Canada’s Kyoto Woes

By Laura Palombi

On August 24, 2007 the New York Times reported that the Canadian government released its first climate change plan, a requirement of Canada’s Kyoto Protocol Implementation Act. , The report should have outlined an action plan for meeting Kyoto targets; instead, it detailed reasons why Canada emissions will be 31% above the target in 2012. How did Canada get to this point?

Setting the Stage: Canada’s status as a signatory country to the Kyoto Protocol

Canada committed to reducing greenhouse gas (GHG) emissions to 6% below 1990 levels by 2012 when the country ratified the United Nations Framework Convention on Climate Change in 1992 and the subsequent Kyoto Protocol in 2002. The Liberal government (1993-2006 ) supported Kyoto despite the refusal to sign by the United State’s newly-elected President Bush, whose energy plan relied heavily on fossil fuels, including oil from Canada. Canada’s position as an industrialized power and a major emitter of GHG provided an opportunity to demonstrate global leadership in addressing climate change. Because the U.S. had already declared their non-participation, Canada had some room to negotiate conditions that should have helped protect their economy from the potential negative impacts of reducing emissions despite their dependence on U.S. investments in the Canadian oil industry. The Canadian government reported in 1994 that 461Mt CO2 were emitted in 1990, thus requiring a reduction of about 28Mt in annual CO2 emissions.

By 2006, however, the political and economic environments were dramatically different. The Conservative party was elected and Prime Minister Stephen Harper stated that the Kyoto targets were unattainable because the economic damage would be devastating. The reality was that by 2004, emissions were 26.6% above 1990 levels and the economy of western Canada was booming as a result of over US $85 billion of international investment in oil sand development by companies such as Petro-Canada, Shell and Chevron. The Canadian national regulatory framework introduced in 2007 expected a 20% reduction below 2006 levels , falling short of the Kyoto target by about 30% in 2012.

Canada’s goal to bring CO2 emission levels down requires a coordination of emission standards among provinces. The Province of Alberta, where oil sand production is concentrated, is expected to produce significantly more of Canada’s overall emissions over time (Figure 1). Alberta’s emissions reduction targets are set at 50% below 1990 levels by 2020 and are scaled to GDP, which would require other provinces to cut emissions by 30-40% in order to meet Kyoto targets

The Economic and Legal Reality of Synthetic Crude Oil Production and Meeting Kyoto Targets

Rising oil prices drove international investment in oil sand development and resulted in a 35% increase in value of the Canadian dollar and a 30-year low in unemployment rates. The oil sands region holds an estimated 175 billion barrels of oil, equivalent to the combined reserves of Iran and Libya, and production is expected to increase from 400,000 barrels/day in 1995 to about 2.7 million barrels/day by 2015. Canada has become the largest supplier of fossil fuels to the US and is economically dependent on synthetic crude oil exports from the oil sands region.

In parallel with the growing economy, the “Kyoto gap” has grown to a difference of 260 mT/year between actual and target CO2 emission rates. As a consequence, Canada will face a penalty of making up the difference plus an additional 30% reduction in the next target period. Although the Kyoto Protocol provides mechanisms for addressing the gap, there are limitations to how Canada will be able to employ the mechanisms. For example, Clean Development Mechanism projects are available to all Annex 1 signatory countries. Presently, 85mT of CO2e Certified Emissions Reduction (CER) credits are unassigned, which would only cover about a third of the gap if Canada was the only country to receive the credits. In addition, CDM projects are meant to provide flexibility rather than long term solutions to meeting targets on a continuing basis at the expense of adequately addressing emissions domestically.

The North American Free Trade Agreement (NAFTA) further complicates how Canada can address environmental challenges associated with synthetic crude oil production. NAFTA prohibits establishing standards on how goods are “produced, gathered, grown, or caught” and requires a provisional approach to managing environmental risks, which necessitates hard data and cost-benefit analysis. In contrast, Kyoto Principle 15 calls for a precautionary approach, which allows governments of signatory countries to intervene in markets in order to address climate change issues. Because the US did not ratify the Kyoto Protocol, the Kyoto mechanisms for meeting targets are at odds with NAFTA laws: Emissions trading could be problematic if credits are defined as marketable goods, Mexico is open to clean development mechanism projects but the US is not, and joint implementation will require Canada to permit US investors and award CER credits to US firms.

The Outlook for Canadian Emissions

Canada’s options for addressing climate change are limited by economic and political circumstances. By concentrating economic development and investment in one industry and by failing to curb emissions from all sectors since ratifying the Kyoto Protocol, Canada is locked in to a no-win situation. It can be argued that oil sand development is not responsible for the majority of emissions generated in the country and, therefore, is not the primary reason why Canada will not meet Kyoto targets. Production of 500,000 barrels/day of synthetic crude oil from the two major production methods (fluid coking and delayed coking) accounts for 46 million T/year CO2, or about 8% of national CO2 emissions. The rapid growth of the industry and direction of investment dollars towards extraction and processing oil sands dwarfed investment in mitigating emissions by industry. For example, the oil and gas extraction industry investment in technologies to reduce GHG emissions dropped 34% between 2002 and 2004. Canada’s emissions trend may turn around in the future if carbon capture and sequestration technology becomes viable or if better alliances for reducing emissions among North American trade partners emerge as a result of U.S. policy shifts.

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References

Rosenthal, Elisabeth (2007). “Backstepping from Kyoto.” Green Inc. August 24, 2007. http://greeninc.blogs.nytimes.com/2007/08/24/backstepping-from-kyoto/?scp=4&sq=canada%20kyoto&st=Search (accessed March 5, 2007).

Climate Action Network Canada (2007). News Release. August 22, 2007. http://www.climateactionnetwork.ca/e/news/2007/discredited-plan-repack-2007-08-22.html (accessed March 5, 2009).

Pew Center on Global Climate Change. “Canada’s Climate Change Plan.” http://www.pewclimate.org/policy_center/international_policy/canada_climate_plan.cfm (Accessed March 5, 2009).

Wikipedia (2009). List of Canadian General Elections.http://en.wikipedia.org/wiki/Canadian_federal_election (accessed March 5, 2009).

Soron, Dennis (2004). “The cultural politics of Kyoto: lessons from the Canadian semi-periphery.” Capitalism Nature Socialism,15:1,43 — 66
Ibid.

Government of Canada (1994). Canada’s National Report on Climate Change – 1994. http://unfccc.int/resource/docs/natc/cannce1.pdf (accessed March 5, 2009).

Lavallee, Guillaume (2007). “Canadian oil sands development an economic boon but leaves a mess.” Energy Daily. June 22, 2007. http://www.energy-daily.com/reports/Canadian_Oil_Sands_Development_An_Economic_Boon_But_Leaves_A_Mess_999.html (accessed March 2, 2009).

Krauss, Clifford (2006). “Oil sands shift economic power in Canada.” International Herald Tribune. March 28, 2006. http://www.iht.com/articles/2006/03/27/business/alberta.php (accessed March 2, 2009).

Government of Canada (2008). Turning the Corner: Regulatory Framework for Industrial Greenhouse Gas Emissions. http://www.ec.gc.ca/doc/virage-corner/2008-03/pdf/COM-541_Framework.pdf (accessed March 5, 2009).

Rosenthal, Elisabeth (2007). “Backstepping from Kyoto.” Green Inc. August 24, 2007. http://greeninc.blogs.nytimes.com/2007/08/24/backstepping-from-kyoto/?scp=4&sq=canada%20kyoto&st=Search (accessed March 5, 2007).

Footitt, Anthony (2007). Climate Change Policy and Canada’s Oil Sand Resources: an Update and Appraisal of Canada’s New Regulatory Framework for Air Emissions. The Tyndall Centre for Climate Change Research. http://www.wwf.org.uk/filelibrary/pdf/oilsands_report.pdf (accessed March 2, 2009).

Krauss, Clifford (2006). “Oil sands shift economic power in Canada.” International Herald Tribune. March 28, 2006. http://www.iht.com/articles/2006/03/27/business/alberta.php (accessed March 2, 2009).

Krauss, Clifford (2006). “Oil sands shift economic power in Canada.” International Herald Tribune. March 28, 2006. http://www.iht.com/articles/2006/03/27/business/alberta.php (accessed March 2, 2009).

Soron, Dennis (2004). “The cultural politics of Kyoto: lessons from the Canadian semi-periphery.” Capitalism Nature Socialism,15:1,43 — 66

Footitt, Anthony (2007). Climate Change Policy and Canada’s Oil Sand Resources: an Update and Appraisal of Canada’s New Regulatory Framework for Air Emissions. The Tyndall Centre for Climate Change Research. http://www.wwf.org.uk/filelibrary/pdf/oilsands_report.pdf (accessed March 2, 2009).

Hornsby, David et al (2007). “NAFTA’s Shadow Hangs Over Kyoto’s Implementation.” Canadian Public Policy / Analyse de Politiques, Vol. 33, No. 3 (Sep., 2007), pp. 285-297. University of Toronto Press on behalf of Canadian Public Policy. http://www.jstor.org/stable/30032536 (accessed March 3, 2009).

Furninsky, Edward (2003). “Emissions of Carbon Dioxide from Tar Sands Plants in Canada.” Energy and Fuels, 17 1541-1548. (September, 2003).
Fritzsche, Jeff. “Canadian industry’s expenditures to reduce greenhouse gas emissions.” Statistics Canada. http://www.statcan.gc.ca/pub/16-002-x/2008002/article/10623-eng.htm#ftn3 (accessed March 6, 2009).

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2 Responses so far »

  1. 1

    Dominic said,

    While this blog was about Canada, for me it highlights problems that the United States will likely face should the government decide to adopt the Kyoto protocol. This is not the first time that NAFTA has been at odds with protecting the environment, and it is clear that it’s not the last time. I do not see “free” trade as being compatible with environmentalism; as long as trading countries have different standards regarding the environment, labor practices, or similar practices, under “free” trade agreements, the lower standards will generally prevail. Only by practicing “fair” trade, where standards are equal, will trade and environmentalism be able to economically co-exist.

  2. 2

    Jesse said,

    I had not realized that Canada was the largest supplier of fossil fuels to the United States. We hear about the need to reduce our dependence on foreign oil and the blame is always placed on Middle Eastern countries as the drug dealers supporting our oil addiction. All this time it had really been our neighbor to the north injecting fossil fuels in the veins of the US.
    It is hard for me to comprehend the fact that oil sands are actually being considered a viable option for fuel production considering how dirty the technology of processing and extracting it is. It is no wonder that Canada will not be able to meet its GHG reduction goal because it is swapping one dirty fuel for another dirtier source.
    It is particularly interesting how strong of an impact on national GHG emissions Alberta will have in the future if current trends continue. Perhaps the best option for Canada at this point is to exile the province of Alberta.


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