…environmental economics and the implications of environmental policy

Uncle Sam says keep your carbon…more on the risks of inaction

with 22 comments

With all the talk of energy security, I would expect that many in the oil patch discounted talk of limited energy imports to the US based on carbon content. After all, is not Canada a good friend with stable long-term energy supply prospects? Seems though this is not the case (see here), with the US now passing into law a carbon performance standard for all fuel consumed by US government operations, which are large,

… the provision covers new contracts for all government operations, including the military and the postal service, which together operate thousands of vehicles and are considered the No. 1 and No. 2 vehicle fuel users in the country.

And since oil sands emissions are higher than conventional sources there could be real and significant trade barriers to Alberta’s synthetic gold. Of course this all needs to shake out and be tested, but one can see the writing on the wall. Even if Canada does not take domestic action, our exports could be facing trade barriers internationally in large and important markets. Recall that France was pushing to erect border taxes on imports from countries without carbon policies just last year.

So while Canada and Canadians continue to cite increasing export costs and lost international market share as the reason for domestic inaction, it seems that the trade barriers are much more of a threat,

“Canada’s oil sands will face large-market risk unless the Canadian government, or the Alberta government, take this challenge seriously,”

All this says that the risks of inaction are greater than just avoiding domestic costs over the long-term or higher cumulative emissions. It means the outcome most cited as the reason for inaction, that of reduced international competitiveness, could occur regardless of our domestic carbon policy. While sticking one’s head in the (oil) sand is an effective strategy to avoid reality, there is a chance you will be eaten.

Written by Dave Sawyer

January 16th, 2008 at 2:59 pm

22 Responses to 'Uncle Sam says keep your carbon…more on the risks of inaction'

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  1. Great post Dave…

    I’m a little unsure of the effect of this type of policy on Alberta’s ability to export oil at the same price though. Seems to me that China would jump at the chance to import lots more oil, and wouldn’t worry too much about the upstream carbon emissions. More to the point, oil is a world market, and the fact that the US won’t buy from a certain source (e.g., Iran) doesn’t influence the price of oil from that same source, unless all other players also play the trade restriction game.

    But I do agree with you that this type of policy will likely continue to be pursued by rich countries.

    Keep up the good posts :)


    16 Jan 08 at 5:39 pm

  2. Thanks Nic, I thought the same WRT the international supply for oil is large and we could simply ship to new markets. But then I thought about transport costs, oversubscribed pipeline capacity to transshipment terminals on the west coast and the high cost of oil sands produciton. So, I thought it plausible that there could be some impact, maybe lower profits for producers and some minimal interruption in supply.

    So, as you say there is uncertainty WRT to the impact.

    Dave Sawyer

    17 Jan 08 at 3:27 am

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    29 Jul 14 at 12:19 am

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    16 Nov 14 at 12:27 pm

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    16 Nov 14 at 7:12 pm

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    17 Nov 14 at 12:34 pm

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    18 Nov 14 at 10:51 pm

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    20 Nov 14 at 7:10 pm

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    21 Nov 14 at 12:37 am

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    22 Nov 14 at 11:20 am

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    22 Nov 14 at 8:35 pm

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    28 Nov 14 at 4:57 pm

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    29 Nov 14 at 3:45 pm

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    3 Dec 14 at 11:22 pm

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    12 Dec 14 at 10:15 pm

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    13 Dec 14 at 9:31 am

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    13 Dec 14 at 10:15 am

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