…environmental economics and the implications of environmental policy

Archive for the ‘oilsands’ tag

The Techno-optimists are Right for a Change: Canada Needs Carbon Capture and Storage

with 22 comments

Oh those cornucopians. Their teachings to economic grad students everywhere has led to the entrenched belief that simple constraints like environmental quality and finite resources can be solved through technological change and emerging backstop technology. For climate policy, this has led many to advocate delay in action until some radical technological breakthrough emerges to solve our climate woes. But this is bad policy. The time period for technologies to move from R&D to commercialization is long, which means that we can’t expect much before mid-century. And the sheer depth of reductions required to stabilize atmospheric carbon globally across virtually all economic sectors means that no single technology will provide the technological silver bullet.

In Canada, however, the cornucopians at least have got it partially right. Canada needs carbon capture and storage (CCS) and big oil knows it:

An alliance of 15 Canadian oilsands, chemical and power companies proposed yesterday a multi-billion-dollar plan to capture and store greenhouse gases in what would be the country’s single-largest carbon dioxide-reduction initiative. They say they are willing to pay their part — billions, in fact — to get this off the ground. It’s time for governments to do theirs — with the same urgency and conviction with which they embraced the green agenda or, in the case of Alberta, demanded a bigger share of the oils ands’ industry by jacking up royalties.

Recent analysis completed (by MKJA and myself) using the CIMS national energy and emissions model indicates that CCS is a big deal. As the graph below indicates, when all foreseeable technologies are competed in the face of an ever increasing emission price, CCS is the cost-effective technology that delivers a large and increasing share of national reductions. This is not surprising given the trajectory of emissions in oil sands and allied industries, and the CCS opportunities in Alberta and elsewhere. Our modeling indicates that without viable CCS, national emission reduction costs at any emission price rise rapidly.

But, CCS is not quit commercial, given the low price of carbon, and the high capital costs to start, and thus there is a justification for government support. But, government is not the best at picking winners and thus with the private sector involved, perhaps an equity position by government is a good start. Demonstration projects are another. And getting the regulatory frameworks, and rules of the game established are yet another.

So, while economists push for an emission price, there is economic justification to pitch CCS as a climate change technology winner in Canada. Indeed, CCS seems to be one silver bullet that we should all bite.


Written by Dave Sawyer

December 4th, 2007 at 4:00 pm