What in the World?Canada and GHG Management

Michal C. MooreSenior Fellow

The Institute for Sustainable Energy, Environment and EconomyUniversity of Calgary

An emerging, thoughtful, if hesitant and discontinuous, approach to carbon impacts and the future

CanadaEnergy and Resource Rich

Major Industries– Thermal Energy Generation– Oil and gas extraction and processing– Pulp and Paper generation– Cement and lime production– Chemical production– Mining, smelting and refining– Iron and Steel production

Oil Sands

Canadian Population Concentrated Near Border

Hydrocarbon Resources e.g. OilSands Concentrated in non-shield areas

WesternSedimentaryBasin

The Oil Sandsan overview

• 174 Billion Barrels of economically recoverable oil (>$35/bbl US)

• Surface mining and in-situ extraction (SAGD)• Upgradable to synthetic equivalent of light crude• Output should exceed SA by 2047 at current rates• Water, energy, transport intensive• Bitumen extraction and upgrading produces >2x

GHG emissions per barrel as conventional crude• Concentration of emissions close to production

site, creating potential sequestration economies of scale

Source: US EIA

Oil Sands Unconventional Oil Productionhas begun to rapidly increase

Initial export focused on USnow increasing to China& in the future to India

Carbon is the Key for GHG

• Carbon is synonymous with GHG emissions, a principal catalyst for global warming

• There are six main GHG’s all expressed as a ratio to CO2

– Methane (CH4) 21

– Nitrous Oxide (N2O) 310

– Hydroflourocarbons (HFC’s, HFC23) 11,700– Perflourocarbons (PFC’s)– Sulphur hexaflouride (SF6)

Policy Drivers in Canada• Emerging Evidence

– Glaciers– Temperature– Crop cycles, breeding cycles– Permafrost changes

• Politics– Kyoto signing– Lawsuits– Emergence of alternative markets e.g. enhanced oil recovery

• Uncertainty and risk– Insurance payments– Trade disruption

• Basic Science Research

Coincident with Expansion of Oil Sands Activity, GHG emissions have increased

… and exceeded Kyoto targets

Overall energy demand increasedeven with energy efficiency

Changes in air pollution indicatorsare regionalized and coincident with population

and political centres

the trend is generally up

Alberta is the Principal Generatorof new supply and of GHG

Official and Unofficial Acknowlegment of carbon constraints

• Kyoto• Project Green• High corporate responsibility• Still slow on energy efficiency• Missing linkage to corporate finance depts

Emerging Long-term Strategies(post Kyoto planning was missing or inconclusive)

• Hedging to reduce risk• Technology investment• Emblematic trading markets

– European Union Emissions Trading System (ETS)

– Chicago Climate Exchange– New South Wales Emissions Trading system

Corporate Actions

• Suncor - published carbon profile• Transalta - emission reduction trading • TransCanada - product transport• EnCana - sequestration

Public Actions• New Renewables interest• Developing interest in demand management• New Carbon trading marketMarket liquidity

– Cdn Federal Gov’t price assurance for compliance $15/tonne CO2 equiv.

– Companies may find it easiest and least risky to purchase non tradable credits from govt, since marginal abatement costs usually in excess of 15/tonne

• Rule change probability• Credit lifespan• Post Kyoto

Examples

• Weyburn - sequestration• New TransCanada Project

Belle Plaine (syngas)• AICISE - Alberta Ingenuity Centre for In-

situ Energy

Challenges That Will Influence Oil Sands Operations

(and consequent GHG emissions)

Competitive marketsLong term cost of fuelTransport challengesFuture cost of carbon reduction creditsDifference in domestic v intl marketsPolicy uncertainty

Future Commitment

• Morality• Market demand• World actions, primarily US policy• Liability and culpability

– Sarbanes-Oxley and Canadian Equiv.

Advice Givenand beginning to be taken

There are a number of compelling legal and economic reasons that corporations would be well advised to give careful consideration to the issue of climate change and even develop their own climate change action plan in advance of any regulatory requirement. . . . [T]here is reason for genuine concern that liabilities may be lurking for those who neglect the issue now, to the later detriment of the corporation and its shareholders.

J. Healy and J.M. Tapick, “Climate Change: It’s Not just a Policy Issue for Corporate Counsel - It’s a Legal Problem,” Columbia Journal of Environmental Law, 29 (2004), pg 93