Pipelines, decarbonization and the future of climate policy
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>>> By approving Keystone XL, President Donald Trump may have salvaged the $2.9-billion writedown TransCanada Corp. took after former President Barack Obama rejected the company’s application in 2015, but that doesn’t mean he fixed the system. The method by which pipelines are reviewed and regulated remains dysfunctional, subject to the same forces of environmental obstructionism and political whim that led to Keystone’s rejection in the first place, to the same forces that led Prime Minister Justin Trudeau to reject Enbridge’s Northern Gateway pipeline.
These are some of the conclusions of Dennis McConaghy, former executive vice-president with TransCanada and the author of Dysfunction: Canada after Keystone XL. McConaghy was in the boardroom as TransCanada navigated the shifting winds of public and political sentiment after Keystone was first proposed in 2008. He says TransCanada played by the rules, jumped through the assessment hoops and met stringent conditions for environmental protection and national interest, but it wasn’t enough. “The denial was unfair,” he says bluntly. “We were more sinned against than sinning.”
Keystone was initially killed not because it would significantly contribute to climate change – the U.S. Department of State found the incremental increase to carbon emissions would be negligible – but because it became a symbol to an environmental movement that was frustrated by the failure of international decarbonization agreements signed in Kyoto and Copenhagen. McConaghy says Bill McKibbin and other environmental leaders skillfully latched onto Keystone as an environmental hill to die on and a significant contributor to Obama’s legacy, if not to climate change.
As a symbol, Keystone was an effective campaign tool. As a case study in reasoned carbon policy, it was an utter disappointment. With or without Keystone the world will consume 100 million barrels of oil a day and the vast majority of carbon emissions will come through your and my tailpipes.
McConaghy does see a way forward but it won’t be easy and, unfortunately, it relies on reason. He says a national carbon tax gives Canada credibility on the climate-change file and should allow the country to exploit and export its hydrocarbon resources. “Carbon taxes are the right policy,” he says. “We can say to the world, ‘We have carbon pricing and now let’s see what you do over the next five years in terms of carbon stringency.’ ”
The risk Canada runs is in getting too far in front of other countries, particularly the U.S., which is not only the primary consumer of Canadian oil but, having vastly increased hydrocarbon production in the lower 48 states, is now a major competitor. “The issue is, can Canada and Alberta maintain the stringency of carbon pricing, which federally is set to go to $50 by 2022, in a world that still has to deal with what the Trump administration is going to do on carbon?” McConaghy asks. The Trump administration is already bending over backwards to accommodate the oil and gas industry, approving pipelines and loosening regulations. This will present a real challenge for Canada, which competes for capital with the U.S.
In addition, McConaghy says the Alberta price of $30 per tonne is nowhere near the level of carbon pricing needed to decarbonize the world. “You’d have to be towards $200 to transform our energy systems from fossil fuels to electricity systems based on non-fossil fuel forms,” he says. He’s open to the price being increased, with the caveat that Canada not get too far ahead of other jurisdictions. He says the price could rise to $50 by 2022 and $100 by 2030, and the markets can sort out where to invest. “There would be enormous micro-economic adjustments,” he says. “The world would get greener; whether it would get greener enough to meet the 2°C goal [set by the Intergovernmental Panel on Climate Change] is debatable, but that’s how we can deal with the risk.”
On January 24, President Donald Trump signed an executive order allowing TransCanada to reapply for a permit to build Keystone XL