CANADA:

Oily sludge could darken talks between Obama and Harper

Canada's conservative government, now considered this continent's climate villain among many environmentalists, is trying to spruce up its image to appeal to the environmentally minded Obama administration by publicizing a continental plan to reduce carbon.

But critics are concerned that the ambitious proposal is designed to camouflage what they believe is Canada's true motive: angling for softer carbon penalties from the United States while expanding the emission-heavy production of oil from its tar sands.

Canada began bracing for seismic political shifts in the United States this fall, after it became clear that Washington would favor much stricter restrictions on greenhouse gases. Four hours before President Barack Obama's inauguration, Environment Minister Jim Prentice publicly outlined a grand bargain: a North American attack on carbon dioxide, stretching from the Yukon to Mexico's southern border.

It would be the world's largest initiative addressing climate change, regulating greenhouse gases in three countries that together account for more than one-quarter of the Earth's emissions.

Prentice proposed a "common cap-and-trade system" between the countries with "shared targets and shared timetables." The speech, delivered to the Canadian Council of Chief Executives, could mark a significant shift in policy for Prime Minister Stephen Harper's minority government.

But his critics doubt it.

Harper is making 'snow'

They see echoes of the Bush administration in Harper's government. The prime minister, who is from Alberta, reversed Canada's involvement in the Kyoto Protocol after being elected in 2006. He supports expanded production of the oil sands in Alberta, the primary source of Canada's sharp rise in emissions between 1990 and 2003.

In a campaign letter in 2002, Harper said Kyoto would "cripple the oil and gas industry" and asserted that it was based on "tentative and contradictory evidence about climate trends," according to a copy of the letter printed by the Toronto Star in 2007.

"There's an attempt to snow Canadians," Elizabeth May, leader of Canada's Green Party, said of Harper's new climate plan in an interview, noting that Obama is highly popular in Canada.

"Their top item with Mr. Obama is clearly to protect the tar sands export to the U.S. and to ensure the U.S. markets for tar sands is going to continue to grow."

The oil sands will likely be a key theme in the first discussion between Obama and Harper on Feb. 19. Thorny questions surround Alberta's "oil patch," which has the largest proven reserves behind Saudi Arabia and currently exports more oil to the United States than any other nation.

The questions include: Will the United States permit the oil sands to emit more pollution because they represent a safe supply of fuel whose profits are not enriching anti-American organizations? Is Obama supportive of expanding consumption of Canadian oil in the short term even though it produces more emissions than other sources? Will Obama accept Canada's assurances that future emissions will be reduced through carbon capture and storage and other technologies, even though some of those are still in the experimental stage?

Leaping emissions and shifting baselines

Perhaps none of the answers are at hand. Obama has not proposed a specific cap-and-trade plan, and Prentice admitted that few details exist, stating frankly in his speech, "I cannot tell you today precisely how we will proceed."

Past moves, though, show that Harper's government has been willing to sacrifice some progress on climate change to advance the nation's growing energy sector. He proposed a climate program that aims to reduce emissions 20 percent by 2020. But the program, which could go into effect next year, uses 2006 as a baseline, rather than 1990, which is widely accepted as the international starting point.

By doing so, Harper's plan won't address a 25 percent rise in emissions between 1990 and 2006, a period of explosive growth in oil sands production that accounted for 42 percent of the nation's new emissions, according to a government analysis of greenhouse gases.

Perhaps more telling is this: Harper's plan measures carbon dioxide output using an intensity scale -- or the rate at which an industry emits pollution on a per unit basis. That means overall emissions can continue to rise, even if the increase occurs in smaller spurts.

"It's just stupid," Stephen Hazell, executive director of Sierra Club Canada, said of the intensity scale. "This government's commitment to the environment is very shallow. They don't really understand the issues."

Press contacts in Prentice's office did not respond to several requests for an interview with the minister. But in his speech, Prentice said the intensity scale was used to avoid economic repercussions associated with climate policies. The government didn't want to measure the total emissions of a company, he said, because it could cut pollution in Canada by moving to a country without greenhouse gas regulations -- like the United States.

"For unlike a so-called hard cap system, an intensity-based system rewards only improvements in efficiencies," Prentice said, according to a transcript of the speech. "It does not provide any credit for reduced emissions which are caused solely by reduction in production levels."

Oil sands benefit from Canada's plan

It's unclear how Canada's current plan could be wedded to a U.S. climate initiative that imposes strict caps on emissions, a route that environmentalists favor because it results in sharper carbon reductions.

Canada also plans to make polluters that exceed emission thresholds pay per-ton penalties into a technology fund, which could advance things like carbon capture and storage. A U.S. version would likely auction pollution permits -- a method that could make fewer of them available and could result in lower emissions.

Some experts fear that Harper will stick to the intensity scale when negotiating with Obama. That could mean the oil sands get a break, they warn. Measuring intensity favors fast-growing industries, like the oil sands, because companies can decrease the rate at which they emit greenhouse gases while still increasing the total amount of carbon dioxide they release.

As a result, emissions from the oil sands under Harper's plan are expected to triple by 2017, according to the Pembina Institute, a Canadian environmental think tank and advocacy group. That's based largely on the explosive boom of the oil sands, which currently produce more than 1 million barrels of oil a day. By 2030, they're projected to produce up to 5 million barrels a day.

"At this point in time, the oil sands have a proposal on the table from the government that really, really suits their emission profile," said Clare Demerse, a senior policy analyst with the Pembina Institute. "Our concern is that the government of Canada would go into these negotiations seeking to protect that advantage they've granted to the oil sand sector."

Keep the oil sands flowing

The tar-like material in oil sands is the troubled cousin of conventional crude. When it is collected, there isn't a geyser of black oil, liberated by a drill. Instead, the coarse mixture, called bitumen, is mined in open pits, scooped up by massive machines.

It is a carbon-intense process that requires fuel to power heavy machinery, lots of water and natural gas-fired heat to create steam used to separate the bitumen from the sand, and additional processes to prepare the bitumen to be piped to special refineries.

All this means that the production of 1 barrel from the oil sands creates about three times more emissions than producing a barrel of conventional oil. When considering the "lifecycle" of Canadian oil -- which has lower transportation emissions than, say, oil shipped from Saudi Arabia -- its emissions are about 20 percent higher than the lifecycle emissions of regular oil, according to a recent study by the RAND Corp.

Paul Cellucci, who resigned as the Republican governor of Massachusetts in 2001 to become the U.S. ambassador to Canada, said the United States should "make some adjustment for the oil sands" in a future cap-and-trade program.

Limiting the consumption of Canadian oil would hurt both countries' economies, said Cellucci, who left his post in Canada in 2005 and now works on energy issues for the law firm McCarter & English.

"I think in the short run that would be a big mistake," he said. "I think we should find a way to keep the oil from the oil sands flowing while we address the larger issue of climate change."

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