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(OTTAWA) A new study by veteran earth scientist David Hughes finds that Canada cannot meet its global climate commitments while at the same time ramping up oil and gas extraction and building new export pipelines.
Hughes calculates that if oil sands production grows to the 100 megatonne (Mt) per year level allowed under Alberta’s climate plan, and the five liquefied natural gas (LNG) export terminals envisioned by the BC government are built, emissions in the rest of the economy will have to shrink by 55% below 2014 levels if Canada is to meet its Paris Agreement commitments. Even under a more modest scenario, where the Alberta plan is observed and only one BC LNG terminal is built, emissions in non-oil and gas sectors would have to contract 47% by 2030.
“Short of an economic collapse, it is difficult to see how Canada can realistically meet its Paris commitments in the 14 years remaining without rethinking its plans for oil and gas development,” says Hughes.
Hughes also finds that even if oil sands production is allowed to grow to the maximum allowed under Alberta’s climate plan, Canada has enough existing pipeline and rail capacity to handle the 45% increase in oil sands production this would entail.
Hughes’ study also takes a close look at oil price trends, and finds that new pipelines with tidewater access are unlikely to confer a significant price premium, as is widely believed.
“For a few years, the international price of oil was significantly higher than the North American price,” Hughes explains. “But that premium has largely disappeared. The idea that exporting more oil sands bitumen to Europe or Asia will boost returns to Alberta simply doesn’t hold water. In the US new pipelines have cleared a bottleneck to the Gulf Coast that was driving down the North American price, and the US ban on crude oil exports has been lifted. Oil sands bitumen will always sell at a discount due to its lower quality, regardless of whether it’s sold in North America or on international markets.”
“The hard truth is that pursuing significant growth in oil and gas production will create a near-impossible challenge for meeting Canada’s climate commitments,” says Hughes. “
Hughes’ findings are based on the National Energy Board’s (NEB) latest projections for oil and gas production, released earlier this year, along with the growth plans of the Alberta and BC provincial governments. The NEB’s “reference case” projects significant expansion through 2040, driven mainly by a near doubling in oil sands production. Hughes report assesses the consequences of four possible scenarios:
- The NEB reference case, without BC and Alberta plans, would result in oil and gas sector emissions growing to half of total allowable emissions under the Paris Agreement by 2030, which means the rest of the economy’s emissions would have to shrink by 52%. The oil and gas sector accounted for 26% of 2014 emissions.
- The NEB reference case allows for the development of only one large LNG export terminal in BC. However, if the BC government’s plans materialize (for five terminals exporting 82 Mt of LNG per year), oil and gas sector emissions would grow even more, requiring a 59% reduction in the rest of the economy’s emissions.
- Alberta’s new 100 Mt/year cap on oil sands emissions would restrict growth in oil sands production to 45% over 2014 levels, compared to the near doubling projected by the NEB. Coupled with BC’s aspirations for an LNG industry, a 45% growth in oil sands production would require the rest of the economy’s emissions to shrink by 55%.
- Even with the 100 Mt cap and assuming only one large LNG export terminal in BC, emissions in the rest of the economy would still have to shrink by 47%.
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Can Canada Expand Oil and Gas Production, Build Pipelines and Keep Its Climate Commitments? was published today by the Canadian Centre for Policy Alternatives, Parkland Institute and the Corporate Mapping Project.
The Corporate Mapping Project is a research and public engagement initiative investigating the power of the fossil fuel industry in Western Canada. The CMP is jointly led by the University of Victoria, Canadian Centre for Policy Alternatives and the Parkland Institute. This research was supported by the Social Science and Humanities Research Council of Canada (SSHRC).
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