Peak Oil

Oil Industry Magical Thinking

By Ryan McGreal
Published February 21, 2007

The CBC reports that Gordon Lambert, the VP of sustainable development for Suncor Energy Inc., just told a special legislative committee that the federal government should set up a new technology fund to help oil and gas companies clean up their act - instead of "punitive measures" like mandatory emissions standards.

"We do have a significant dilemma before us," he told a special legislative committee studying Bill C-30, Canada's Clean Air Act, in Ottawa.

"On the one hand, we want abundant clean energy. On the other other, we want to protect the environment. The only way to square that circle is through new technology.

"We are looking for all kinds of policies and partnerships with government to enable us to get there. What's going to work is not punitive measures, but collaborative efforts."

(Well, there's another term for "collaborative efforts" between governments and corporations, but it falls rather outside the pale of acceptable political discourse.)

Lambert's solution? New technology. I'm sure I've heard the same argument somewhere else.

We don't need to scratch our heads and wonder how responsive the oil industry will be to voluntary targets and public subsidies; it's never worked before. The only measure that produces real improvements in pollution and energy efficiency is firm standards backed by meaningful penalties.

Contrary to Lambert's obfuscations, a predictable business framework with firm targets actually produces more innovation, as companies chase the strong incentive to meet the targets and continue operating.

Consider the auto industry. European and Japanese companies, operating under much stricter mandatory emissions and safety standards than the US companies, have the highest rated vehicles, the most sales, and the highest profits.

The American automakers, long mollycoddled under lax standards and public subsidies, are hemmoraging billions of dollars a year with their bloated, inefficient vehicles.

Of course, there's a chance it simply may not be possible to produce oil from the Alberta Tar Sands at an acceptable level of pollution. The process of digging up oily sand, injecting it with steam and skimming off the bitumen to refine into oil is inherently energy-intensive and environmentally devastating.

Energy investment banker Matthew Simmons (see the RTH review of his book Twilight in the Desert) described the method of using natural gas to heat the water used to extract the hydrocarbons as "like turning gold into lead".

However, we'll never discover whether the process can be cleaned up enough to make it worth continuing as long as the oil corporations continue to enjoy voluntary "targets".

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan writes a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. He also maintains a personal website and has been known to post passing thoughts on Twitter @RyanMcGreal. Recently, he took the plunge and finally joined Facebook.


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By Roy (anonymous) | Posted February 22, 2007 at 11:03:46

Reacting to the current ongoing dilemma about prosperity and pollution tradeoff, we have to remember a few facts. We can not live in the land of prosperity, boast of open economy and then when it comes to decision making completely forget the benefits of market economy and refer to punitive measures to control events. North America has achieved its prosperity believing in the forces of market economy and has survived the shocks of any sort beleiving in those principles. And there is no reason to believe the lawmakers are all fools to have taken certain decisions at a point of time. It is a proven fact that the more measures you bring in to control an event, the more loopholes are created to break such rules and less committed are all parties to it, Finally such loopholes become breeding ground for corruption. The best way forward in a market driven economy is creating incentives to toe to different policies created by government in the interest of the society. So when someone like Mr. Lambert says oil industry is looking forward to collaborate with the government to look for a solution, I take that as an opportunity to move forward. Take the example of your own home. Rather than being a father who is bent on disciplining his children through Capital punishment, won't you enjoy the status with less stress and better results if you took a collaborative approach with your children, sat down and discussed with them and finally came up with a solution to best interest of all parties. With this understanding, I would like to propose that what is happening right now is in the best interest of the nation and can achieve long term results. It is no good to try and punch it at this critical juncture when we are all concerned about our tradeoff between prosperity and pollution.

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By Ryan (registered) - website | Posted February 22, 2007 at 11:26:53

Hi Roy,

Thanks for your thoughtful post. I'd argue by response that:

  1. There doesn't have to be a trade-off between prosperity and pollution. A number of jurisdictions are proving that conservation itself is a powerful, sustainable engine of prosperity. The question, of course, is how you define prosperity. A narrow, econometric measure like GDP per capita is highly misleading because it is very poorly correlated with any meaningful quality of life indicator.

  2. It is simply false to claim that standards are bad for buseinss. Strict regulations on the auto industry in the 1970s reduced air pollution by orders of magnitude without hurting business.

Today, the least regulated auto companies are also the poorest market performers, whereas the most regulated companies are the best market performers, since they are subject to tougher competitive forces and manufacture better cars as a result.

  1. Loopholes exist because of the systematic corruption of a political system in which corporations have huge influence over elected officials. In the context of legislation being ghost-written by energy industry lobbyists, do you really think a "collaborative approach" between industry and government will produce anything other than what the industry wants for itself?

  2. I'm a strong believer in the value of market forces; price is a simple, fluid, dynamic feedback system that tends to bring supply and demand into balance by sending timely signals to buyers and sellers.

However, market forces cannot produce the conditions under which markets function efficiently. Go back and read that sentence again - it's the single most important thing to understand about the role governments play in economies.

Markets cannot produce transportation or communications infrastructure; they cannot produce an educated, healthy work force; they cannot account for externalities - costs of an economic decision not borne by the buyer or seller; and they cannot reflect long-term considerations.

Markets work better when they are regulated in a simple, clear, and strict manner and people conducting exchanges in those markets can predict how they're going to operate and can trust that every party will operate according to basic norms of good behaviour.

That's why Honda and Toyota are kicking Ford and GM's ass. It's why Portland, Oregon is growing economically and supporting a hub of investment and innovation even as it reduces its energy consumption, air pollution, and greenhouse gas emission and consistently ranks among the most vibrant, livable cities in North America. It's why countries like Denmark, the Netherlands, Sweden, and Finland are consistently rated among the best countries in which to do business as well as having the best measures of wellbeing.

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By Ryan (registered) - website | Posted February 23, 2007 at 12:10:45

DENVER - Raising the state's standards for electricity produced by renewable energy will create thousands of new jobs and increase Colorado's gross domestic product by nearly $2 billion, Gov. Bill Ritter said Thursday.

Ritter cited a study by the Environment Colorado predicting that the state would see 4,100 new jobs, $570 million more in wages and $1.9 billion more in gross domestic product if it doubled the minimum amount of electricity its utilities generate from renewable energy - the goal of a bill now before the Legislature.

The bill, which would require utilities to generate 20 percent of their electric power from renewables by 2020, would also save 18 billion gallons of water that would otherwise be used to cool coal- and gas-fueled turbines, the environmental coalition study said.

"We have only just begun to tap the potential of a new energy economy," Ritter said.

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