research support it made available for development in the oilsands.

The report also recommended a “Building Clean Energy Fund” be established to support transmission lines, smart grids, infrastructure for electric vehicles and cutting-edge clean energy projects across the nation.

Lastly, the report said the federal government should put a price on carbon pollution, an act that would make clean energy choices more competitive and give fossil fuel users an incentive to be more efficient.

“Speeding up Canada’s energy transition would clean up our power grids and transportation systems, but would also help Canadian companies prosper in the fast-growing global clean energy marketplace,” Smith added.

DeSmog Canada wrote about a related Clean Energy Canada report in September that said renewable energy and other low-carbon technologies are now a successful mainstream business with investors spending $207 billion USD in the global sector last year.

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If oil prices continue their slide downward, the cancellation of high-cost oilsands projects are likely, but just because prices rebounded in the past and investment returned, does not mean that is a guide for the future, warns James Leaton, research director of the Carbon Tracker Initiative.

Thursday night at the Royal Ontario Museum in Toronto, Leaton told the crowd of over 170 people the Alberta oilsands are a big target for investors looking to reduce risk because of the high capital expenditure (capex) costs.

“The oilsands are Canada’s elephant in the atmosphere,” said Leaton, an originator of the “carbon bubble” theory. “We see investors moving away from high-cost, high-carbon projects, so there is a challenge that capital is not going to automatically flow to Alberta anymore.”

Source: Carbon Supply Cost Curves: Evaluating Financial Risk to Oil Capital Expenditures from Carbon Tracker Initiative, May 7, 2014.

Investors and oil companies may de-leverage their portfolios of risky projects in the face of new carbon regulation or even from other factors like the decreasing costs of renewable energy, vehicle efficiency improvements in key markets, and economic growth rates in China, Leaton said.

Before the oil price started plummeting, Royal Dutch Shell PLC, Total SA, and Statoil ASA cancelled oilsands projects because of the high costs and lack of access to markets.

In a media conference yesterday finance minister Joe Oliver said the federal government has taken the drop in oil prices into account in its fiscal forecasts.

“When we took into account the oil price decline which had already occurred, we made the assumption that the prices would stay at the low level for the entire period,” Oliver said.

The sinking oil price provides companies an opportunity to re-evaluate the resiliency of their business models and projections that oil demand will keep growing, Leaton told DeSmog Canada in an interview after the talk.

Carbon Bubble theory impacting oil firms

The carbon bubble theory argues oil companies are overvalued based on their proven fossil fuel reserves — a large amount of their reserves are stranded assets because they cannot be burnt if the world is to avoid catastrophic climate change.

Once the carbon bubble, like the tech or housing bubble, pops it would bring dramatic re-evaluation of oil companies, resulting in massive layoffs and major industry restructuring. In Canada, the oilsands represents two per cent of the country’s GDP and 90 per cent of the economic benefit goes to Alberta.

Pressured by activist shareholders, ExxonMobil and Shell have publicly rejected this theory. Shell told their shareholders the methodology underpinning the carbon bubble “has significant gaps,” arguing energy demand growth will keep the world wanting oil for years to come.

In March, Exxon released a 30-page document to shareholders saying they “are confident that none of our hydrocarbon reserves are now or will become stranded.” In reviewing Exxon’s report to shareholders, the Carbon Tracker Initiative found the document, far from assuring stakeholders, underestimated the threat climate action poses to the company’s carbon reserves.

“If some of your biggest shareholders write to and say: ‘we are worried about how you are spending capital’, you should be able to write back on two sheets of paper and explain how you are spending capital, rather than 30 pages of fluffy stuff,” Leaton said.

On Tuesday activist shareholders filed a resolution seeking increased dividends or share buy backs for investors, rather than invest in expensive, carbon-intensive oil projects.

“This shows the investors are not satisfied with the response because it didn’t address their issues,” Leaton said.

Ontario is working with Carbon Tracker

In attendance at the talk, Ontario Environment and Climate Change Minister Glen Murray told Desmog Canada afterwards that his government was conducting extensive stakeholder discussions about a new approach to price carbon in Ontario.

Included in those discussions are conversations with the financial industry about potential stranded assets. Three of Canada’s five big banks are the largest investors in the oilsands.

“We are working with Jim and Carbon Tracker to develop that policy discussion…” to bring forward to the financial industry, Murray said.

Influencing activism

The Canadian Association of Petroleum Producers predicts oilsands production to double from nearly 2 million barrels a day to over 4 million by 2025.*

Tim Gray, executive director of Environmental Defence, also spoke at the talk and told Desmog Canada the public doesn't want the pipelines to help fuel the rapid expansion of the oilsands.

“There are two billion barrels of production there a day and that will continue to generate revenue,” Gray said. “Those are relatively low cost assets…Why not use the wealth being generated from the current level of development to invest it that [low-carbon economy] transition.”

“What the Carbon Tracker Initiative has done is show that putting all of our eggs into the tar sands basket is a very risky economic move,” Keith Stewart, climate and energy campaigner with Greenpeace Canada, said. “We could end up with multi-billion dollar white elephants which are weighing our economy down and miss out on the green-energy revolution which could lift us up.”

The event was organized by Environmental Defence and The Pembina Institute.

*An earlier version of this article stated billions, rather than millions, of barrels.

Image Credit: Kris Krug

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At least $83 billion USD in financing was provided to 65 coal mining and energy companies last year by 92 of the world’s leading commercial banks, according to a Dutch report published Wednesday.

Leading banks provided $500 billion in financing for the coal industry through 2,283 lending and underwriting transactions between 2005 and April 2014, said the report Banking on Coal 2014, which was released by BankTrack in Nijmegen.

The top 20 financiers provided 73 per cent of this amount alone, added the report, released just days ahead of the publication of the fifth United Nations Intergovernmental Panel on Climate Change (IPCC) assessment.

The report said JPMorgan Chase was the top financier between 2005 and this year, lending more than $27 billion, while Citi, in second place, lent $25.8 billion and third-place RBS provided $22.9 billion to coal-related borrowing.

Bank finance for coal is increasing rapidly, the report said, adding 2013 was a record year for coal finance, with commercial banks providing more than $88 billion to the main 65 coal companies – over four times the amount provided in 2005.

Yann Louvel, BankTrack’s climate and energy campaign coordinator, said the new data shows that rising coal financing continues to provide a vital lifeline to the increasingly beleaguered coal industry, while at the same time placing the planet in climate jeopardy.

“This is the most extensive data ever compiled on commercial bank financing of both coal mining and coal power, and even though we’re probably only covering little more than half of the global banking sector’s true financial support for the sector, the conclusion is stark: the lending figures have been rising steadily since 2005, and last year was a record year,” Louvel said.

The report said JPMorgan Chase remains the world’s biggest ‘coal bank’ over the period 2005 to April 2014, in spite of its oft-stated claims to be “transitioning to a low-carbon economy” and its commitments to initiatives such as the Carbon Principles.

It also said a major trend recently has been the growing role of Chinese banks in coal financing.

Between 2011 and 2014, six of the top 20 coal banks are Chinese, including the top three, the report states.

By comparison, between 2005 and 2014, only four Chinese banks are in the top 20, and none in the top three.

Banks headquartered in just three countries — China, U.S. and U.K. — were responsible for the majority (62 per cent) of coal financing between 2011 and 2013, the 28-page report added.

It also noted that coal is the single greatest source of man-made carbon dioxide (CO2) emissions heating up our planet.

“According to the [International Energy Agency], 44 per cent of global emissions from fossil fuels come from coal. Since the year 2000, global coal production has grown by over 69 per cent and now amounts to a staggering 7.9 billion tons annually.”

The report said commercial banks must stop bankrolling climate change by ending support for new coal extraction and delivery projects, as well as for new coal-fired power plants.

“Banks must also start becoming responsible asset managers and divest from the coal companies in their portfolios,” the report said. “Banks must finally stop trading coal – both ‘physical coal’ and coal derivatives.”

It also said banks must finally calculate and disclose the financed emissions associated with their loans, investments and other financial services.

“The next step must be to rapidly decrease these financed emissions, in line with global and national climate targets, and shift their energy finance from fossil fuels to energy efficiency and renewables.”

BankTrack is a global network of civil society groups tracking the operations and investments of private sector banks and their effect on people and the planet. It has also published Bankrolling Climate Change and Banking on Coal 2013.

Alex Scrivener, policy officer at the UK-based World Development Movement, which works with BankTrack, said banks all over the world are fuelling a whole new round of coal mines and coal-fired power plants when humankind needs to be rapidly pulling back from coal in order to avoid the worst impacts of climate change.

“Any notion of ‘ethical banking' is incompatible with financing an energy source like coal,” Scrivener said. “It’s not only a disaster for the climate, it’s also responsible for all manner of injustice inflicted on communities in the global south who have been devastated by the impacts of coal mining.”

Image Credit: Scholven coal fired power plant by Guy Gorek via Flickr.

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This is a guest post by Andrew Gage, Staff Counsel and head of the Climate Change program at West Coast Environmental Law, and Michael Byers, the Canada Research Chair in Global Politics and International Law at the University of British Columbia. This article originally appeared in the Globe and Mail.

Climate change is no longer a distant threat. Peer-reviewed science has already linked climate change to drought in Texas and Australia, extreme heat in Europe, Russia, Japan, and Korea, and storm-surge flooding during Hurricane Sandy and Typhoon Haiyan.

Climate change is already causing about $600-billion in damages annually. Here in Canada, the National Roundtable on the Environment and the Economy estimated that climate change will cost Canadians $5-billion annually by 2020.

Canadian oil and gas companies could soon find themselves on the hook for at least part of the damage. For as climate change costs increase, a global debate has begun about who should pay.

Nobel Peace Prize laureate Desmond Tutu recently called on global leaders to hold those responsible for climate damages accountable. “Just 90 corporations – the so-called carbon majors – are responsible for 63 per cent of CO2 emissions since the industrial revolution,” Tutu said. “It is time to change the profit incentive by demanding legal liability for unsustainable environmental practices.”

So far, the fossil fuel industry has successfully opposed litigation for climate damages, brought in the United States by victims of hurricanes and sea level rise. But new areas of litigation often fail at first; in the 1980s, tobacco companies were still boasting that they “have never lost a case to a consumer, have never settled, and do not expect that picture to change.” As the tobacco industry learned, changes to the interpretation and application of laws sometimes occur quite rapidly.

Nor is litigation in the U.S. or Canada the only thing the fossil fuel industry should worry about. It is becoming increasingly likely that companies could be sued by victims of climate change overseas, in countries with quite different legal systems. There, they might face lawsuits based on constitutional rights to a healthy environment, strict liability for environmental harm, or any number of other legal principles that don’t currently exist in Canadian law.

Once a foreign court has ordered a Canadian company to pay for climate damages, that order is a debt – which Canadian courts can be asked to enforce. Chevron is currently fighting court actions in Canada, the United States and Brazil that seek to enforce a $9.5-billion award handed down by the supreme court of Ecuador – for pollution caused by oil spills.

Moreover, new laws could be introduced to facilitate climate litigation. When Canadian provinces encountered impediments to their ability to sue tobacco companies for public health costs, they eliminated those impediments by passing new laws. It’s not hard to imagine countries impacted by climate change enacting new laws to clarify the liability of greenhouse gas producers.

Five companies traded on the Toronto Stock Exchange are among the “carbon majors” – Encana, Suncor, Canadian Natural Resources, Talisman, and Husky currently are collectively responsible for about $2.4-billion a year of global climate damages.

Canadians are broadly supportive of the “polluter pays” principle – the idea that those who cause pollution should pay for the harm. But because climate change has seemed far off, there has been relatively little discussion about who should pay. It has been assumed – by industry, politicians, even some environmental activists – that oil and gas companies can continue producing with impunity, at least until a global climate agreement is reached.

But rising climate costs cannot be born only by taxpayers and by those who suffer the impacts of climate change. We believe that a new global awareness of the moral and legal responsibilities of the carbon majors will lead to a wave of climate litigation. Foreign lawsuits – with damage awards that are potentially enforceable in Canada – will be difficult and expensive to defend.

Image Credit: Zack Embree

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Renewable energy and other low-carbon technologies are now a successful mainstream business with investors spending $207 USD billion in the sector last year, according to a report released Monday by Clean Energy Canada.

The report — Tracking the Energy Revolution — also said that carbon-based fuels would remain an important part of the global energy system for decades but added that “for the first time in more than a century, multiple signs suggest that their dominance is beginning to wane.”

Global fossil-fuel power generation investment last year totalled $270 billion, the report said, only $63 billion more than for clean energy investments.

It is clear that falling equipment costs, strong investor interest, and government and business leadership are driving a global clean energy revolution, the 18-page report added.

“When it comes to addressing climate disruption, the countries that succeed on the world stage are those taking action at home,” Merran Smith, director of Clean Energy Canada, said in an accompanying media release.

“We found scores of countries and leading companies — from China to the United States — that are fighting climate disruption by cleaning up their energy systems.”

Smith was critical, however, of the Canadian government for showing a lack of interest in supporting green energy.

“Provincial governments are helping Canada play a growing role in that revolution, despite scant federal support for the sector,” she said.

“Thanks to provincial leadership, Canada is a significant player in the global clean energy market. In 2013, ours was the second-fastest growing clean-energy market in the G20, with a 45 per cent increase in investment to $6.5 billion.”

The report said China, the U.S. and Japan were the top three national investors in low-carbon technologies such as wind and solar power last year, spending $55 billion, $36 billion and $30 billion respectively.

By the end of last year 144 countries had renewable-energy targets, the report said. Uruguay has the top 2020 policy target of 100 per cent of primary or final energy to be sourced from clean and renewable sources in six years. Scotland’s 2020 target is 80 per cent and Norway’s is 68 per cent.

China, the world’s largest polluter, invested more last year in new clean energy power plants than it did in new coal power plants, said the report, released one day before the UN Climate Summit in New York.

Sixty per cent of Fortune 100 firms now have goals for renewable energy sourcing and/or greenhouse gas reductions, the report said, adding 6.5 million people now work in the global renewable energy industry.

In a telephone interview with DeSmog Canada, Smith said the federal government is reluctant to engage the low-carbon revolution because it doesn’t understand how big and how fast the clean energy transition is happening.

“This is where big investment dollars are already, and are going to,” she said. “Canada needs to wake up and quit ignoring this. We can’t put all our eggs in the fossil fuel basket.”

She said that the U.S., the European Union, China and other nations are embracing the clean energy economy because technology costs are plunging, it can clean up the air quality, it can provide national energy security, and there are many good business opportunities.

“We are at the tipping point and this is becoming the new business-as-usual,” she said. “This is real, this is big, this is unstoppable.”

The Vancouver-based Clean Energy Canada is a project of Tides Canada Initiatives Society, a group of charities dedicated to social and environmental issues.

Image Credit: Clean Energy Canada

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Investments in renewable energies and low-carbon infrastructure can help the environment and the economy at the same time, says a comprehensive new report released Tuesday.

The report — Better Growth Better Climate — found that about US $90 trillion will likely be invested in infrastructure in the world’s cities, agriculture and energy systems over the next 15 years, unleashing multiple benefits including jobs, health, business productivity and quality of life.

“The decisions we make now will determine the future of our economy and our climate,” Nicholas Stern, Co-Chair of the Global Commission on the Economy and Climate, said in a media release.

“If we choose low-carbon investment we can generate strong, high-quality growth – not just in the future, but now. But if we continue down the high-carbon route, climate change will bring severe risks to long-term prosperity,” he said.

Felipe Calderón, Chair of the Global Commission on the Economy and Climate, said the report refutes the idea that humankind must choose between fighting climate change or growing the world’s economy.

“That is a false dilemma,” Calderón said. “Today’s report details compelling evidence on how technological change is driving new opportunities to improve growth, create jobs, boost company profits and spur economic development. The report sends a clear message to government and private sector leaders: we can improve the economy and tackle climate change at the same time.”

The 71-page report was presented to governments and business and finance leaders at a global launch event at the UN headquarters in New York City, attended by United Nations Secretary General Ban Ki-moon. The report arrives just one week before the UN Climate Summit.

It concluded that countries at all levels of income have the opportunity to build lasting economic growth at the same time as reducing the immense risks of climate change.

“This is made possible by structural and technological changes unfolding in the global economy and opportunities for greater economic efficiency,” the report said. “The capital for the necessary investments is available, and the potential for innovation is vast. What is needed is strong political leadership and credible, consistent policies.”

The next 15 years will be critical, the report said, as the global economy will grow by more than half, a billion more people will live in cities, and rapid technological advances will continue to transform society.

“The next 15 years of investment will also determine the future of the world’s climate system. Climate change caused by past greenhouse gas emissions is already having serious economic consequences, especially in more exposed areas of the world.”

The report added that without stronger action in the next 10 to 15 years it is near certain that global average warming will exceed 2°C, the level the international community has agreed not to cross.

“On current trends, warming could exceed 4°C by the end of the century, with extreme and potentially irreversible impacts. By building up greenhouse gas concentrations and locking in the stock of high-carbon assets, delay in reducing emissions makes it progressively more expensive to shift towards a low-carbon economy.”

The report noted, however, that future economic growth does not have to copy the high-carbon, unevenly distributed model of the past.

It said there is now huge potential to invest in greater efficiency, structural transformation and technological change in three key systems of the economy — cities, land use and energy systems.  

Describing cities as engines of economic growth, the report said how they develop in the future will be critical to the global economy and climate change. “More compact and connected urban development, built around mass public transport, can create cities that are economically dynamic and healthier, and that have lower emissions.”

In terms of land use, the report says productivity will determine whether the world can feed a population projected to grow to over eight billion by 2030, while sustaining natural environments. “Food production can be increased, forests protected and land use emissions cut by raising crop and livestock productivity, using new technologies and comprehensive approaches to soil and water management.”

With regard to energy systems, the report said humankind is on the cusp of a clean energy future. “Coal is riskier and more expensive than it used to be, with growing import dependence and rising air pollution. Rapidly falling costs, particularly of wind and solar power, could lead renewable and other low-carbon energy sources to account for more than half of all new electricity generation over the next 15 years.”

The report also states faulty policy and a reliance on market economics has led to increased emissions. Annual subsidies for clean energy amount to around $100 billion each year, while subsidies for polluting fossil fuels are at about $600 billion.  

“Phasing out fossil fuel subsidies can improve growth and release resources that can be reallocated to benefit people on low incomes. A strong and predictable price on carbon will drive higher energy productivity and provide new fiscal revenues, which can be used to cut other taxes. Well-designed regulations, such as higher performance standards for appliances and vehicles, are also needed.”

The report also said that low-carbon forms of infrastructure are essential to reduce current emissions trajectories. Stimulating innovation in technologies, business models and social practices can also reduce emissions while driving economic growth.

As part of its 10 key recommendations, the report asks politicians to accelerate a low-carbon transformation by integrating climate change considerations into core economic decision-making processes, enter into a strong, lasting and equitable international climate agreement, phase out subsidies for fossil fuels and agricultural inputs as well as incentives for urban sprawl, and introduce strong, predictable carbon prices as part of good fiscal reform and good business practice.

Image Credit: Kris Krug via Flickr

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A total of $1.1 trillion USD earmarked for risky carbon-intensive oil sector investments need to be challenged by investors, according to a new report released today by the Carbon Tracker Initiative.

The research identifies oil reserves in the Arctic, oilsands and in deepwater deposits at the high end of the carbon/capital cost curve. Projects in this category “make neither economic nor climate sense” and won’t fit into a carbon-constrained world looking to limit oil-related emissions, Carbon Tracker states in a press release.

The report highlights the high risk of Alberta oilsands investment, noting the reserves “remain the prime candidate for avoiding high cost projects” due to the region’s landlocked position and limited access to market.

“The isolated nature of the [oilsands] market with uncertainty over export routes and cost inflation brings risk.”

Oilsands major Canadian Natural Resources Limited (CNRL), the company responsible for the mysterious series of leaks at the Cold Lake oilsands deposit, has the largest total exposure to high-cost and high-risk oil investments, valued at a potential of more than $38 billion between now and 2025.

Production forecasts, the basis of capital investment decisions, often rely on business-as-usual assumptions of economic growth and energy demand. But given potential changes in cost, fossil fuel consumption and emission constraints, industry demand projections may need to be reconsidered.

The report’s authors recommend such projections be “stress-tested” for a variety of future scenarios.

Recent efforts by socially responsible investment firms, such as Trillium Asset Management, to limit environmentally egregious investments, as well as the growing divestment movement throw the future of especially expensive and carbon-intensive oil reserves like the Alberta oilsands into question. They face the very likely potential of becoming “stranded assets.”

Previous Carbon Tracker research suggests about two-thirds of the world's proven fossil fuel reserves need to remain in the ground if international targets to remain under a 2 C temperature rise are to be met.

“For the first time, this report bridges the worlds of oil project economics — in terms of both the marginal cost of supply — and carbon, allowing investors to gauge where risk lies, given a range of demand scenarios,” Mark Fulton, adviser to Carbon Tracker Initiative and a former Head of Research at Deutsche Bank Climate Advisors, said.

“It makes it clear that investors have reason to engage companies on many high-cost and high-carbon-content projects.”

The report recommends investors identify companies investing the majority of their capital in high-cost projects, set thresholds for investor exposure and demand greater transparency and disclosure from industry.

The seven global “majors,” which include BP, Chevron, Shell, Exxon Mobil, Total, ConocoPhillips and Eni, represent the bulk of potential oil production and have high exposure to deposits in expensive locations with expensive-to-produce oil types, such as bitumen from the Alberta oilsands.

Several oil companies have taken steps to address their carbon investment risk. Most notably, Exxon Mobil recently announced they will begin reporting more fully on risky carbon assets in response to investor pressure.

Around $21 trillion of potential capital expenditure would need to be invested by the oil sector in high-risk projects by 2050 to keep the industry afloat, according to the report. But this investment “would not pay for itself in a world where demand is lower and that continues to take climate change and air quality seriously.”

“Many investors are concerned about the growing amount of capital that the oil companies have thrown at low-return, carbon-heavy projects,” Paul Spedding, a former-HSBC Oil & Gas Sector Analyst, said.

Major oil companies need to change their strategy, he added.

“As this report shows, returns are falling and costs are rising. To reverse this, a greater focus is needed on higher return, lower cost assets. If this means lower capital investment and higher dividends or buybacks, so much the better. This analysis is important as it provides the data investors need to challenge proposed investments on the basis of returns as well as carbon content.”

Image Credit: All images courtesy of Carbon Tracker Initiative.

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This article originally appeared in Maclean's magazine and is republished here with permission.

It was reported recently that Exxon-Mobil will begin disclosing the degree to which its assets are exposed to future greenhouse gas policies. This risk is at the heart of what has become known as the carbon bubble, a term advanced by UK group Carbon Tracker, which suggests that assets may be over-valued as a result of not accounting for potential future limits on fossil fuel extraction imposed to fight climate change.

The so-called carbon bubble should be a concern to investors in oil sands stocks, and you only need to consider two numbers to understand why: 80 and 320. First, the number 80: oil sands producers and the Alberta government are quick to tell you that up to 80 per cent of the life-cycle emissions from oil sands occur from refining and combustion, not from extraction and upgrading.

That’s comforting, until you consider that this means that most of the carbon policy exposure for these projects comes from emissions-control policies and innovations far beyond the jurisdictions and markets in which oil sands companies operate.

Second, the number 320: when it was leaked that the Alberta government was considering a 40-40 approach (a requirement to reduce emissions intensity by 40 per cent, with a penalty for exceeding this limit of $40/tonne), the oil industry responded that governments acting this aggressively would create significant competitiveness concerns. Shell’s CEO Lorraine Mitchelmore, long a champion for carbon pricing policy, was quoted as saying that, “Alberta needs to be sure that it keeps the industry competitive,” while former Suncor CEO Rick George stated that, “it’s a bad idea to make companies uncompetitive.” 

Here’s the kicker: if an average cost of carbon of $16/tonne on 20 per cent of your emissions raises competitive concerns, it seems that investors should worry a great deal about risks to future returns from oil sands assets. Such a policy boils down to 320 pennies per tonne of life-cycle carbon emissions, hardly aggressive given the magnitude of global emissions reductions which will be required to meet Prime Minister Harper’s commitment to policies which keep global climate change below 2 degrees Celsius.

Reports by Carbon Tracker and others were part of what led me and my colleague Branko Boskovic to ask whether stringent carbon policies, if applied to all emissions associated with oil sands, would render new oil sands investments uneconomic. We started out with a model of an oil sands mine, tabulated the life-cycle emissions (for a mine, production emissions are about 36kg per barrel of bitumen produced, while total, life-cycle emissions are about 535kg per barrel as estimated by Jacobs and others), and applied carbon taxes first to production emissions, and then to the full emissions impact of the oil produced.

Sensitivity of oil sands mine rates of return to upstream and downstream carbon prices.

In the figure above, you can see some of the preliminary results of our analysis. Our base case is a mine with financial attributes similar to Suncor’s recently-approved Fort Hills mine. This project has a rate of return of 12.5 per cent assuming WTI prices of $90, a Canadian dollar exchange rate of 94 US cents, and a $15 differential between light and heavy oil at Edmonton, with Alberta’s existing policy in place.

In the top row of the figure above, you see what happens to those returns on investment as carbon prices on production increase—not so scary, even as carbon prices climb to $100/tonne of CO2. However, it’s when the number 80 starts to play a role that you really see where the risk comes from. Reading down every column, you see what happens to project returns as a greater share of the downstream (combustion and refining) carbon liability is paid for by the producer, most likely indirectly through lower oil prices resulting from demand-side carbon policy.

Even a $50/tonne carbon price presents a serious risk to the economic viability of this investment if, as will have to be the case if global emissions are to be reduced, these policies are applied to combustion emissions and consumers aren’t willing to simply pay the tax. The more consumers react to increased prices with reduced demand, the more detrimental carbon policies become for oil sands investments.

So, if you want to know where the risks to oil sand projects lie, they aren’t from the policies which are being considered for production emissions in Canada. They come from two numbers—the 80 per cent of emissions that occur once the oil is burned, and the concerns that executives appear to have with carbon emissions costs of as little as 320 pennies per tonne.

Image Credit: Alex MacLean via @grossmanmedia, used with permisson

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Investments in the oil, gas and coal industry are starting to lose their value and will become a liability based on a major UN report released today. The UN Intergovernmental Panel on Climate Change's (IPCC) 2000+page report confirms that Canada must keep more than 75% of its fossil fuel reserves in the ground.

Forget peak oil. This is the era of Unburnable Carbon.

In the IPCC report summarizing more than 9000 new climate research papers confirmed that only so much fossil fuel can be burned to keep global warming under 2C, the internationally agreed on cap. Written by hundreds of the world's leading scientists from 39 countries, the report also confirmed that half to two thirds of the 2C carbon budget have already been used up.

At the current 'burn rate' the remaining carbon budget will only last 15 or so years. And that's to have a 50% chance of staying below 2C of warming. No scientist regards 2C as 'safe.' The heating will be wildly uneven and spawn extreme weather events beyond any ever experienced in human history.

What is the liability of companies continuing to produce and profit from their carbon stocks?

"It's the reserves of oil, gas and coal that props up the stock prices of the industry," said David Cadman, President of ICLEI, the only network of sustainable cities operating worldwide. More than 1200 cities in the network are on their way to reducing their emissions 20% by 2020 and 80% reductions by 2050.

"This 'carbon bubble' is going to burst. What are the consequences for Canada now that we've tied ourselves to the fossil fuel industry?" Cadman, a Vancouver city councilor, told DeSmog.

At least 78% of Canada’s proven oil, bitumen, gas, and coal reserves, and 89% of proven-plus-probable reserves need to remain underground according to a 2013 study by the Canadian Centre for Policy Alternatives (CCPA).

"Business-as-usual for the fossil fuel industry is incompatible with the need to keep the global temperature increase to 2 degrees C or less," said CCPA Senior Economist Marc Lee. 

"We are in need of a ‘managed retreat’ from fossil fuel investments," Lee said in a press release.

Some of the first calculations about the size of the 2C carbon budget were published in the leading scientific journal Nature four years ago. That same year the first-ever Indigenous Peoples’ Global Summit on Climate Change ended with a call to phase-out of fossil fuels.

The fact that carbon or CO2 traps heat from the sun was established more than 120 years ago. Burning fossil fuels, deforestation and other human activities puts additional CO2 into the atmosphere where it remains essentially forever.

It is hardly surprising – and is certainly not scientifically controversial – that additional CO2 in the atmosphere acts as insulation, trapping heat.  

Humanity has already pumped out 531 billion tons of carbon* the IPCC confirmed. The resulting warming is now 0.85C and on its way to between 1.0 and 1.2C.

Add roughly 1 trillion tons of additional carbon* to the atmosphere and the blanket will be so thick the surface of the entire planet will heat up on average of 2C.

This heating, however, will not be even. The Arctic and the north will heat up 6 to 8C due to a process called Arctic Amplification. That guarantees the end of the Arctic sea ice in summers and major but unknown changes to the weather of the Northern hemisphere. It would also mean the end of the Greenland ice sheet, raising sea levels 7 meters over the next 1000 years. Local effects on Canada's northern region will be profound from collapsing permafrost, increased flooding in some regions and fires in others. And in this new climate there will be major impacts on wildlife and vegetation.

And that's the 50-50 budget: With that much CO2 there is a 50% chance of heating up more than 2C. And scientists acknowledge this budget doesn't include positive feedbacks like emissions from thawing permafrost that they know are draining the carbon account but not by how much.

Given the deadly serious consequences of blowing the budget, there is a high incentive to stay well under the budget cap. But the opposite is happening. Billions of dollars are being wasted by banks, investment funds and pension plans on the oil, gas, and coal industry's efforts to get more carbon out the ground.

None of this is theoretical. Lord Stern, the former World Bank chief economist, said on Sunday that the effort required to stay within the budget must be addressed as a matter of urgency.

"Delay is dangerous because greenhouse gases are accumulating in the atmosphere and because we are locking in high carbon infrastructure and capital."

Lord Stern told the Guardian that cutting carbon emissions "will be full of opportunity, discovery, innovation and growth," if there is sound public policy.

*Correction: this originally stated 531 billion tons of CO2 had been pumped into the atmosphere rather than carbon. Note 1 ton of carbon = 3.67 tons of CO2.

Image Credit: Kris Krug

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By Hannah McKinnon, National Program Manager at Environmental Defense.

In last week's State of the Union address, President Obama reiterated his vision for clean energy and urgent action on global warming. With TransCanada’s Keystone XL tar sands pipeline on the frontlines and looking threatened, oil industry supporters are suddenly desperate to look like the environmental and climate risks of the tar sands are under control.   But there’s a massive credibility gap as Canada’s contribution to global warming is spiralling out of control, with the reckless expansion of the tar sands.   We’ve always believed that actions speak louder than words. So while the oil industry and government embark on a pro-tar sands PR campaign, let’s look at how Canada has behaved on climate action and the environmental risks of the tar sands.  

Broken promises

The federal government has repeatedly promised, and then failed, to take strong action on climate change. We’ve become a pariah internationally, thanks to the government’s weakening of our global warming goals and pulling out of the Kyoto Protocol.   Domestically the federal government hasn’t kept promise after promise at home to address Canada’s fastest growing source of greenhouse gas pollution – the tar sands. Currently, there is not one federal regulation on climate pollution from the tar sands. Even the government’s own reports are clear that it would almost take magic to meet our weak 2020 climate goals.   Blocking clean energy at home and abroad

In Canada, the federal government has failed to renew meaningful investment in clean energy and energy efficiency – the tools that will not only get us out of this mess, but can help us build a strong economy founded on good jobs and safe, clean and renewable energy. Instead of supporting popular clean energy programs, the government hands out over $1.3 billion per year in tax breaks to Big Oil.   Outside our borders, the government has taken its pro-tar sands show on the road, with aggressive lobby efforts in California and Europe, aiming to undermine other countries' efforts to fight global warming and use cleaner fuel. Although both jurisdictions are standing their ground, the Canadian government continues to pressure them to weaken their rules so Canada’s dirty oil gets a free pass and doesn’t pay its fair share for higher than average pollution.     Dismantling science and science-based policy

Respected scientists and scientific bodies across the country are voicing their concerns about recent attempts to dismantle science and science-based policy investigating climate change and other environmental issues. This ranges from cuts to funding for critical, long-standing research programs to not allowing federally funded scientists to speak to media about issues of national concern, like climate change.   In 2012, the federal budget bill was undemocratically used to force through major and devastating blows to environmental laws – dismantling decades worth of policies that protect our natural environment, lakes, rivers and fish. The best explanation for these sweeping changes is that these laws, designed to protect our green spaces, waters and animal life, would have made it that much more difficult to rubber stamp pipeline approvals through Canada’s most sensitive ecosystems.   Fighting a public relations battle rather than battling pollution

The Alberta tar sands are already Canada’s fastest growing source of global warming pollution. And the expansion plans in the works make current projects look like child’s play. There are plans to triple tar sands production in the next seven years. This would cause Canada’s emissions to soar well beyond what our climate can handle.   Instead of reducing pollution, our government has engaged in a public relations war. This has included labelling environmental groups radicals, singling out First Nations as ‘enemies,’ and massive diplomatic campaigns abroad to paint a rosy picture of one of the dirtiest projects on the planet.   Closing the Credibility Gap

Canada’s credibility will continue to be tarnished, as long as the government keeps breaking promises, weakening environment regulations and commitments, and muzzling climate scientists.   To close the credibility gap, oil industry supporters will need to accept that their tar sands plans and climate action cannot co-exist. Period.   According to the International Energy Agency, in order to live up to our commitment to keep global warming below 2 degrees, two thirds of all remaining fossil fuels must stay in the ground. That would include a big chunk of the tar sands.   It’s not too late

The good news is that there are solutions. To start with, the government could implement long-promised robust regulations for oil and gas, requiring those sectors to do their fair share to cut pollution. Instead of subsidizing the oil and gas industry, the government could invest in clean, profitable, reliable energy.      In recent years, Canada’s climate policy has often followed the United States. With renewed interest in climate change south of the border, it’s time to change our actions – not just our PR spin.

Image Credit: Kris Krug, used with permission.

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