Alberta's oil and gas sector will be among the biggest winners of a federal proposal to ease the greenhouse gas emissions-reduction target for large industry, say environmental groups that vow to fight the move.
Natural Resources Canada (NRCan) is proposing to back off Ottawa's original target for large industry to reduce emissions by 55 million tonnes by 2010, as part of Canada's commitment under the international Kyoto treaty.
Large industry includes the oil and gas, electricity, manufacturing and mining sectors, together accounting for about half of Canada's greenhouse gas emissions.
"There's no doubt that both coal-fired electricity and oil and gas would be the big beneficiaries (of reducing the target)," says Matthew Bramley, director of climate change at the Pembina Institute for Appropriate Development.
NRCan proposes making such a deep cut to the emissions target for large industrial emitters that it would be impossible for Canada to achieve its Kyoto goal and abide by the treaty, he said.
"Canada's not the kind of country that deliberately breaks international law," Bramley said. "And that's what we would be doing if we had a policy that involved consciously falling short of the Kyoto target."
But Pierre Alvarez, president of the Canadian Association of Petroleum Producers (CAPP), says the oil and gas industry hasn't been lobbying Ottawa to reduce the sector's emissions-reduction target.
"The other industries have been very aggressively pushing for reductions for a number of reasons," he said.
But CAPP, in its discussions with NRCan and Environment Canada, hasn't focused on a specific target, Alvarez said. "What we have said is: 'Listen, at the end of the road we will do our share but we will only do our share, from the point of view that we will not be treated any more onerously than any other sector on a per-unit basis.' " As for the oil and gas sector being among the biggest beneficiaries if Ottawa reduces large industry's target, Alvarez said that this is simply a consequence of the sector's size and importance to Canada's economy.
Capital spending by the oil and gas industry this year will total about $35 billion, or one-quarter of all capital spending in the country, he noted. "We are the biggest private-sector investor in this country bar none, and we are miles ahead of most."
That means any policy change by Ottawa that affects the economy will by definition have a big effect on the oil and gas sector, Alvarez said.
Natural Resources Minister John Efford, during a visit to Calgary last week to announce funding for oil industry carbon dioxide (CO2) capture and storage projects, confirmed there is a proposal from his department to ease the emissions-reduction target for large industrial emitters.
However, the federal cabinet will make the final decision and the proposal might not be approved as policy before Feb. 16 when the Kyoto Protocol will take effect as a binding international treaty, he said.
Whether the target for large industry is 55 million tonnes of CO2 or some lower figure, "every tonne we take out of the atmosphere is going to be a plus," Efford said.
"I don't want to talk about numbers," he said, adding the focus should be on encouraging industry to use best practices, such as capturing CO2 and permanently storing the greenhouse gas underground.
NRCan's proposal is to cut the original 15-per-cent reduction target, or 55 million tonnes, for large industry to 10 per cent or about 37 million tonnes.
Efford, who also visited Edmonton to meet with Energy Minister Greg Melchin, said there's no way large industrial emitters can achieve the original target.
"We've agreed on one thing - that 55 megatons is a number that's not realistic," Efford told reporters.
Bramley said the proposal from Efford's department would actually slash the amount of emissions that large industry will have to reduce to only eight million tonnes, from a total of 73 million tonnes under Canada's original climate-change plan.
He said Ottawa's decision to follow Alberta's lead, and cut emissions in proportion to the amount of production by industry rather than by the total volume of emissions, will result in large industry emitting an additional 29 million tonnes of greenhouse gases in Canada by 2010.
"This is essentially from new oilsands projects that were not known about in 2002 when the climate-change plan was produced, but that have been announced since then," Bramley said.
NRCan's proposal is that the federal government and Canadian taxpayers - not the industry - find a way to eliminate those extra 29 million tonnes to meet Canada's Kyoto goal, he said.
But in addition to reducing the original target for large industry, NRCan would chop the target even further, by double-counting 18 million tonnes of emissions that were supposed to be reduced by separate initiatives, Bramley said.
This includes the CO2 capture and storage program for the oil industry and other initiatives that weren't originally included in the target for large industrial emitters, he said.
All together, NRCan would slash the target for large industry to just eight million tonnes, rather than a total of 73 million tonnes that would have been cut under the 2002 climate change plan, Bramley said.
This leaves a total shortfall of 65 million tonnes for large industry and puts Canada's Kyoto target even further out of reach, Bramley said.
Efford said in Calgary that he wants to work with the oil and gas sector to grow Canada's economy. At the same time, he added, "I do not want to destroy the environment doing it."
CAPP's Alvarez said the oil and gas sector has always insisted on a sensible emissions-reduction target that doesn't hurt its international competitiveness over the long term.
Even if Ottawa decides to reduce the target for large industry, "on a per-unit basis, we wouldn't benefit any more than other large industrial sector," Alvarez said.
But Bramley argues that the oil and gas industry's own studies show cutting emissions by the original 15 per cent would cost the sector, on average, less than 25 cents per barrel of oil.
With oil prices hovering around $50 per barrel, "is that a significant impact on the oil sector? I don't think so," Bramley said.
Alvarez, however, said the return on investment in Canada's oil and gas business, compared with oil and gas operations in other countries, is much less because of the high costs of operating in Canada.
Current record-high prices for oil and natural gas aren't going to last forever, he added. "Kyoto is a competitiveness issue. We can't pretend that it's not."
The federal government, under its "One-Tonne Challenge" program, is asking each Canadian to reduce his or her personal greenhouse gas emissions by one tonne or about 20 per cent.
Yet if cabinet approves NRCan's proposal, large industrial emitters will only have to reduce their emissions by 10 per cent or less, Bramley said.
NRCan's proposal has gone to the federal cabinet committee on sustainable development, chaired by Industry Minister David Emerson, and isn't expected to be reviewed for at least three weeks.
(Mark Lowey can be reached at mark@businessedge.ca)
