Downstream GHG Test Takes Out Half of Energy East Revenue, Fraser Institute Calculates
A senior official with the Fraser Institute is out with a back-of-the-envelope analysis that sets out to make the case against assessing downstream greenhouse gas emissions from new pipelines—but ends up with numbers that make it hard to fit any new pipeline within a limited global carbon budget.
The issue has moved to the front of the fossil advocacy agenda over the last month, after the National Energy Board announced it would assess both upstream and downstream emissions associated with TransCanada Corporation’s proposed Energy East pipeline, and TransCanada asked the Board to suspend its hearings on the controversial project.
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Kenneth P. Green, the Koch-funded institute’s senior director of natural resource studies, does the math to argue that pricing of Energy East’s downstream emissions would soak up about half of the project’s annual profits: if the pipeline carried (a mind-bending) 400 million barrels of oil per year, representing (an equally mind-boggling) 220 million tonnes of emissions, a C$50-per-tonne carbon tax would cost TransCanada $11 billion.
“So the implied upstream/downstream carbon emission cost would consume about half of the value of the overall endeavour,” Green writes. “It’s hard to see how halving the economic potential of an infrastructure project (or any project) is likely to pass the NEB’s consideration of a project’s economic viability.”
Then again, “it’s also hard to see why producers would even produce in such a regime. And that may well be why proponents of the new upstream/downstream test are cheering.”
But the assumption Green and other pipeline boosters have never stated over the last couple of weeks—and may never have thought through—is that a downstream emissions test is an attack on an otherwise viable industry, rather than an initial approximation of the atmospheric space available for any new fossil extraction or burning.
“If the world is serious about achieving the goals agreed in Paris, governments have to stop the expansion of the fossil fuel industry,” said Oil Change International Executive Director Stephen Kretzmann, following the release of his organization’s September 2016 report tracking future fossil development against a 1.5°C long-term limit on average global warming. “The industry has enough carbon in the pipeline—today—to break through the sky’s limit.”
“This does not mean stopping using all fossil fuels overnight. Governments and companies should conduct a managed decline of the fossil fuel industry and ensure a just transition for the workers and communities that depend on it,” the report by Oil Change and 14 other organizations stated. “With the necessary decline in production over the coming decades to meet climate goals, clean energy can be scaled up at a corresponding pace, expanding the total number of energy jobs.”