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Policy
| 02/01/17

Trump’s Keystone impact on Alberta oil sector emissions cap

TCE

Canadian energy firm TransCanada has this week submitted a “Presidential Permit” application to the US Department of State seeking approval to build its Keystone XL pipeline, following an invitation to do so in the executive order signed by President Donald Trump.

The controversial Keystone XL pipeline had been rejected in November 2015 by Trumps’s predecessor, Barack Obama.

The policy reversal was warmly greeted by Prime Minister Justin Trudeau and Alberta Premier Rachel Notley. The project aims to overcome a pipeline bottleneck that limits the amount of crude from the province’s oil sands region that can be shipped to world markets by transporting more oil, via Nebraska, to the Gulf of Mexico.

It is predicted to create some 4,500 jobs during construction on the Canadian side of the border. The Alberta economy, which depends on the oil and gas sector for 26.7 percent of its GDP, has been reeling from a collapse in oil prices. Unemployment in the province is at a two-decade high and Calgary has the highest unemployment rate of any large city in the country. While the NDP administration of Notley has introduced a 100 Mt cap on oil sector emissions for the first time, as well as announced a complete phase-out of coal power, the premier argues that it needs the revenues to pay for the transition to a cleaner economy. Both Ottawa and Edmonton argue that there is no contradiction between pipeline construction and tougher climate action.

Environmental organisations and indigenous groups on both sides of the border however contest this position.

Primarily, opposition focuses on greenhouse gas (GHG) emissions. Production of oil sands crude is much more energy intensive than conventional crude. This is a result of the additional processes required to extract oil from the sand, and because most of the energy used in the process comes from the combustion of fossil fuels. A US State Department analysis put Canadian oil sands crude at 17 percent more carbon intensive than the average oil consumed in the US.

According to Canadian federal data, the oil sands produce 66 megatonnes (Mt) of GHGs per year. The US State Department analysis concluded that if Keystone XL were to proceed, it would add another 27 Mt to this figure. However, this number did not take into account the effects on world oil markets. In 2014, researchers with the Seattle-based Stockholm Environmental Institute published a full lifecycle analysis of the emissions profile of the pipeline in Nature Climate Change, finding that for every barrel of increased production, global oil consumption would increase 0.6 barrels due to the incremental decrease in global oil prices. They concluded that the annual impact of the pipeline could be as high as an additional 110 Mt.

Although this would blast through Notley’s cap if these emissions occurred in Alberta, as combustion for the most part would happen outside Canada’s borders, it does not threaten the letter of the legislation governing the cap.

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The annual impact of the Keystone XL pipeline could be as high as an additional 110 Mt CO2eq

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