Keystone compromise faces up to realities

Ottawa should link additional petroleum flows going south on Keystone to a hard cap on future extraction rates.

The expansion of the Keystone XL pipeline has become a lightning rod for the battle between long-term climate concerns and shorter-term economic benefit. Opponents say Canada’s tarsands are one of the world’s most carbon-intensive and environmentally destructive sources of oil. Proponents argue they’re a politically stable source of oil in a world fraught with risk. Both are correct. A compromise on Keystone is essential if Canada is to become a responsible energy superpower in the complex 21st century world of carbon constraints.

I suggest the Canadian government take the lead by linking additional flows going south on Keystone to a hard cap on future extraction rates and priority access in all Canadian pipelines based on the carbon content of the oil. This compromise reflects facts on the ground and aspirations for change. Like all good compromises, everyone loses and everyone wins.

Climate hawks like me recoil in horror at yet another long-term high-carbon infrastructure project, built in the very teeth of an increasingly angry climate. For us, Keystone reaffirms industry’s capacity and willingness to burn enough fossil fuels to tip an already unsteady climate into a very unfriendly state. The question behind the Keystone protests is simple: if we can’t stop now, when? But let’s be honest. We’re not shutting down what’s already developed anytime soon, no matter how urgent the climate crisis. That oil will get to market, by pipeline, truck or rail. A pipeline increases profit, not production.

But the oilpatch has not yet spoken openly about the hard limits on extraction that climate change demands. They, too, must be honest: we cannot burn all the economically recoverable resources we want. According to the International Energy Agency, more than 80 per cent of the world’s proven reserves of hydrocarbons must be left in the ground if we are to have even a slim hope of limiting warming to 2C. Oil companies the world over face the same problem. Canada has an opportunity to take the lead in that discussion. Our energy sector can easily accept development constraints and still profit. Indeed, a shortage of skilled labour already limits development.
But everyone also wins. The oilpatch gets another pipeline, and higher profits. Companies compete to lower the carbon content of their fuel in order to gain access to those pipelines. And by agreeing to limit production, Canada gets a stronger card to play in what will be intense international negotiations on carbon constraints.

Nobody who’s looked into Canada’s carbon kitchen thinks we have a snowball’s chance in July of meeting our existing obligations to reduce emissions. But with a renewed commitment to real carbon constraints — not just “emissions intensity” gobbledygook — we regain the credibility to negotiate an agreement that’s in our long-term interests.

Even our burgeoning biofuels sector benefits. Since the carbon content of fuel defines your place in the pipeline queue, biofuels will always have priority. There’s little need for biofuel pipeline access now, so it’s no threat to the oilpatch. But as the biofuel industry matures it will need infrastructure to grow into.

There are three kinds of biofuels. Additives like ethanol and biodiesel, as well as drop-in fuels like green diesel, have markets now. They’re mixed in the final fuel near the point of sale. They don’t need a pipeline, and couldn’t be mixed with heavy oil anyway. But next-generation mixed hydrocarbon biofuels — like that produced by Kior — require refining. With priority pipeline access they don’t need to raise extra capital for refining. The Keystone compromise means all pipelines become transitional infrastructure. They serve short-term energy needs, but enable a low-carbon future.
Keystone expansion also takes pressure off the Northern Gateway, which is off-the-charts when it comes to threatening pristine wilderness and aggravating native sensibilities. Environmentalists should be happy about that.

The tarsands are one of Canada’s most divisive subjects. Whether environmentalists like it or not, current development will not be shut down. But the oil sector’s social licence to expand operations is under legitimate threat.

Right now the world sees an aggressive Harper government battling environmental groups, a growing portion of the public, and angry native Canadians. They see a Canada that can’t have an adult conversation about climate change and carbon constraints. A compromise on Keystone offers us an opportunity to demonstrate we can still do what we’ve always done best: brings opposing sides together.

First published in the Toronto Star, March 29 2013.