Alberta’s energy industry will lose business to international competitors if it has to cut greenhouse gas emissions under the Kyoto climate change treaty, a prominent Canadian economist warns.
Carbon dioxide or CO2 – the main greenhouse gas blamed for global warming – is bound to increase with rising energy production and consumption, University of Guelph environmental economist Ross McKitrick said in Calgary last week.
But CO2 is not considered a harmful air pollutant, nor is it controlled by regulation in Alberta and the rest of Canada – unlike sulphur dioxide, nitrogen oxide or mercury emissions.
That means “reducing CO2 emissions is not a benefit to air quality and it’s very costly,” said McKitrick, a frequent critic of the Kyoto Protocol.
The energy industry saves money and is therefore more competitive by not having to control CO2 emissions, he said. “It’s a valuable activity to be able to release CO2 and not have to capture it, not have to store it, not have to change the (energy-production) process.”
Kyoto could cost the Canadian economy between $6 billion and $35 billion a year, yet Ottawa appears likely to ratify the accord to avoid being seen as an environmental villain, McKitrick said. “This is a runaway train . . . it’s a screwy blend of politics and environmentalism.”
All 15 European Union nations ratified the Kyoto Protocol last week. Japan has given notice it would ratify early this month and Russia is expected to ratify by the end of the year, which EU officials say would be sufficient to bring the treaty into force.
But Alberta oilpatch veteran Jim Gray says that whether Canada decides to reject or ratify Kyoto, the country will never contradict U.S. interests.
Much of the heated debate in Canada over the accord is simply rhetoric, says the founder and former chairman of Canadian Hunter Exploration Ltd. This nation’s economy is so inextricably linked with the U.S., “that in the end, we’re going to be in compliance,” he said.
“Do you think we’re going to take a position that is dramatically different than the United States Congress? We might temporarily but, in the longer term, it is not possible,” Gray told an energy growth strategy conference in Calgary last week, sponsored by the Conference Board of Canada.
“We do more trade between Ontario and the U.S. than the U.S. does with Japan. We have the largest bilateral trading relationship in the world.”
Gray noted that if Canada ever tried to make the U.S. hostage to secure Canadian energy supplies – in retaliation for U.S. tariffs on agricultural goods or softwood lumber, for example – the response would be simple and swift.
“If we did anything inappropriate they’d just say: ‘Fine. There is now a five-per-cent surtax on imports from Canada starting at 4 o’clock this afternoon,’” he said. If Canada protested to the World Trade Organization or any other trade bodies, “then they’d say: ‘OK, it’s 10 per cent at 6 p.m.’ ”
Conference Board vice-president Gilles Rhéaume says he doesn’t believe the U.S. is putting any pressure on Canada to reject the Kyoto accord, under which Canada would have to make a 26-per-cent cut in greenhouse gases, or about 240 million tonnes, by 2012.
“Washington has already decided their game. They’re following Canada on the sidelines. They know the implication of it, but they are not forcing the issue,” Rhéaume told the conference.
Just because the U.S. has withdrawn from the accord doesn’t mean they’ve backed away from reducing emissions, he said. Instead, the Americans are contemplating a multi-pollutant strategy for air quality, focusing on reducing amounts of sulphur dioxide, nitrogen oxide and mercury in the environment.
And despite the Bush administration’s rejection of Kyoto, several U.S. states have set carbon dioxide-reduction targets or require power plants to reduce CO2 emissions. No province has set similar targets.
Canada is still lobbying to get more emission-reduction credits under Kyoto for exporting “clean energy” like natural gas to the U.S., reducing the amount of coal that the Americans need to burn.
Rhéaume said European nations realize that if they refuse to grant Canada credits for positive actions that reduce greenhouse gases, “it’s almost game over for Kyoto.”
But depending on the going rate of internationally traded carbon permits, Alberta’s crude oil sector would likely be dramatically affected. Since the U.S. would not need to conform to Kyoto measures, including the price of carbon emissions permits, refining business could be lost south of the border to Montana and the U.S. Midwest, Rhéaume predicted.
McKitrick, in a talk to the annual meeting of the Coal Association of Canada, said coal producers here could lose 15 to 50 per cent of global market share under Kyoto because of diminished competitiveness.
Alberta is Canada’s largest exporting province of thermal coal – used as fuel in generating electricity – and the second-biggest exporter (behind B.C.) of metallurgical coal used in steel making.
Allen Wright, executive director of the coal association, said: “We don’t think that Kyoto is the answer,” including Kyoto under any of the four options offered by the federal government a couple of weeks ago.
Alberta’s alternative proposal to reduce greenhouse gases outside of the binding international treaty “is certainly a better, more pro-active plan,” with more realistic targets than Kyoto, Wright said.
Rather than cutting total greenhouse gas emissions, Alberta pledges to cut in half the amount of emissions generated per million dollars of the province’s economy by 2020. Environment Minister Lorne Taylor insists the plan will enable the province to reach the Kyoto target of 2012, albeit eight years later.
But Gerry Scott, climate change campaign director for the David Suzuki Foundation, says the only way Alberta could meet the Kyoto target even by 2020 would be to exempt from its plan all emissions generated in producing energy for export to other provinces and the U.S.
That amounts to over 94 million tonnes of emissions – or 40 to 45 per cent of Alberta’s total, Scott said. “Under this plan, emissions will continue to rise very rapidly and will dramatically exceed the Kyoto target . . . ,” he predicted.
Environmentalists argue that economist McKitrick’s criticisms and cost estimates are based on outdated information and improbable worst-case scenarios under Kyoto for Alberta.
“It’s clear that he is simply making numbers up on the fly,” said Rob Macintosh, a senior adviser to the Pembina Institute, an Alberta-based environmental policy research group.
“There are still a few people out there who will claim that cigarette smoking is not related to cancer,” Macintosh said of McKitrick’s views. “But they’re a tiny minority and they’re not given a lot of credibility by most of the rest of the scientific community.”
McKitrick contends that bureaucrats manipulated reports by the Intergovernmental Panel on Climate Change (IPCC), the United Nations’ expert body on the issue, to produce a consensus on global warming that wasn’t in the scientists’ original reports.
He also maintains that when the warming effect of cities is removed from temperature data gathered by weather stations on Earth and from satellites, the records show no warming either on the planet’s surface or in the atmosphere.
But Macintosh called McKitrick’s claims absurd. More than 2,000 top scientists reviewed more than 20,000 pieces of peer-reviewed published research in reaching their conclusions in the IPCC’s three consensus reports, Macintosh said.
The IPCC’s most recent report also took into account any heating effects of cities and temperature abnormalities measured by satellites in the upper atmosphere, he added.
“The Alberta government no longer questions the science” of global warming, Macintosh said. “The vast majority of the oil and gas companies no longer question the science.”
McKitrick also argues that even if global warming is actually due to fossil fuel burning, the amount of greenhouse gases to be reduced under Kyoto is too small to have any effect on future climate change.
But Macintosh points out that the Kyoto Protocol obligates countries to negotiate further and more significant emission cuts, beyond the first compliance period ending in 2012.
If the Canadian government walks away from Kyoto now, Macintosh warned, “they’ll have zero credibility with the Canadian public, the environmental community and the international community.”
