Category Archives: Economics

Dauvergne on consumption

“On many measures, policies, actions, and technologies to shape consumption appear to be “improving” environmental management. But too often the measures are close-up snapshots that cut out a much bigger, more complex, global picture of crisis. One common set of measures zooms in on consumer use of a product. Here, it is easy to and progress: simply compare the energy needs of a refrigerator or microwave or TV from the 1970s with a 2010 model. Another common set of measures zeros in on national consumption patterns. Here it is harder to and positive trends. Still, many exist—from higher recycling rates to more green buildings—for those who are looking for signs that capitalist economies are capable of shifting toward some form of sustainability.

Yet all of these measures need to be put into the context of a rising global population and rising per capita consumption in a globalized capitalist economy, a system that creates incentives — indeed, makes it imperative — for states and companies to “externalize externalities” beyond the borders of those who are actually doing most of the consuming. The challenge for environmentalists and policymakers is therefore about much more than influencing “consumers” — much of what is happening globally is beyond their control. Rather, it is about transforming a global system that is driving unsustainable production, much of which is increasingly masking itself as sustainable consumption. Fundamentally, this means that any move toward sustainable consumption will require much better full cost accounting and more equitable distribution of income: locally, nationally, and globally.”

Dauvergne, Peter. “The Problem of Consumption.” Global Environmental Politics, Volume 10, Number 2, May 2010, pp. 1-10 (Article)

Canada should phase-out fossil fuel exports

There are a few scientific facts about the world that are vital and increasingly well understood. Foremost among them is the reality that human beings have already put a dangerous amount of greenhouse gas pollution into the atmosphere. Nonetheless, the world as a whole continues to demonstrate a ferocious appetite for fossil fuels. Burning those fuels will inevitably contribute still more to climate change, turning a dangerous situation into a potentially catastrophic one.

In order to avert the worst-case outcomes, humanity as a whole needs to work toward keeping most of the planet’s remaining fossil fuels underground, while achieving a global transition to a low- and ultimately zero-carbon economy.

In a world where states, companies, and individuals behaved rationally, we would already be working aggressively to phase-out fossil fuels. As it is, nothing like the necessary level of effort is being made. In an ideal world, Canada would be finding itself with fewer and fewer willing buyers of coal, oil, and gas; as it is, we should choose to restrain production and exports unilaterally.

Right now, Canada is helping to feed the fossil fuel addiction of the United States. Under the current Conservative government, we also aspire to help feed the addictions of China and others. If the world is to avoid catastrophe, those addictions must be curbed. By voluntarily reducing our exports of fossil fuels, Canada can play a disproportionate role in driving that necessary transition.

Canada may not have much population or total wealth when compared to giant states like China and the United States, but we do have vast reserves of coal, oil, and gas. When we export those fuels, we help keep the world on an economic development pathway that is tightly linked to fossil fuel use, and in which well over 2ËšC of climate change will eventually occur.

Catastrophic global climate change would serve the interests of nobody, but states are not thinking ahead and responding appropriately to the dangers we face. Within that context, Canada has the choice between continuing to be an enabler of unethical and destructive fossil fuel use or voluntarily restricting fossil fuel production and export. Hopefully, Canada will eventually find itself in a situation where nobody wants to buy these dangerous fuels, and where the world as a whole recognizes the value of keeping them underground. In order to help drive the emergence of such a world, the best thing Canada can do is to stop fueling the fossil fuel addictions of other countries, while also working to decarbonize our domestic economy.

Intensity-based targets for the oil sands are inadequate

There has been a bit of talk in the media about adopting federal intensity-based greenhouse gas pollution standards for the oil sands:

“The federal government is using Alberta’s greenhouse-gas emissions target – criticized as too accommodating to industry – as the launching point for a national oil and gas carbon policy, even as the province itself looks to toughen those standards.

Alberta today requires large energy companies to achieve a 12-per-cent reduction in emissions, on a per-barrel ‘intensity’ basis that allows overall emissions to still climb dramatically.

That 12-per-cent standard “is part of the conversation, for sure” as the federal government seeks to write its rules, Environment Minister Peter Kent said in an interview Friday.”

The idea is to drive firms to reduce how much greenhouse gas pollution they produce in the course of producing each barrel of synthetic crude oil – not to restrict how much pollution they produce in total. Under an intensity-based plan, total emissions can continue to grow, particularly given how our measuring system ignores the biggest source of pollution associated with the oil sands.

Intensity-based targets ignore the main source of pollution associated with the oil sands: the actual barrels of synthetic crude that the oil sands industry exists to produce. Inescapably, when those barrels are burned, the carbon they contain will be added to the already-dangerously-large stock of carbon dioxide in the atmosphere.

We need a plan to wind down the oil sands as a whole as part of a fair global transition to a carbon neutral economy. We certainly don’t need a regulatory regime that permits continued growth in oil sands output.

Peak oil is unlikely to solve the climate crisis

An interesting report released by Leonardo Maugeri (PDF) at Harvard’s Belfer Center argues that the world still has huge amounts of unconventional oil and that recent concerns about ‘peak oil’ are ill-founded:

“My field-by-field analysis suggests that worldwide, an additional unrestricted supply of slightly less than 50 mbd is under development or will be developed by 2020. Eleven countries show a potential outflow of new production of about 40.5 mbd, or about 80 percent of the total. After adjusting the world’s additional unrestricted production for taking into account risk-factors, the additional adjusted supply comes to 28.6 mbd , or 22.5 mbd for the first eleven countries – as shown in Figure 3 (more extensive data are shown in Table 3, Section 4).

These numbers carry at least two important messages:

* They represent the largest potential addition to the world’s oil supply capacity since the 1980s.

* They point to a tectonic shift in the oil geography and geopolitics, by making the Western Hemisphere the fastest growing oil-producing region in the world, with the United States and Canada combined outpacing any other country.

This suggests that the hopes of some environmentalists that there might not be enough oil available to cause catastrophic or runaway climate change may not be realized. Of course, even if oil were scarce, there is a lot of planet-altering gas and coal left in the world.

Maugeri concludes that in the medium term, substantially more oil production is possible:

“In any case, the single most important issue that emerges from my analysis is that, from a purely physical and technical point of view, oil supply and capacity are not in any danger. On the contrary, they could significantly exceed world consumption needs and even lead to a phase of oil overproduction if oil demand does not exceed a compounded rate of growth of 1.6 percent each year to 2020.”

He identifies Iraq, the United States, and Canada as the countries most capable of increasing their oil output during that timespan.

Maugeri also highlights the long investment lag-times and asymmetries that exist in the fossil fuel sector:

“The industry tends to increase investment gradually as the price of crude oil increases, but once the new investments are started, they are very difficult to stop, even when consumption and crude oil prices suddenly collapse. In other words, the industry behaves like an elephant running: it starts very slowly, but once it gets going, no one can stop it.

In fact, as an oil company gradually spends its budget, the investment assumes a life of its own, and it becomes unprofitable to block the spending, especially when hundreds of millions of dollars have already been spent. The need to obtain an economic return on capital already invested takes priority over almost any other consideration, unless there are dramatic changes in the market situation.

To complicate matters, contractual commitments are made by the oil companies with the countries owning the deposits, which often make it difficult to block or reduce the spending. Indeed, these commitments demand heavy economic penalties or even revocation of the concessions granted by the host government if, by pre-established dates, the agreed number of wells and the needed infrastructure are not realized, and initial production is not achieved.”

Once companies make the gigantic investments necessary to access these unconventional oil reserves, it is unreasonable to think that they will be willing to stop exploiting them in the future, or that politicians will be willing to force them to accept such losses. Arguably, the only way to stop an unconventional fossil fuel bonanza that wrecks the climate is to keep it from ever starting.

George Monbiot has also written a column about Maugeri’s report.

NRTEE report on climate policy

The National Round Table on Energy and the Environment has released a new report on Canada’s climate change policy:

Reality Check: The State of Climate Progress in Canada

In their summary of the report, they explain:

Despite making progress in reducing greenhouse gas emissions, Canada is not on track to achieve the federal government’s 2020 reduction target of 17% below 2005 levels. Canada will not achieve its 2020 GHG emission reductions target unless significant new, additional measures are taken. More will have to be done. No other conclusion is possible.

Reality Check: The State of Climate Progress in Canada was undertaken last year at the request of the federal Minister of the Environment to inform the government’s regulatory approach to reducing emissions. NRT’s research is based on original modelling using Environment Canada’s data as a principal source, as well as extensive consultations with the provinces and territories, academic and public policy experts.

The report serves as a reality check on the state of climate progress in Canada today. It reinforces some key truths about climate policy in Canada: that a national target needs a concerted national policy behind it, that policy uncertainty still exists and stifles progress, that the country has yet to implement effective policies to address some large sources of emissions, and that all this means progress has been and will remain difficult and uneven across the country.

It is worth noting that NRTEE will be eliminated if the budget implementation act (C-38) becomes law. The bill is currently under consideration by Parliament.

Nuclear uncompetitive in the marketplace

In a survey on nuclear power written for The Economist, Oliver Morton does a good job of explaining one of the reasons why nuclear power is unlike any other form of electricity generation:

In liberalised energy markets, building nuclear power plants is no longer a commercially feasible option: they are simply too expensive. Existing reactors can be run very profitably; their capacity can be upgraded and their lives extended. But forecast reductions in the capital costs of new reactors in America and Europe have failed to materialise and construction periods have lengthened. Nobody will now build one without some form of subsidy to finance it or a promise of a favourable deal for selling the electricity. And at the same time as the cost of new nuclear plants has become prohibitive in much of the world, worries about the dark side of nuclear power are resurgent, thanks to what is happening in Iran.

None of this contradicts the argument that we need more nuclear plants to deal with climate change, but it does highlight some of the special risks associated with the technology.

Strategies for stopping Gateway #1: The Hecate Strait

As Gerald Butts explained in The Globe and Mail, one of the biggest environmental risks associated with the proposed Northern Gateway pipeline is the stream of supertankers that would carry oil from Kitimat out to the Pacific: “At Kitimat, toxic diluted bitumen would be loaded onto supersized tankers. Each year, more than 200 would travel through narrow fjords and into some of the world’s most treacherous seas”.

These tankers would flow through the treacherous Hecate Strait – a dangerous maritime environment located far away from equipment that would be required in the event of a major spill. It’s also an area of considerable natural beauty and ecological importance.

It seems like a convincing case to be made that building the Northern Gateway pipeline creates an unacceptable marine oil spill risk – and that is just one of a great many arguments against the project.

Engineer speaks out against Keystone XL pipeline

Mike Klink, a former pipeline inspector with Bechtel, has publicly spoken out about the shoddy construction he saw on the original Keystone pipeline and what that means about the risks arising from the proposed Keystone XL expansion:

I am not an environmentalist, but as a civil engineer and an inspector for TransCanada during the construction of the first Keystone pipeline, I’ve had an uncomfortable front-row seat to the disaster that Keystone XL could bring about all along its pathway.

When I last raised concerns about corners being cut, I lost my job – but people along the Keystone XL pathway have a lot more to lose if this project moves forward with the same shoddy work.

What did I see? Cheap foreign steel that cracked when workers tried to weld it, foundations for pump stations that you would never consider using in your own home, fudged safety tests, Bechtel staffers explaining away leaks during pressure tests as “not too bad,” shortcuts on the steel and rebar that are essential for safe pipeline operation and siting of facilities on completely inappropriate spots like wetlands.

I shared these concerns with my bosses, who communicated them to the bigwigs at TransCanada, but nothing changed. TransCanada didn’t appear to care. That is why I was not surprised to hear about the big spill in Ludden, N.D., where a 60-foot plume of crude spewed tens of thousands of gallons of toxic tar sands oil and fouled neighboring fields.

TransCanada says that the performance has been OK. Fourteen spills is not so bad. And that the pump stations don’t really count. That is all bunk. This thing shouldn’t be leaking like a sieve in its first year – what do you think happens decades from now after moving billions of barrels of the most corrosive oil on the planet?

Klink says he is speaking out because his children have encouraged him to do the right thing.