The federal government has a problem. It has committed to reduce the country's greenhouse gas emissions to 17 per cent below 2005 levels by 2020. But Canada can't do it alone. The government made overtures to the United States back in 2008 and again in a recent letter to President Barack Obama, asking the U.S. for help in reaching emissions targets through coordinated policy or by clarifying what environmental progress would allow the U.S. to approve trans-border pipeline plans.
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This week, Canada admitted how bad our greenhouse gas emissions have become. After much delay, Environment Canada finally released its emission trends report for 2013. It contained few surprises and further confirmation of what we already know. Apart from being on target to make it only "halfway" to the 2020 target, emissions are actually growing. By 2020, we would have increased our emissions by 32 million tonnes from today's levels and would be 122 million tonnes away from achieving the government's target.
Environment Canada builds its projection of what emissions will be in 2020 by inputting past trends and future expectations. In its latest projection, emission growth in nine of 10 provinces has halted. Some sectors reduce their emissions, some don't grow at all and some grow modestly. Yet, Canada's emissions production is essentially the tale of two different economies. While emissions are growing slowly or declining in six of seven sectors, the outlier sticks out like a sore thumb. It is — you guessed it — the oil sands.
Growth from oil and gas emissions is greater than the sum of the growth in all other sectors. Growth in GHGs in this sector is the result of total production increases as each unit of oil and gas extracted requires fossil energy inputs and releases some fugitive emissions. Looking closer, however, we see the story of increased oil sands production. Environment Canada expects that most of Canada's conventional oil and gas sector will be in stasis or decline by 2020. Natural gas production is expected to decline by 24 per cent and conventional crude oil to increase only two per cent.
However, Environment Canada expects raw bitumen production to double from 1.7 million to 3.3 million barrels a day. This means oil sands emissions will increase by 80 per cent, or 46 million tonnes, more than any other sector. To give you a sense of scale, Environment Canada expects our total emissions to increase 60 Mt (nine percent).
To achieve these levels of production, the bitumen pipeline system will need to greatly expand. Take a look at this chart by the Canadian Energy Research Institute. The amount of available pipeline capacity is 3.5 million barrels per day (mbd) but total oil production in 2011 was 3.1 mbd. Oil sands are projected to increase from 1.7 to 3.3 mbd, increasing total production to 4.7 mbd. All of Keystone's 0.7 mbd pipeline would be required plus additional capacity like the Northern Gateway or Trans Mountain pipelines.
Some speculate that transport by rail will replace pipelines, but that's not certain. The most optimistic assessments show rail would be to carry an additional 600- to 800-thousand barrels per day by 2035. So, at most, rail could carry less than half the total projected increase in bitumen production and it would require a time frame 15 years longer than EC's 2020 forecast. Clearly, new pipelines are required to achieve EC's ambitious GHG growth projection between now and 2020.
That brings us back to President Obama. He could reject the Keystone XL pipeline or he could require GHG policy on Canada's oil and gas sector as a condition for approving it. A policy framework on oil sands emissions would look something similar to what the Pembina Institute recommended. In requiring policy, he would put the brakes on Canada's fastest-growing source of emissions by either stopping production or by requiring the much ballyhooed technology and process improvements to actually be deployed.
At least under this scenario, Canada's GHG target would be in sight. But at what cost? The Canadian Energy Research Institute still shows that with no additional pipelines employment will grow by 100,000 jobs, royalties in Alberta by $16.5 billion and GDP by $951 billion. Far from screwing Canada, President Obama would be providing the leadership desperately lacking in Canada to move us beyond reliance on a 20th-century economy into the 21st century. The Canadian government should send the president a Thank You card.