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Greenwash: Alberta’s ‘climate plan’

By: 
Eric Lescarbeau

March 4, 2016

At the heart of the First Ministers’ climate framework is the Alberta Climate Leadership Plan, a plan which is being sold as a significant step in the right direction but which at the end of the day will lead to dramatic increases in global greenhouse gas emissions.

Released on the eve of the Paris climate talks, the plan has been the object of considerable praise both in Canada and internationally at the Paris climate talks. On its surface the plan represents an important moral victory for the climate justice movement. After years of mass mobilization and campaigns that have blocked pipelines, slowed tar sands expansion and cemented the image of dirty oil in the global media, big oil and government have finally been forced to acknowledge the reality of climate change and the need to do something about it. The climate change denialism of the Harper years is officially dead. This is a terrain on which the climate justice movement can continue to gather momentum towards a 100% fossil fuel free future.

However, the plan also contains a glaring contradiction. It asks us to believe that it is possible to massively expand tar sands production—projected to double by 2030—while simultaneously reducing “tar sands emissions.” This seemingly impossible task is achieved not through technology as the plan and its boosters seem to suggest but rather through a clever bit of deception. “Tar sands emissions” literally means emissions released in the tar sands. It only counts emissions at the point of production in the extraction and upgrading of bitumen. These “upstream” emissions count for just 10 per cent of the total. It doesn’t count emissions at the point of consumption when it is refined and then ultimately burned as fuel. These “downstream” emissions count for 90 per cent of the total. In other words, the aim is to reduce emissions that happen within Canada’s borders while massively increasing our export of emissions to the rest of the world. In effect this represents the ultimate act of what corporations refer to as “externalizing costs.”

In announcing that climate tests would be included in pipeline reviews during the Kinder Morgan NEB hearings last month, Prime Minister Trudeau smoothly claimed that it would “include” upstream emissions. In practice this actually means excluding downstream emissions from consideration. Apparently, Trudeau and the plan’s authors seem to forget that climate change is a global phenomenon. Exporting emissions and attempting to make it someone else’s problem is an absurd act of self-delusion and arrogantly implies that we are not responsible for the impact our oil exports have on the rest of the world.

The twisted logic of the market

The twisted logic behind the climate plan is the logic of market driven competition as Alberta NDP environment minister Shannon Phillips, speaking in Paris, demonstrated so well: "Alberta is an energy producing jurisdiction, and will remain so for the foreseeable future. So what we need to do is exercise leadership to show that it can be done, and that our energy products compete for world markets and be sustainable, and demonstrably so."

Competition in the world oil market has never been more intense. Low cost oil producers in the Middle East have responded to the rapid growth of high cost, unconventional (tar sands, shale oil, fracked gas and offshore drilling) oil and gas production centered in North America by opening the taps in a bid to drive them out of the market. Oil prices have fallen from historic highs in 2014 to their lowest level since 2002. This is expected to intensify this year as the decades-long embargo on Iranian oil comes to an end, and Saudi Arabia still holds a further 1.5 million barrels of spare capacity. Currently it is estimated that there are more than 2 million barrels per day of overproduction on the global market and neither side has any intention of backing down or sacrificing their market share for the sake of the climate.

Some in the climate justice movement have been tempted to view the crisis for producers of non-conventional fossil fuels in places like Alberta as a sign that the days of the fossil fuel economy are numbered and therefore that the crisis is a boon for the climate justice movement. This is often encapsulated in talk about “stranded assets” where energy companies would be forced to mothball fossil fuel extraction projects. The belief is that the only “rational” response is to shift to production from renewables. From the point of view of the existence of human civilization on earth, this makes perfect sense. But from the point of view of the market, it doesn’t.

While there has certainly been a drop in tar sands production, and Christy Clark has largely failed to deliver on her promised LNG boom in BC, neither the provincial premiers nor the Trudeau cabinet have shown any sign of dropping their support for these projects. The Alberta Climate Leadership Plan, more than anything else, is a plan to ensure the long-term viability and expansion of the tar sands industry. 

There are two reasons why this makes sense for the 1% in Canada. First of all, while low fossil fuel prices may make life difficult for oil and gas companies they also help stimulate all other sectors of the economy. Since the collapse in oil prices the US manufacturing sector has grown and the US economy is finally showing signs of real recovery from the 2008 financial crash. The impact of this has been slower to hit Canada because of its heavier reliance on fossil fuel exports but with growth in the US economy the Canadian manufacturing sector is beginning to show signs of recovery. Trudeau’s $125 billion national infrastructure program is designed to help stimulate this. At the same time low oil prices also hurt competing economies that are largely based on fossil fuel production in the Middle East and Russia.

The second reason is that control over global oil resources is highly contested because oil is so strategically important both for the economy and the military. Since the 1970s oil crisis both the Canadian and US governments have invested heavily in developing technologies to exploit non-conventional fossil fuel sources with the aim of ensuring North American energy security. This was largely the purpose of Petro Canada—Canada’s state owned oil company established in 1975 and privatized in the 90s and early 2000s—to allow private oil companies to profit from these tax payer funded efforts. This strategy has been wildly successful, with the US economy now getting just 4 per cent of its oil from offshore imports. With ongoing wars and growing instability in the Middle East—fuelled by Canada’s $15 Billion arms sales to Saudi Arabia and military interventions in Afghanistan, Iraq and Libya—competing nations in Asia and Europe have a much harder time securing the energy they need to support economic growth.

The Alberta Climate Plan fits into this strategy in a number of important ways. It may seem counterintuitive to think that an emissions cap, carbon pricing and phasing out coal would lead to even more tar sands production and greater emissions, but this is exactly what they do. One of the key objectives is to improve access to global markets. By greenwashing the tar sands industry the plan aims to lose the “dirty oil” label and overcome the resistance built by the climate justice movement to pipelines domestically and the stigma attached to buying it overseas. As the Alberta government report states, “Alberta has arguably paid a steep price for the perception that our economy, resources and investment climate are not compatible with action on climate change.”

“Hard” Cap on Emissions?

The core of the plan is the so-called “hard” cap on emissions. This cap is primarily what has drawn praise from Environmental NGOs. According to Karen Mahon, national director of Forest Ethics, “Six million barrels of tar sands per day are currently permitted, but under this plan and under existing technology, half of that—three million barrels per day that would have burned—will now stay in the ground.” 

The cap is set at 100 Megatons, which, along with an exemption for upgraders, would allow for a 50 per cent increase in emissions above the current level of 70 Megatons. In reality all current projects under development, with significant capital invested, will not be affected. By 2017 production capacity in the tar sands is expected to grow by 650,000 barrels a day above 2014 levels. 

The permits Mahon refers to have not been abandoned but delayed, primarily due to low prices.  With current technology and projected growth the cap would not be reached until 2023, nearly two full election cycles later. In fact a closer look at the plan reveals that the emissions cap is not intended to be fixed in stone. Instead it enshrines a race to the bottom mentality as other countries and jurisdictions compete to attract oil and gas investment: “To ensure our policies remain competitive, we are also recommending periodic reviews to assess and adjust to changing global commodity markets and climate policies.”

Some industry leaders have also made it clear that they fully expect technology to allow them to expand production even if the cap remains in force. This is why Shell Canada President, Lorraine Mitchelmore, supports the plan: “It actually shows that we believe in technology, and we believe we can grow this at a reduced emissions intensity. It’s putting our money where our mouth is, basically, that we’ll be able to grow. It’s the same in any policy. What is the outcome you want? Alberta doesn’t want unlimited growth in emissions, because it’s got a target. So let’s put a policy in place that says you can grow if you reduce emissions.”

The bottom line is that global emissions from the rapidly expanding consumption of tar sands oil will far outstrip any reduction in emissions “intensity” at the point of production.

Carbon Pricing and Output Subsidies

The plan also introduces a $30 per ton carbon price. Like the cap on emissions this is also intended to encourage technological innovation to reduce emissions per barrel and improve the emissions efficiency of tar sands operations. While it is obviously better to have lower emissions per barrel, the carbon price is also intended to spur consolidation leading to larger “too big to fail” players in the tar sands that can survive the low price environment. Roughly half of the revenues from the carbon levy will be returned to the oil and gas industry as a subsidy, what the plan vaguely refers to as an “output allocation credit,” constituting the largest single expenditure of the revenues. This combination of carbon pricing with an output subsidy that literally rewards companies for every barrel of oil produced is designed not to restrict production but to encourage new technologies and economies of scale that will improve efficiency and lower overall production and operating costs to help the industry ride out low prices over the long term. 

There will be winners and losers in this process. Smaller companies or those with less efficient operations will end up paying to lower the operating costs of larger and more technologically savvy companies. This is why in the wake of the plan’s release many smaller companies that had less influence in the negotiations have protested and pressured the Canadian Association of Petroleum Producers—the main industry lobby group—to oppose the plan. Ultimately this could drive a round of consolidation in the tar sands that will benefit the biggest investors and the largest corporations. What no one has talked about is the fact that consolidation and technological upgrades will also mean even fewer jobs per barrel produced—leaving many of the 40,000 laid off tar sands workers and their families with little hope of a job to go back to.

 

One of the technologies that is being touted to reduce emissions intensity is carbon capture.  Shell Canada’s Quest Carbon Capture and Storage project, currently the largest, is supposed to capture one million tonnes of CO2 (roughly one megatonne of CO2) and store it more than two kilometers underground.  To date there is little scientific proof that this CO2 will stay there and not make its way back to the surface. Worst of all many CCS facilities pump the CO2 into “mature” oil wells to help them extract more oil from dying wells, at the same time releasing much of the “captured” CO2 back into the atmosphere.

In theory carbon prices are intended to give a competitive advantage to green technologies.  However, the carbon price in the Alberta plan is set at such a ridiculously low price it would increase the cost of a barrel of oil by an average of just $2.25. For many producers it would be less than a dollar. At the same time companies would be allowed to purchase emissions credits from other jurisdictions and countries at even lower costs. This has the negative impact of slowing development in poorer countries that are often denied access to green technology. It ultimately offloads responsibility for the climate crisis onto the backs of the people least responsible for and often most directly affected by climate change. It also relies to a certain degree on corruption in countries with weak states where emissions are often not tracked effectively and standards are not enforced. In addition, companies can purchase carbon offsets, like forests, and then pretend that by not cutting them they are reducing emissions. 

Revenue from the sale of government emissions permits is projected to generate approximately $3 Billion by 2018 and $5 Billion by 2030. It is certainly good that the fossil fuel industry is being taxed, even if half of it flows back to the industry. However, it was widely expected that the NDP government would also raise royalties in its widely anticipated Royalty Review earlier this month. This was something they had pushed for for years while in opposition. Instead they left rates unchanged and made changes that are estimated to reduce revenues by a further $1 Billion per year, largely wiping out any gains made from carbon pricing. 

Gil McGowan, leader of the Alberta Federation of Labour and a long-time champion of royalty reform, rebuked the NDP government of Premier Rachel Notley for supporting the review: "Some people say the NDP have come face to face with reality. I say what happened can best be described as the government being captured by industry. I honestly think the government has made a profound political mistake. We don't believe progressive governments have to become conservative to deal effectively with economic issues or to succeed politically. That's a fallacy."

Royalties in Alberta have been criminally low for decades, currently hovering around just $4 per barrel. One of the biggest crises in the Alberta economy is the enormous civil and social infrastructure deficit, estimated at $24 billion. The development of hospitals, roads, schools, social services etc have lagged behind the rapid population and economic growth for years while oil corporations made huge profits and paid little back into Alberta’s cities and towns. While there are important commitments in the Alberta Climate Plan to spend on developing green infrastructure like public transit and retrofitting, this is proposed on a piecemeal basis in partnership with often cash strapped municipalities. At the same time the province expects to run up a $35 billion debt for infrastructure and grants to the private sector over the next 5 years.

Some of the money will also be used to subsidize green energy to help it compete in the energy market. All these programs, however, will be supported from a relatively tiny portion of the overall funds. Rather than putting all the money into building a green economy where far more jobs are created per dollar invested, a large portion of the funds will be used to offset the impact of higher fuel prices for low income families. Instead of creating jobs and building badly needed social and green infrastructure that reduces consumption of fossil fuels and lowers costs for poor families, those families will get a rebate cheque in the mail: a time-honored bit of populist vote buying that does little to raise living standards.

Coal Out… Fracking In?!

Another part of the plan which has received much praise is the commitment to phase out burning coal for electricity by 2030. This will supposedly be replaced with 30 per cent coming from renewable energy sources. However, yet again, this is smoke and mirrors accounting. Currently, 18 per cent of Alberta’s electricity is already produced from renewable energy sources. In fact, the plan merely accelerates a process that was already well under way in the private sector with coal burning slated to produce just 10 per cent of Alberta’s electricity by 2034. There is also the misleading claim that 50 to 75 per cent of current coal burning capacity will be replaced with wind and solar capacity. But capacity only refers to what would be produced if generators were operating 100 per cent of the time. In practice carbon burning generators have a much higher utilization of capacity because they don’t depend on environmental factors and can be fired up at will. Wind and solar depend on the availability of wind and sunlight and so generate intermittently. In addition electricity demand will grow dramatically by 2030, not least because of an expanding tar sands industry. Putting these two factors together the current plan appears to only lead to 15 per cent production from renewables by 2030, a reduction from the current 18 per cent!

The plan has been updated since its release to state that renewables will be used for 30 per cent of generation, rather than capacity, but without explaining what further steps would be taken to achieve this. At best it appears the government is relying on a weak strategy of using the green energy subsidy to spur the private sector to invest in the development of renewable sources. The problem with this is that even at comparable prices wind and solar are not as profitable as fossil fuels, partly because of the lower use of capacity, and have a harder time attracting investment.

The real winner in the phase out of coal is actually the Oil and Gas companies because it will largely be replaced by the phase in of natural gas, extracted using hydraulic fracturing, much of it from BC. This is indeed a cleaner burning fuel for the end user, but the overall emissions associated with fracked gas extraction, transmission, transportation and end use are in fact just as bad as coal (according to a landmark 2012 study from Cornell University). 

Ultimately, the Alberta Climate Plan demonstrates that the competitive forces driving capitalism are the cause rather than the solution to the climate crisis. This is why the Alberta NDP’s commitment to working with the oil industry has prevented it from taking real action to address climate change. It will be up to the climate justice movement of Indigenous, environmental and labour groups to keep fighting against Big Oil for a truly just transition to a fossil free future.

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