Something unprecedented in Alberta happened last week. CEOs from the oil industry, leaders of environmental groups, and the Treaty 6 Grand Chief, all standing on stage together. They were all happy, too. No joke. Was this the second coming? The lion laying down with the lamb? Witness Broadbent Institute Executive Director Rick Smith taking a selfie at the press conference with former Canadian Association of Petroleum Producers President Dave Collyer
On the eve of the Paris climate talks, Alberta Premier Rachel Notley announced a new climate plan for Alberta that includes an economy-wide carbon tax, an accelerated coal power phase-out by 2030, an increase in renewables and energy efficiency programs, and a carbon emissions cap for the oilsands.
What makes this announcement so special? First, it is legitimized by many of the major players in the oilsands industry and in Canada’s environmental movement. Second, a blue ribbon advisory panel received over 500 submissions from the public, developed a potential climate policy, and published a report. Third, the Government of Alberta accepted all of the panel’s recommendations and negotiated an emissions cap with industry and environmental non-governmental organizations (ENGO), according to panel chair and University of Alberta economics professor Andrew Leach. I could go on about many aspects of this new climate policy, but let’s focus on one: the emissions cap.
What exactly does this cap mean? This puts in place a binding ceiling on oilsands emissions at 100 million metric tons (Mt) of carbon dioxide per year, up 43% from today’s current levels of 70Mt. Don’t get me wrong, 100 Mt is still a massive amount of pollution – equivalent to emissions from over 21 million passenger vehicles. Nevertheless, it effectively puts an end to the possibility of near-infinite amounts of carbon pollution from oilsands production. For investors and oil companies alike, this cap sends a strong regulatory signal that developing all of the listed oilsands reserves is no longer inevitable. Companies will have to innovate with emission-reducing technologies or emit their carbon elsewhere.
Curiously, the carbon emissions from filling the proposed Energy East pipeline, around 30 Mt according to an analysis by the Pembina Institute, is practically the same amount as the difference between current emission levels (70Mt) and the 100 Mt emissions cap. Put another way, TransCanada’s proposed Energy East pipeline, or the smaller Vancouver-destined TransMountain pipeline expansion proposed by KinderMorgan, would likely just squeak in under the emissions cap (although they could not both be built).
How did they arrive on this number? As Professor Leach admits, the cap was clearly negotiated. Financial Post columnist Claudia Cattaneo nefariously calls the cap a “secret deal.” While the cap was not transparently negotiated, it was no secret that Alberta’s new NDP government would be taking strong action on climate change: it was a major plank in their election platform this past spring.
If I was a fly on the wall during these discussions (and I wasn’t), here is what I imagine would be the positions of the different players. The oilsands industry clearly wants to have environmental groups off their back. If expansion plans are to be realized, more pipelines will be needed. Unfettered carbon pollution is the top concern for many environmental groups, as the freshly nixed Keystone XL pipeline can demonstrate. Agreeing to a limit to emissions growth may get some environmentalists to stand down over climate concerns on the pipelines. In the meantime, industry does not have to worry about hitting any binding targets any time soon. If low energy prices continue, a slower growing oilsands industry will not run up against the emissions cap for at least another decade.
Environmental groups are also playing the long game and realize that a binding cap may be sufficiently important to have these groups back off their campaigns, at least for those green groups who were on stage with Premier Notley, and at least on the upstream emissions argument. It also means that the argument that upstream emissions have to be considered when battling pipelines is now rendered moot, for the time being.
We also need to consider the federal government. Supposing Prime Minister Trudeau fulfills his campaign promise to consider upstream carbon emissions of pipelines when he revamps the National Energy Board, environmental groups would have a much stronger case for not granting development permits based on unmitigated carbon pollution. However, with a binding emissions cap in Alberta, there is a distinct possibility that the Board could simply cite the Alberta cap as evidence that upstream emissions have already been considered by the province, and not worry themselves about considerable carbon pollution from extracting bitumen.
To be sure, there are many other sound arguments to make on the environmental and treaty concerns from oilsands and pipeline development that this announcement does not address. Those issues, like water pollution or impacts on caribou, will not be going away. But, in order to win on many fronts (an economy-wide carbon tax, an accelerated coal power phase-out, an increase in renewables and energy efficiency programs, and an emissions cap for the oilsands), something from the environmental groups had to give. Consequently, oilsands export pipelines have just become easier to build.
Luckily, that’s not the end of the story. There is also the end of coal power in the biggest coal-burning province in Canada. We now have a clear, stable price signal to the private sector and to Albertans that it is not longer acceptable to pollute and that there are economic alternatives.
Alberta is no leader on any of these policies. They have all been successfully road-tested in other jurisdictions. However, considering the extent to which the fossil fuel industry is embedded in Alberta’s economy, government, and culture, this new climate policy could be seen as a major turning point for the province and for other major fossil fuel producers around the world. Hopefully others in Paris will take notice of what is happening in Alberta!