One week ago the state of California adopted Governor Arnold Schwarzenegger’s Low Carbon Fuel Standard, which calls for a 10% reduction in greenhouse gas emissions from fuels by 2020, with greater cuts thereafter. The legislation requires refineries, producers, and importers of fuels sold in the state to consider the carbon footprint of the entire life cycle of the product (as opposed to just the emissions released during combustion in the engine).
Why the concern in Alberta, Canada’s most oil-rich province? While Canada has the second-largest national petroleum reserve in the world, the majority of those reserves are in the Alberta oil sands. Much more energy is required to extract crude from oil sands than using conventional drilling methods, as the bitumen needs to be pried from the sand and clay. The oil sands are so energy intensive that they are being singled out as one of the main reasons that Canada’s greenhouse gas emissions continue to increase at a rate that far exceeds most other developed nations (and are over 30% above the Kyoto targets that the country signed on to).
Alberta is worried – and they should be. While little Alberta oil is exported to California, the new law is expected to serve as a model for other states and the federal government (many of which currently import large amounts of Alberta oil). As a result, a backlash has begun to flow out of Alberta, including claims of discrimination, favoritism, and protectionism:
“What we have here is one state of the US deciding to pass regulations which dictate discriminatory treatment about a product depending where it comes from, not depending what it is” (Simon Potter, partner at McCarthy Tetrault law firm in Montreal)
“That’s one of the reasons why the protectionist forces in the US … are looking at these types of policies and saying ‘well the environment may effectively be a back door through which we can apply the types of trade barriers that we would like to have anyway’”. (Andrew Leach, professor, University of Alberta)
“It’s kind of a gratuitous shot at oil sands. Because we had no significant supply going into California, they can make this political statement without much [economic] consequence”. (Rick Hyndman, Senior Policy Advisor, Canadian Association of Petroleum Producers).
“Does it have a possibility of a negative effect on Alberta’s bitumen future? I would suggest I’d be very naive if I thought anything other than ‘yes’ is the proper answer to that”. (Mel Knight, Alberta Minister of Energy)
What is shocking is how surprised these people seem to be about this legislation. While California is the first state to actually legislate such an approach to greenhouse gas management, the writing has been on the wall for quite some time. The governments of Canada and Alberta have both had their heads in the sand with their continued support and insistence of using intensity-based emission reduction targets to protect the lucrative oil sands. The widespread disdain and criticism of these approaches have come from many circles, including industry, other governments (both within Canada and internationally), and environmental groups. Now this lack of planning and foresight is coming back to potentially harm them and leave eggs on their faces.
Image: Gregory Melle at flickr under a CC License
Stephen Boles is co-founder of Kuzuka, a marketplace website that will bring a new level of convenience and confidence to carbon offset customers and provide consulting services to organizations that want to assess and reduce their carbon footprint.
If they wish to impose regulations on Alberta oil to be sold in their State or Country; maybe Alberta should stop sales to that region as there are many other customers out there that would gladly pay more for the resources that is there.
I certainly agree that the Governments of Canada and Alberta were asleep at the wheel in allowing this bill to be passed without a significant lobbying effort.
The typical industry response is to run to the aforementioned governments crying "not fair" instead of actually marketing its own products to end users.
Where I disagree is with the statement about Alberta being worried.
There are already efforts underway to implement shipments of upgraded crude across the Pacific Ocean to the increasingly hungry markets of China and India, who don't a fig's leaf for carbon emissions.
If Congress implements the California bill as a federal standard it will simply mean a shortage of supply, as the oil will always flow with the path of least resistance.
Very good point that there is always going to be a market for crude, regardless of what a single state or country does. That is why I don't think Alberta is panicking – they know the crude will get sold somewhere. In fact there is a proposed pipeline in the works that will take oil sands crude to the west coast in BC for shipment to Asian markets.
I still stand by the statement that Alberta is worried about this. How could they not be? The US is still the biggest market for oil and gas in the world, and they are much more cost-effective to sell to than Asia given their close proximity to Alberta. The oil sands producers aren't going to fold because of this legislation, but it will have a direct impact on their bottom line.
So let California tax the hell out of oil they are broke from what I hear..Alberta has nothing to worry about except having the same tax on them, if California wants to cut emmissions they should all buy the new ford car it gets 1000.00 miles to a tank of fuel without raising taxes that would be more than 10% emissions, use less fuel and no tax increase. I wonder how the highways will be, they still need oil to have pavement. This idea about going green is a tax grab, thats how Obama is going to pay back all the money he is spending by taxing emission on each and every American and his top sales man is Al Gore. He is a very popular President because of this going Green. Oil will still be here when he is long gone so will the taxes. So North Americia go green and make this planet healther oil will still be needed at the same rate as now its just going to be a little more expensive to run your vehical.
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