By Gerard Wynn
LONDON, March 5 The battle over U.S. approval of
the Keystone oil pipeline shows the difficulty in regulating
carbon emissions through the supply of crude oil, barring an
unlikely global agreement to curb demand.
If approved by Washington later this year, the pipeline
would transport land-locked, high carbon Canadian tar sand crude
to Gulf Coast refineries and from there to world oil markets.
A U.S. Department of State report last Friday concluded that
denying the pipeline would have a negligible impact in reducing
climate change, because railways or alternative pipelines would
still find the crude a global outlet.
By implication, the U.S. Environmental Impact Statement saw
no way to stem the flow of tar sands crude in the absence of
some kind of global regulation reining in oil demand, although
the report did not examine options for regulation.
Options might include an upstream carbon tax or a carbon
Such regulation is all but unthinkable at present, leaving
policy focused on national fuel economy standards for cars which
are less controversial, as they would save U.S. consumers money,
but which green groups may find too slow and incremental.
Crude oil carbon labelling has so far struggled because
global standards for measuring greenhouse gas emissions are at
an early stage.
The European Union's executive Commission has tried to
regulate transport fuel through a low carbon fuel standard which
would label the upstream carbon emissions of different crudes
The EU already sets refiners carbon intensity targets, under
its Fuel Quality Directive, which coupled with carbon labelling
could in theory rein in demand for high-carbon Canadian tar
sands, although these presently have no European market.
Opposition among oil producers and from Canada is based on
perceived unfair discrimination against tar sands, given that
other heavy crudes are similarly carbon intensive but have less
well developed greenhouse gas emissions data.
"The proposed directive unfairly singles out and penalizes
the oil sands," Ron Liepert, Minister of Alberta Energy, said in
a speech to the European Parliament two years ago.
"Alberta is fully prepared to have our crude oils assessed
and competing on a fair and level playing field with all other
crudes. The current path of the directive provides a commercial
advantage to other heavy crude imports. All crude oils should be
treated equally based on scientifically verifiable data."
The European Commission has delayed any ruling on tar sand
labelling until later this year.
GLOBAL CARBON PRICE
The EU has also introduced regional carbon prices through a
cap and trade scheme.
Some economists argue that the most efficient carbon pricing
solution would be a global carbon tax on upstream fossil fuel
production, whose extra cost would pass to consuming countries
and the tax revenue retained by exporting governments.
Such a tax would dampen demand and foster alternatives,
however, making agreement by major oil producers problematic.
Some oil firms have voiced support for a carbon tax on the
condition that it is applied globally, which would make it
unlikely any time soon.
Exxon Chief Executive Rex Tillerson expressed that
view in his support for a carbon tax four years ago.
"A carbon tax may be better suited (than cap and trade) for
setting a uniform standard to hold all nations accountable. This
last point is important. Given the global nature of the
challenge, and the fact that the economic growth in developing
economies will account for a significant portion of future
greenhouse-gas emission increases, policy options must encourage
and support global engagement."
Environmental opposition to tar sands is based both on the
higher emissions associated with a barrel of tar sands crude
compared with the U.S. average, and cumulative emissions given
the size of the resource.
The greenhouse gas emissions from burning transport fuel in
cars, trucks and planes can be measured on a well to wheels
(WTW) basis which accounts for extraction, refining and the
burning of the final product in an engine.
Most emissions, at 70-80 percent, are at the final stage of
gasoline combustion where the origin of the crude oil is
But tar sands have significantly higher upstream emissions.
There are two approaches to Canadian oil sands extraction:
surface mining of bitumen which is then processed remotely to
make a synthetic crude oil (SCO); or steam extraction from
underground and in situ mixing with a diluent such as natural
gas condensate to make dilbit (diluted bitumen).
The process produces higher carbon emissions because heat is
needed to make the raw bitumen flow, and because of greater
electricity demand and the need for hydrogen in the case of
synthetic crude manufacture.
Last Friday's report estimated that Canadian tar sands
emitted 17 percent more greenhouse gases than the average barrel
of crude oil refined in the United States in 2005.
That used a conservative National Energy Technology
Laboratory estimate from 2009 which is higher than many
measures. (See Chart 1)
Chart 1: (page 97)
If developed entirely, Canadian tar sands would probably
account for a sizeable fraction of the carbon that humankind can
still burn and stay within safer climate limits, as Columbia
University climate scientist James Hansen argued in a blog two
"We stand at a fork in the road. Conventional oil and gas
supplies are limited. We can move down the path of dirtier more
carbon-intensive unconventional fossil-fuels, digging up the
dirtiest tar sands and tar shales, hydrofracking for gas,
continued mountain-top removal and mechanized destructive
long-wall coal mining. Or we can choose the alternative path of
clean energies and energy efficiency."
The State Department concluded that additional, cumulative
emissions would be rather negligible from allowing Keystone
because alternative infrastructure would otherwise take its
Link here: (page 17)
By implication, the report leaves U.S. action to curb
transport sector carbon emissions resting on fuel economy
standards which are unlikely to drive a serious shift to hybrid
and electric cars before 2030.