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A US court just laid out the flaws in Canada’s climate plan

By insisting on expanding oil production and export, Canada is actively growing global emissions

Canadian PoliticsEconomic CrisisEnvironment

Oilsands reclamation site and Syncrude operations. Photo by Julia Kilpatrick/Pembina Institute/Flickr.

In January, a United States federal court invalidated a series of oil and gas leases based on the federal government’s willful ignorance of a simple economic principle: increasing supply of a commodity lowers prices and increases overall consumption.

Canada’s climate plan is built on the same willful ignorance. The Trudeau government is focused on emissions intensity (how much carbon we release into the atmosphere in the process of extracting oil) and has even gone so far as proposing an emissions cap for the oil and gas sector.

The problem is, these policies deliberately ignore the impact that increasing the global oil supply has on oil consumption and, subsequently, on global emissions. What this means is we are working towards a “net zero” oil and gas sector that produces and exports ever more fossil fuels⁠—and that oil and gas still releases greenhouse gasses when it is burned in other countries. Needless to say, the atmosphere does not operate with the same methodological nationalism that Canada is hiding behind.

The principle underlying the US court’s ruling is based on the X-shaped supply and demand graph taught in high school economics: increasing supply shifts the supply line to the right, yielding a new equilibrium at a lower price and higher consumption rate. Exactly how much consumption changes depends on coefficients called the elasticities of supply and demand that can vary from market to market.

The court ruling relied on work by a Stockholm Environment Institute researcher named Peter Erickson. Together with the US government’s own modeling, his work allows us to run some back-of-the-envelope calculations for just how much Canada’s planned increases in oil production and export will impact global greenhouse gas emissions.

The latest report from the Canada Energy Regulator modeled two scenarios, an “Evolving Policies Scenario” where climate policy ramps up and electrification and efficiency upgrades lead to falling domestic fossil fuel demand and energy use, and a “Current Policies Scenario” with no new climate policies. The evolving scenario sees crude oil production grow by 16 percent to 5.8 million barrels per day in 2032 before declining slowly to 4.8 million barrels per day in 2050; the current policies scenario sees it grow 45 percent to 6.7 million barrels per day by 2040 before plateauing through mid-century.

It’s worth noting that both of these scenarios assume oil prices that are substantially lower than they are today—higher prices would mean even higher Canadian fossil fuel production.

Erickson, drawing from modeling by the US Department of the Interior, reports that the global oil market can be estimated with an elasticity of supply of 0.45 and an elasticity of demand of -0.4. In the evolving scenario, between now and 2050, assuming a linear growth of supply through 2032 followed by a linear decline (roughly in line with the CER’s scenario), Canada will produce 3.5 additional billion barrels of oil by 2050—on top of the 53 billion barrels the country will extract at current production levels. In the current policies scenario, Canada would produce an extra 10.5 billion barrels.

Plugging those numbers into Erickson’s equation indicates that global oil consumption will increase between 1.65 and five billion barrels over the same period precisely because of the addition of new Canadian crude to the market—again, on top of the 53 billion barrels of crude produced at Canada’s existing production rates. That added consumption is equivalent to between almost one and 2.2 billion metric tons of CO2, or one to three years of Canada’s current emissions.

Applying the same logic to the Trans Mountain Expansion, a pipeline specifically intended to add export capacity for tar sands oil production, yields similarly troubling numbers: if TMX operated at full capacity from 2022 to 2050, six billion additional barrels of oil would be exported, resulting in 2.82 billion additional barrels of oil being consumed globally. TMX’s construction alone could cause total global emissions from oil consumption to rise by an amount equivalent to almost two years of Canadian emissions.

As Seth Klein, author and head of the Climate Emergency Unit, just told the House of Commons Natural Resources committee, the “scope 3” emissions of Canada’s exported fossil fuels—the greenhouse gasses released when those fuels are burned elsewhere—exceed Canada’s domestic emissions. That alone is reason enough to start drawing down Canada’s fossil fuel production and export. But what the numbers above indicate is that it isn’t simply a matter of the emissions created by burning Canada’s fossil fuels: it’s that Canada’s growing exports actually increase the total amount of global fossil fuel consumption.

The cacophony of cynical pro-war arguments put forth by Jason Kenney and the fossil fuel industry’s band of merry lobbyists in the wake of Russia’s invasion of Ukraine—“Alberta oil is better than dictator oil”—is based on a simplistic and inaccurate understanding of markets. Canada can’t just replace supply that would otherwise be filled by someone else. Demand is a function of supply in more ways than I’ve detailed here. By expanding supply, we are directly causing the demand for fossil fuels to go the wrong direction.

By insisting on expanding its oil production and export, Canada is actively growing global emissions. Canada’s current government intends to reach “net zero” domestically by systematically ignoring the effects of Canadian fossil fuel exports on global consumption and emissions.

Of course, Canada is not alone. The US, Canada, Norway, the United Kingdom, and others are all codifying domestic climate goals while continuing to grow their own oil and gas production and export. Put bluntly, the nations most responsible for climate change are attempting to profit from worsening it right until the very end.

This troubling reality illustrates aptly where we are today: until there are real, binding limitations on the production of oil and gas, climate policy is a whole lot of “blah blah blah.” It makes it hard to take any efforts toward domestic emissions reduction seriously.

Nick Gottlieb is a climate writer based in Squamish, BC and the author of the newsletter Sacred Headwaters. His work focuses on understanding the power dynamics driving today’s interrelated crises and exploring how they can be overcome. Follow him on Twitter @ngottliebphoto.

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