Carbon price won’t be determining factor in oil sands development: report

Energy producers need oil prices above $60 per barrel to go ahead with projects, economist says.

November 23, 2016   by CP Staff

CALGARY — A new report says putting a price on carbon won’t likely affect oil sands development plans if the price of oil rises above US$60 a barrel.

TD Bank economist Dina Ignjatovic said that’s the estimated minimum price oil sands companies need to go ahead with their projects, and if it’s reached then the extra cost of a carbon tax likely won’t sway a decision.

If the price of oil stays below US$60 a barrel then the picture becomes murkier, said Ignjatovic, as advances in productivity and cost reduction would also need to be achieved and factored into any decision.

Ignjatovic noted that Alberta’s proposed carbon tax system would reward low-emissions oilsands producers and penalize high-emission projects, with Alberta Environment and Parks estimating most projects would see costs per barrel getting between 50 cents cheaper and 75 cents more expensive with carbon pricing.

The announcement of a federally-mandated carbon tax brings more uncertainty, since it pushes the price of carbon higher than what Alberta’s proposing by 2021, said Ignjatovic.

But even still, she said if the structure of the province’s carbon tax is followed, it shouldn’t be a driving force in rejecting a project, with the price of oil, more pipelines and greater efficiencies the key factors for project approval.

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