GOOD NEWS! Environmental Journalist Says Oilsands Production Emissions Are a “Rounding Error” Tammy Nemeth

 

By Tammy Nemeth – The Nemeth Report

Imagine my surprise this morning when I read “climate correspondent” Chris Hatch’s Zero Carbon newsletter grouching that emissions from Canada’s oilsands are “rounding errors” in the grander scheme of global emissions. Wow. What caused this recognition of reality?

Mr. Hatch was sullenly reflecting on the week’s various announcements from Canada’s Prime Minister Carney regarding the investment decision for Phase 2 of LNG Canada, an expansion of the Coastal Gas Link pipeline, and the Pacific Link oilsands oil pipeline as a project of “national interest.”

What most irritated and depressed Mr. Hatch was the oil pipeline with its prerequisite of Carbon Capture Storage (CCS) for oilsands operations. With respect to the projected emissions savings from CCS in the oilsands Mr. Hatch wrote, “Never mind that all these claims amount to rounding errors in the full life cycle of climate pollution. The lion’s share comes from burning the oil, gas or coal. And even if some gains do materialize on the production side within Canada, they would be ‘swamped’ by all the megatonnes from new extraction and pipelines, according to the Canadian Climate Institute.” Put plainly, what he’s saying more directly than usual is that the emissions in the production of a barrel of oilsands oil is insignificant compared to the emissions released when the product is used. That distinction between production emissions and end-use emissions matters because climate-accounting frameworks increasingly connect the two.

Few might be aware that the climate movement has been working towards an accounting system that assigns the “responsibility” of consumption emissions to the producer of the product. In disclosure jargon this is known as “Scope 3 Emissions”, that is, the emissions from the use of sold products, reported, priced and, where the activists can manage it, penalized at the wellhead. Eventually, emissions from the vehicle tailpipe and home furnace will also be calculated at an individual level and everyone will pay multiple times over. This is being embedded into climate-disclosure regimes, from the mandatory climate disclosures for Canada’s big banks, insurers, and institutional investors, to the ISSB standards (which Canada has currently adopted for voluntary use) to the complex European Sustainability Reporting Standards (which Canada will likely have to adopt as it draws closer to the EU). This broader accounting framework also helps explain why the argument over CCS has changed.

Activists have long treated CCS as a lifeline for the oilsands and opposed it on those grounds. The critique was less prominent when the assumption was that the oilsands companies would pay for the CCS themselves, draining their own capital, lowering their profit margins, and making them less investable. Under the Alberta-Ottawa MOU, however, the Pathways CCS project now comes with government financial support: federal tax credits of about 50 percent on equipment and 37.5 percent on the pipe and storage facilities plus a provincial 25 percent grant through a carbon capture incentive program. The project also has a smaller emissions capture target with a longer timeline than was first discussed. The objection that the emissions to be captured will be a “rounding error” seems sharper because of the public money involved. In fact, Mr. Hatch inadvertently makes the argument of climate and energy realists: What is the point of the enormous material and financial effort for capturing the smaller share of lifecycle CO2 emissions that are negligible in the global system? Indeed.

Nevertheless, if one reads between the lines, Mr. Hatch’s objections seem to be rooted in the understanding that Scope 3 emissions accounting and the penalties associated with it are where climate policy is headed. The subtext in the article is that CCS and the Pacific Link pipeline will be a poor and wasted use of government money. If producers are charged for the larger share of emissions released from the use of their products, they can’t recover that cost through higher prices because oil is priced in a global market. A Canadian oilsands producer with a capture plant on the upgrader and a Scope 3 liability on the ledger will not receive a “premium,” regardless of what Prime Minister Carney or others in his Cabinet say; instead, the producer will actually receive a handicap. China and India, which will consume a growing share of whatever is shipped, may not be included in that ledger. Even so, the pipeline’s effect on total production depends on whether it expands supply or merely redirects existing barrels.

An important observation, if not wishful thinking, in the article is that the Pacific Link pipeline may redirect Canada’s oil production rather than increase oilsands output. Mr. Hatch notes that Pacific Link may never be built, but if it is, it may carry existing production diverted away from the United States market and sent to Asia instead. Thus, this could represent a shuffle rather than an expansion: taxpayers would carry the cost of “decarbonization,” while companies would be left holding the accounting for combustion emissions they don’t control. Even if the pipeline survives the new, unknown process and likely litigation, it may be a Pyrrhic victory. Supply would be diverted rather than increased, and made more expensive in the process, all to capture a global “rounding error.”

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