Pipelines are not a Reconciliation of Canada’s Environment and Economy

In announcing approval of the Kinder Morgan and Enbridge Line 3 pipeline-expansion projects, Prime Minister Justin Trudeau offered the now-familiar refrain that Canadians don’t need to choose between a healthy environment and a prosperous economy. We can enjoy the economic benefits of a growing fossil-fuel industry, even while maintaining our global commitment to mitigate climate change.

It is true that a prosperous economy and a healthy environment can go hand in hand. However, it does not follow that every prosperous economy is also environmentally sustainable. There are reasons to question both the environmental and economic reassurances offered by the Prime Minister.

On the environmental side, Canada has committed to reduce our greenhouse gas emissions to 30 per cent below 2005 levels by 2030. The federal government has announced a series of laudable measures, including a national carbon price, a low-carbon fuel standard and accelerated phase-out of coal-fired electricity. Those actions have been more than matched by provincial governments, most notably Ontario and Quebec. However, the combined effort still falls well short of Canada’s 2030 reduction target, let alone the more ambitious reductions that will be needed thereafter.

The leading obstacle is concurrent growth in extractive emissions from the oil and gas industry, which is facilitated by new pipeline infrastructure. The emissions increase from the oil sector allowed within the Alberta climate plan will more than offset the reductions by 2030 from a $50 national carbon price.

Federal Environment Minister Catherine McKenna is correct that the transition away from fossil fuels necessarily will be gradual, but to expand fossil-fuel production, with resulting significant increases in Canada’s greenhouse emissions, is a transition in the wrong direction.

On the economic side, it is noteworthy that the two pipelines approved this week represent investments in new infrastructure that is intended to operate for decades. Consistent with that, the National Energy Board (NEB) requires that proponents demonstrate their projects’ long-term economic viability.

Consider the business case for the Trans Mountain pipeline. The project is predicated on an optimistic projection of steadily increasing Canadian oil exports. One underlying assumption, that oil prices will remain sufficiently high that all expansion projects will be viable, has already proved wrong.

Trans Mountain also assumed no change in public policies that might affect oil demand, whether in Canada or in the countries to which the oil in the pipeline is destined. It failed to account for any additional effort to mitigate climate change over the life of the project, let alone the international Paris Agreement to limit the increase in the global average temperature to below 2 degrees C above pre-industrial levels.

The International Energy Agency (IEA) has modelled global oil markets under several scenarios, including existing policies and more ambitious policies consistent with the 2C commitment. The current policies scenario anticipates steadily increasing oil demand, reasonably consistent with Trans Mountain’s projection for Canada. It also is a scenario that promises global warming in excess of 3.6C, which IEA anticipates will lead to “substantial species extinction and large risks to global and regional food security.”

In contrast, IEA’s 2C scenario anticipates that oil demand would peak in 2018 and decline thereafter. Demand in 2040 is projected to be 20 per cent less than in 2015. Although IEA’s 2016 analysis does not report specific implications for Canada, modelling of a 2C scenario by researchers McGlade and Ekins projected that “open-pit mining of natural bitumen in Canada soon drops to negligible levels after 2020 in all scenarios because it is considerably less economic than other methods of production.”

Put bluntly, the business case for the Trans Mountain expansion project is predicated on a world of unchecked global warming. In approving infrastructure that promises to increase Canada’s bitumen exports for decades to come, the federal government is not reconciling the environment and economy but, rather, placing a bet against the success of the Paris climate agreement.

This post appeared in the Globe and Mail on November 30, 2016. http://www.theglobeandmail.com/opinion/pipelines-are-not-a-reconciliation-of-canadas-environment-and-economy/article33118291/

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