Editorial: Let the market lead emissions reductions

September 1, 2008   by Joe Terrett

Business continues to boom in Alberta as energy development drives the Canadian economy’s growth, such as it is; yet the sector is under siege.

Environmental groups complain of the escalating greenhouse gas emissions coming from the oil sands and want development to slow down, or stop; and politicians are intent on multi-taxing the sector to curb emissions and placate voters who fear the environmental consequences of our reliance on oil.

Meanwhile, there’s trouble south of the border where Alberta’s biggest energy customer has passed legislation that could affect future exports of “dirty oil,” a term that has ominously worked its way into Democratic presidential candidate Barack Obama’s vocabulary. And we can add to the mix an association of environmentally concerend US mayors that passed a resolution urging municipalities not to use fuel refined from this dirty oil in city vehicles.

Not to worry. Alberta’s golden goose is not in any danger of being plucked to death. And the environmental issues may be best addressed by allowing the marketplace to do its job.

Here’s a market fact. The US mayors can power their vehicles with wind propellers and rubber bands if they wish, but US demand for Alberta’s oil is expected to rise from 1.3 million to 3-million barrels a day by 2015. Indeed, America’s thirst for oil will not be slaked overnight. With worldwide demand for fuel, especially in China, driving up costs and straining supply, it’s unlikely the US will turn up its nose at the generous supply of oil residing in the friendly jurisdiction next door.

Let us note another market fact: the incredibly decisive and swift shift in driver preferences for smaller, more fuel-efficient vehicles as gasoline prices soar weekly to new heights. This does more for emissions reduction than Stephane Dion’s proposed “neutral” carbon tax, which would not be neutral to oil sands developers, and yet avoids taxing gasoline, a major generator of greenhouse gases.

It’s questionable how effectively a cap and trade system would reduce emissions. Big emitters that fail to meet targets would buy credits from firms that have reduced their carbon foot prints by planting shrubs on their premises. So those who can afford to buy credits increase their emissions and this helps the environment, how?

Alberta’s industry has reduced emissions per barrel of oil by 45% since 1990 and $40 million has been collected from industries that have failed to meet the province’s emission’s targets. That’s nice, but it needs to do more, except the options, short of shutting down, are limited. There’s much promising talk about carbon sequestering, yet this is an untried and potentially expensive technology that is some time away from being put into use.

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