AND ENVIRONMENT 1m; 1 I A DISCUSSION PAPER ON POTENTIAL GLOBAL WARMING March, 1990 Wigwam 01-- word s a leading industrial company in Canada and a major producer of fossi1 fuels, petroleum products and petrochemicals, Imp erial Oil Limited has an important stake in the development of public policy Loaddress the growing environmental issue of climate change. At Imperial , we are committed to fulfilling our environmental responsibilities to society, to being part of the solution. It i in this context that we present the following discu sion paper on potential global warming. The paper does not purport to offer a soluti on, but we believe it will make a valuable contribution toward it. Much scientific uncertainty surrounds the debate about the impa ct human activities and a build-up of "greenhouse gases" in the atmosphere could have on global climate. An important first step is to fill in the gaps in scientific analys es. Oth e~ priorities include as essing economic consequences for this country, and others; determinin g a range of response options; and fostering devel~pment of new technolog y. Imperial Oil is committed to help meet these challenges. We have undertaken an extensive work program, which is outlined in the paper, to advan ce our compr ehension of the implications of potential global warming for our company and our countr y. Over th e next months, we hope to share these results as part of our contribution to the broad consultative process on, environmental issues facing Canada. We welceme your comme~ts and suggestions. J.D. McFarland , VICE-PRFSIDENT, ENVIRONMENT A.R. Haynes CHAIRMA~ AND CHIEF EXECL",TIVE OFFICER 3 Icontents I 6 I. EXECUTIVE SUMMARY 8 II. INTROD UCTIO N 9 III. POTENTIAL GLOBAL WARMI NG Impact of Greenhouse Gases 10 Canadian Carbon Dioxid e Emi ssion s l] Energy Use in Canada . . 13 -- - The Canadian Challenge 15 Canada in Perspective 16 Key Observations and Conclusions 17 IV. COMMITMENTS AND RECOMMENDATIONS 19 Imperial Oil 19 Fed"ral Government 19 V. REFERENCES 21 s Executive Summary his di scussion paper outlines views which understand cli:arl y J,,,1h I h,: 1:nv1fl1r1m1·r,t;il and economic isHUl;H,Ih ,Iii ,1,,:i:1t•:d n k hav e been developed and the costs and h1:ndi1 r1f J,,,t,:n j,1 1 responses, i;o that ratirirwl r,t1j,:ctiv1· and within Imperial Oil Limited ("Imp eria l") for the purpose of contributing to the public discussion and consideration of the issue 1; cost-effective soluti<>ns will h,: fr,rttw,,rnin;..,. The federal governm,:nt is urw:d tr, ~f,1:arhead the procesi; of building thi un,forstanding . Imperial is <;<>rnmitt,:d t<1 help. This discussion paper is ntnof potenti~l global warming in the context of energy use. Imperial wants to be a part bution. It focuses on the relationship ,Jf fo,,of any solution, and, in this spirit, makes sil fuel consumption and associated carb,,n specific commitments to assess the impli- dioxide emissions to potential global warmcations of potential global warming for ing. The di scussion draws on Imperial' _ Imperial and for Canada. In addition, rec- extensiv:e data base and foreca ts of Canaommendations are presented that the federal dian and world energy supply and demand. The key o.bservation and conclusions are: , government may wish to consider in developing its new environmental policy frame- • The possibilit y of global warming i a work for Canada that will encompass the complex and pot entially seriou issue for the key environmental issues facing the country, world community; however, many scientific contradictions and uncertainties remajn. A including potential global · warming. Canada has an important role to play as commitment to ;esponding positively to the part of the world community in safeguarding issu e of potential global warming is no guarantee that the particular solution will have and maintaining the environment around us, but this role cannot be decisive in terms the appropriate effect. Therefore. high priof its impact on the global scene. Canadian orit y ne eds to be pla ced on improving the actions must also be consistent with the deficient areas of the science to better guide imperative to maintain the economic well- potential respon ses . being of the world and Canada's competi- • Canada contributes only a relatively mall tiveness in a global trading economy. 2% share of global carbon -dioxide emisIn developing the new environmental pol- sions frotn fossil fuel combustion. and this 1icyframework for Canada, Imperial believes share is expected to remain unchanged in that the participants must at the same time the future. Further, no one country makes keep to the forefront the progress Canada . a dominant contribu tion to these emissions. still needs to make t_o strengthen its own This means that cooperative actions among economy and position as an international countries, rather than unilat eral actions by competitor. The market-oriented approaches individual cou~tries, is the essential route to that are contributing to this progress must a constructive outcome. be extended, wherever possible, to be used • In addition , growth rates of carbon diox· as instruments of change to address envi- ide emission ar expected to be greatest in ronmental challenges. developing countries as th e) industrialize The challenge for Canadians will be to and achi eve ignifi cantly greater rates of economic growth than the relatively more mature industrial economies. Accommodating the economic aspirations of developing countries adds to the complexity of any potential accords to reduce global carbon dioxide emissions. • Potential global warming, therefore, is an international challenge. In response, Canada should not act unilaterally. This is not only because su~h action would likely damage Canada's international competitiveness and, at best, achieve negligible improvement in mitigating the potential for global warming. Of even greater importance is the possibility that costly unilateral Canadian action would be ineffective, whereby industries simply redirect their operations to those countries which are not tl!king constructive action: • While market forces will lead to further improvements in energy efficiency, steps to appreciably reduce carbon dioxide emissionE from fossil fuel combustion in Canada would likely be difficult and costly, partly because of Canada's energy intensive economy, cold climate and long distances . In addition~ as a result of market forces and the country's well-endowed sources of energy, Canada's energy economy is already less fossil fuel based than most other industrial nations. • Imperial has examined one possible scenario to stabili 1e carbon dioxide emissions in Canada at 1988 levels by 2005 as an illustration, only, of the size of the challenge. Tnis could require an expenditure of about ' $50 billion to replace 70% of coal-fired electricity generation facilities expected to be in operation in 2005 with the equivalent of four new Darlington nuclear plants. In addition, a 50% improvement in average automobile fleet energy efficiency would be required, or double the gains Imperial forecasts over the period. Such steps -may or may not prove to be appropriate or necessary. They would, in any event, require very significant intervention into the economic marketplace in Canada, carry very substan- tial costs for Canadian consumers. and. if 1 done in isolation, could jeopardize Canada's international competitivenes . • Canada's first priority should be to foster the development of a significantly improYed understanding of the scientific and economic consequences of actions that might be contemplated to reduce the buildup of greenhouse gases in the atmosphere. Priority should also be placed on stepping up research and development of the most costeffective technologies that could reduce greenhouse gas emissions or m'itigate the potential impacts of increased concentrations of greenhouse gases in the atmosphere. Imperial shares the view that the possibility of global warming is a potentially serious issue and is committed to understanding the implications for Imperial and for Canada. More specifically, Imperial will: • develop an inventory of greenhouse gases that are emitted in its operations and identify feasible opportunities and costs to reduce these emissions; • determine the technical and economic potential for additional energy efficiency opportunities in all of its operations, with an eye to reducing carbon dioxide emissions; • determine, in dialogue with governments and the scientific community, how its extensive research capabilities and facilities and external research programs can be utilized to address potential global warming. The primary context will be energy usage, considering both input and output implications; • determine the technical and economic potential for carbon dioxide "sinks," or mechanisms to remove carbon dioxide from the atmosphere, such as underground injection into oil-bearing reservoirs to support enhanced oil recovery operations, or into deep saline aquifers for disposal purposes; • develop "life cycle" assessments of green- / house gas emissions for fossil fuels and their alternatives in various end-uses; • carry out a comprehensive assessment of 7 the technical and economic potential for fuel switching with emphasis on the transportation sector, including an assessment of the full range of environmental consequences; • spearheading a broad consultative process in 1990 that engages the thr~e levels of governme~t, industry, public interest group s, academia and the general public to help create this f~amework and to facilitate the national consensus-building; • assess the macro -economic consequences to Canada of options being contemplated by governments to reduce carbon dioxide emis-_ • establishing a dialogue with industr y and stimulating a sector-by-sector analysis of sions, such as carbon or fuel taxes. Imperial expects to be in a position to opportunities to respond to the environshare the results of this work, as they become available, beginning in mid 1990. - In leadi ng the overall process of develop ing the new environmental policy framework for Canada, the federa l government may wish to cons ider: mental challenges, in partnership with government. A framework similar to that employed by the Canadian Industrial Program for Energy Conservation (CIPEC) to facilitate improvements in energy efficiency might be helpful in achieving these goals. Introduction 8 _plan to develop a com pre hensive, long-te rm, nationa l envi ro nme nt al program was ann oun ced in Octoher 1989 by Lu cien Bou chard , th e federa l environm ent m inister. A poli cy fram ework to support th e plan - "An En vironm ental Age nd a for Canada" - will b e develop ed in 1990. It. is expected that thi s fram ework will b e wide-ranging and will addr ess th e k ey environmental ~halleng es facing Canada , ineluding the emerging issue of pot enti al This, paper presents the company's initial views on potential global warming and its place in the new environmental policy framework. It is presented now because of · the accelerated attention being paid worldwide to this issue. We conclude with commit m ents and recommended actions for Imperial and governments to start addressing this important issue of public policy immediate ly. These are focused on increasin g t he understanding of the scientific aspec ts of potentia l global warming and the econ om ic consequences of po-ssible public · poli cy initiatives . global warming . Imperial Oil Limited ("Imperial") has an important stake in the development of pub lie policy in the environmental area. As a leading industrial compan y in Canada and a major producer of fossil fuels (oil, gas and Canada has a role to play as part of the world comm unity in safeguarding and maintain ing th e environment around us. The enviro nm enta l challenges are global and int erlocking - potential climate change, air and wat er quality, waste management and coal), petroleum products and p~tro chemicals, Imperial believes that it has an obligation to be a part of the solution and that it is in its interests to participate actively.in the search upp er atmosphere ozone depletion. Canada's role is important but cannot be decisive in t erm s of its impact on the global scene. Canad ian actions must also he consistent for realistic and cost-effective solution s. with th e impera tive [o maintain the economic J T well-being of the world and Canada\ com petitiveness in a global trading l'<'Ollomv . In developing the new emironnwntal policy framework for Canada, Imperial beliews that the participants must at the same time keep to the forefront the progress Canada still heeds to make to strengthen its own economy and position as an international competitor. The market-oriented approaches that are contributing to this progress must be extended, wherever possible, to be used as instruments of change to address environmental challenges. The challenge for Canadians will be to understand clearly both the environmental and economic issues, the associated risks and the costs and benefits of potential responses, so that rational objectives and solutions will h1• forl hl'o111i11gTlw l',•d,·i.d l,!,11\t'llllltcnl i-. FIGURE 1 11q:.!,('d lo Sfl\',Ufo•ad1111'f'l"Ot 't 'S>i of l111ild111 g t !ti:-; RELATIVE IMPACTS OF 1111derstarnli11g . I 11q11 •rwl is ,·0111111il led to lwlp. GREENHOUSE GASES This disc11ssio11papn 1:-.0111·such 1·0111ri b11tio11.111 part, it drnws 011 \i1·\,:,;l11q1t•rial GREENHOUSE GASESIN ha;; PXpres:-lt'd previo11:-.h in othl'r foru111s THEATMOSPHER E where public poliq i:-;sue :-;of vital i1111 ·n·:,;I ANUAL Al MOSPt irRIC RATEOf CONC! NIRATION INCREASE to the eompauy w1·rc b1•i11gdt'l1al1·d. Thc :-;1• (PPM) ~oJ. 04 included Ca11ada-U.S. lra1k, " E,wrg y Op - CARBON 350 OIOXIOl tions" , lax reform, an 500X Potential Global Warming mperial cannot add significantly to the science associated, with global climate forecasting and atmospheric gases "hiefly water vapour and carbon dioxide - absorb some of the re- change resulting from human activities that are believed to be causing changes in the atmosphere. Scientists agree that atmospheric concentrations of carbon dioxide, methane, chlorofluorocarbons and nitrous oxide are increasing and that these concentrations may possibly lead to higher global temperatures in the decades ahead. But scientists cannot agree on whether a humaninduced · warming effect has or has not begun, how much, if any, or at what rate the earth might warm, and how the warming will aff~ct individual countries or regions over time. There is much contradictory evidence and analytical forecasting is uncertain. In particular, the radiative properties of clouds and the impact of oceanic circulation radiated energy from the cart h's surface. This maintains the earth's surface temper- are not well understood. As an illustration of the difficulties faced ature, facilitating life on «'arth as we know it. In recent years, there has lwcn growing debate about the pot1·ntial for climate by climatologists the potential impact of greenhouse gases in the atmosphere. However, the company can offer a perspective on the robustness of the technical argument and on the ensuing implications for public policy development in Canada. The scientific basis for the so-called greenhouse eff eel 'Was well established decades ago. It ia a mechanism fundamental to maintaining the earth's temperature within a tolerable range. In simple terms, '------~- --- endeavouring OZO NE > CFC" S > 10000X 1000X CONTRIBUTION TO WARMINGEFFECT CFC'S AREFAST ESTGROWING ANl HIGHESTIMPACTPER UNIT CARBONDIOXIDEIS THELARGEST CONTR IBUTOR I METHANEIS THESECON D LARGEST CON TRIBUTO R,IS GROWING2 5 TIMES FASTERANDHAS 25 TIMES MOREIMPACTPER UNITTHANCO2 to make quantitative predictions, various computer mo- -- D 109 Cf) UJ COAL z ~ 100 1-- z 0 ::i __J :::Z 47 50 CANADIAN CARBON DIOXIDE EMISSIONS As an industrialized country with very high living standards, Canada consume s signifi- 0 INDUSTRIAL TRANSPORTATION POWER GENER'N RESIDENTIA L COMMERC IAL 11 from automobiles. The next larges.t source of carbon dioxide emissions was coal in power generation, pi;:imarily in Alberta and Saskatchewan, but also in Ontario and the Atlantic provinces. The residential and commercial sectors play a lesser role in carbon dioxide emissions . As with most major issues in Canad a, carbon dioxid e emissions have an imp ortant regional dimen sion. Emis sions by region from the various sectors , industrial , tran sportation, power generation and residential and co~ercial, are compar ed in Figure 5. Th e significant regional variation s in emissions are, in part , related to population but other factors such as industrial produ c· tion, the availability of nuclear and hydraulic power and climate also. play a significant role. Emissions by industry ar e. high est in Ontario where there is a lar 9e industrial base fuelled mostly by natural gas, and in Alberta where the production, transportaFIGURE 5 tion and refining of oil and gas, and the CO2EMISSIONS BY SECTOR ANDREGION petrochemical industry are major consumers 1988 of oil and gas as both fuel and feedsto ck. Emissions by industry in Quebec and INDUSTRIAL • British Columbia are reduced by _ the reliance on relatively low-cost electricity TRANSPORTATION generated hydraulically and the extensive POWER use of biomass, including sawmill waste, by GENERATION the pulp and paper industry. (Carbon dioxRESIDENTIAL COMMERCIAL ide emissions have not been attributed to the D D 60 burning of biomass since• ii ii:; dirlirnl1 to quantify and it is assumed 1ha1if ii wn(· 1101 burned, this material wo11Id d(•grad1·nal 11 rally.) Carbon dioxide emissions from 1hP transportation sector correlate C"losclywith population and gross domestic prod u<·L (GDP) and do not vary significantly between regions when differences in thes(• fact ors are con·sidered. Foss il fue ls (largely coal) are used to generate es~entially all the electricity in Saskatc hewan and Alberta and some of the power in Ontario and the Atlantic region. Qu ebec, Manito b a and Brit ish Columbia rely almo st exclusively on hydraulic power and , h ence, do n ot h ave carbo n dioxide emi ssion s fr om this source. · Th e resid enti al and commerc ial sectors are relativ ely sm 1ll direct emitt ers of carbon dioxide as mu ch of th e fu el consumed in ' th ese sector s is in th e form of electr icity. This is parti cularl y tru e in jur isdictions such as Quebec and Manitob a where relatively low-cost, hydrauli cally-generated electricity is available. Climat e also plays a significant role in overall ener gy consu:mption in these sectors and, henc e, in carb on dioxide emissions. This is evid ent in provinces such as Saskatchewan and Alb erta th at rely more heavily on fossil fuels and have relatively severe winters. These regional differences in carbon dioxide generation across Canada mean that maintenance of the prin cipl e of int erregional equity may well be a major ch allenge in 50 developing policy to addr ess th e issue of er: ~ LI.J >- carbon dioxide emission s. 40 From an international CJ) LI.J z perspective, Fig- ~ 30 ures 6 and 7 show that Cana da, on average, t- z produces relativel y more carb on dioxide per ::i 20 capita or per unit of GDP than most major ~ western developed economi es . Th is is some- 0 times interpreted 10 to m ean Canadians waste energy, implying we have at han d readily accessible opportunities 0 ATI.ANtlC ONTARIO MANITOBA SASK ALBERTA B.C. for ener gy efficien- cies. The reality is more compl ex . E~ERGY USE IN CANADA The economy of Canada. to a significant extent. is based on the production of energy intensive, internationally traded export commodities which are then used in other countries to support their industrial processes. Five of these industries - pulp and paper, iron and steel, mining. petrochemicals and non-ferrous metals - account for about 75% of Canadian industrial energy use. The concentration of these types of industries in Canada, and the corresponding higher level of energy use, demonstrate how we haw made the best use of the country', natural ad\antages and resource base. Conventional energy accounting charges this consumption against Canadians. but the international buyer is actually the con, umer. in every sense of the word. The same interdependence, of course. works in reverse in relation to Canadian purcha es from other sellers. These indu tries are export oriented, which means they are driven by international market forces to be as efficient and competitiw as possible. Typically, th ey have little influence over international market prices for their product and, therefor e, have limited ability to pass on cost increases to con umer ,. In the absence of an international accord, Canadian policy measures to reduce carbon dioxide emissions from these industrie · (e.g. special taxes or energy-use standard ) could redure their international competitivenes . This, in turn, could lead to plant closures in Canada, which would certainly reduce carbon dioxide emissions here. However, this does not change world demand for the commodity in question, and if the result of a Canadian plant closing is increased production elsewhere, global carbon ~ioxide emissions wilJ not he diminished. Canadian industry has for several years been actively focusing on improving energy efficiency. The Canadian Industrial Program for Energy Conservation (CIPEC), for example,estimatesthat since 1973Canadian --------------------- 25 20 2 0 Cf) ~ 15 Q_ -- en UJ 2 Z 10 0 1-- "'¥,'I-<;)\>., ":,s~ "/,to'I'-¥,'{\)'I'u V ~ c_,"<,f/1. \)s"' '/,)-¥,<;) ~"''{ ,,'11 ¥,Qf/1. <;)'-¥, ~'I-¥, ~'u'- 'u~\¥,'1- \¥-<;)'"' ~'/< <~'/< ":,~'<) industry has improved energy efficiency by about 28%. This organization, with membership from a broad cross-section of Canadian induslry, would be well suited to continue its work in the 1990's with a renewed focus on environmental improvements with particular empha i on carbon dioxide emissions. Further improvements in energy efficiency are possible as well, and task forces made up of key members of each industry, with support and assistance from appropriate government personnel, appear to be an efficient way to hasten Lhis process. Canadian industry is not a "waster" of energy and has shown itself ready and able to adopt ne.w economic processes and technology. Our high standard of living currenLly the second highest in the world in terms of FIGURE6 CO2EMISSIONS ON A PERCAPITA BASIS-19 88 FIGURE7 CO2EMISSIONS TONNESPERMILLION US$OFGDP-1988 8,000 7,000 6,000 f/) Cf) , :::> z 5,000 ::::; 0 ...J :ii: 4,000 C./) 3,000 UJ z z 0 1-- 2,000 -- - - 13 to the average of the U.S.A ., U.K., West ] Germany, France and Italy and eliminating ~ 80 ~ :::J 74 C/) z · 0 70 u >CJ a: w z 70 69 the energy consumed in manufactured exports of pulp and paper and non-ferrous metals - Canadian carbon dioxide emissions 68 would be reduced almost 1~ percent from , those shown in Figure 7 to a level below w LL 0 60 -, those of West Germany on a per unit of GDP. Even after these adjustments, emission s data do not reflect the substantial N C> N 0 (_) 49 50 LL 46 0 C/) w z z 0 40 I- UK W.GERMAN Y JAPAN U SA CANADA FRANC E I qua ntiti es of energy imported by some indu stri alized countries in the form of finished energy intens ive manufactured goods. Anoth er i~ p orta nt , although under -appreciated fact is that th e Canadian energy economy is relati vely less fossil fue l based than that of mo st oth er ind us tr ial nations as a result of mark et forces an d tbe country's GDP per capita ·(pur chasing power parit y basis) - is another reason Canada has relaCO2EMISSIO NS AS tively high per capita carbon dioxide ' emisCOMPARED TO sions. This means Canadians can b e AMOUNTS OFENERGY expected to consume more of-any parti cular . well-endow ed sour ces of ene rgy. Figure 8 CONSUMED· good, including energ y. compar es th ~ ratio of car b on dioxide emisOur cold climat e and vast geograph y also sion s per unit of tot al prim ary energy con contribute to the eney~y intensity of our sumption in a numb er of in du strial nations economy. For example, Canadian houses are including th e U. K ., West Germ any, Japan, abou t as energy efficient as thos e in the U .S.A. and Fran ce. Canada rank s th e lowest U.S., Germany, France -or Italy4. However, of this group larg ely because of th e relatively they are somewhat larger and the climate is greater rol e of hydrauli c an d nu clear power colder, so they use more energy . Similarly, in our en ergy mix . Cana da's options to Canadians tend to own more vehicles to redu ce carbon dioxid e emi ssions, th erefore, FIGURE 9 could b e mor e limit ed than those of the drive greater distances. CO2EMISSIONS If Canadian energy consumption and car - other industrial nation s. GROWTH BYSECTOR Analysis of potential alternati ves to reduce bon dioxide emissions were adju sted for just ANDFUELSOURCE CANADA - 1988vs2005 two factors - brin gin g th e Canadia? climate carbon dioxide emissions in: Canada should 120 consider current sources and future trends . Future projections . of ener gy demand in GAS. 100 95 · Canada and the world have been developed by OIL Imperia l and affiliat ed comp anies_and these ~ 80 un derlie the outlook on carb on dioxide emisw FIGURE 8 D OIL-NON ENERGYD >- ~ 60 z z COAL. 0 I- z 40 0 ::i :=20 :E 0 (20) 14 (8) INDUSTRIAL TRANSPORTATION POWER GENERATION RESIDENTIAL COMM ERCIAL sions contained in the following discussion. Fi gur e 9 sh ows the proj ect ed growth in Canadian carbon dioxid e emi ssion s by fuel sour ce and sector of the econom y du ring th e years 1988 to 2005. In creases -are expected in most consuming sectors. Higher emissions are larg ely relat ed t o greater use of gas and coal to power a growing indu stri al sector and to great er use of coal to meet th e growth in deman d for electrich y. While oil-based tran sportation curr entl y represents the largest single sour ce of carb on dioxide emission s (Figur e 4), increases in this sector are mod est as efficiency imp rovements help to offset demand growth. A reduction in carbon dioxid e emi ssion s from those project ed would b e diffi cult to achieve, partly be cause many efficien cy improvements and changes to fuel mix (to hydraulic and nuclear-based electricity) are . already included in the Imperial base energy outlook in response to current and projected price relationships and expected improve ments in technology. For example, I~perial predicts that by 2005 residential energy use will become 10% more efficient, commercial buildings will on average use 7% less energy, in dust ry will consume 7% less energy per dollar of outp ut, and th e auto mobile fleet will be 20% more efficient . Fur t her improvemen t s in eff iciency would .requ ire addition~ ! economic incen tives, changes in ins tituti onal barr iers or · government man dat ing , or a comb inat ion of all three. Also, furth er switching between fossil fuels in th e tran sportation sector likely offers limited possibilhi es in redu cing any potential global warmin g tr end. For example, Im perial and affiliat ed compan ies have carried out som e analyses of th e greenhou se gas emissions from variou s alt ern atives to gasoline and dies el as fuels for motor vehicles. The se alternative fuels included meth anol, compressed natural gas (CNG) and liquified petroleum gas (LPG), largely propane. The analyses considered the emissions of greenhouse gases over the full cycle of production and consumption of each fuel. Once consideration is given to the energy requirements for fuel manufacturing and possible losses of methane, with its greater heat-trapping effect in the atmosphere, alternative fuels which appear to produte much less carbon dioxide per unit of energy than conventional oil-based fuels, could in fact 800 D TRANSPORTATION-OIL 659 a: ~ GAS. OTHER OIL 600 >....._ D COAL• (f) UJ z z : 0 1- : ", ~ . ' '' ' ' ' z 0 ' ' ' ' ' ' ' .. ' '' ' '' ' ' '' _J _J ~ 423 . ..'' .. 200 ' ' ' ' ' 200 ''' ' ,, ' ' 2005 2005 CONFERENCE AGGRESSIVE TORONTO (20% REDUCTION VS1988) GASE contribute as much or mQre to any poten~ial warming effect in the atmo sph ere. THE CANADIAN CHALLENGE To illustrate t~e dimension ?f th e challenge, Imperial has developed one possibl e scenario of what might be necessary to stabilize Canadian carbon dioxide emissions from fossil fuel combustion at their 1988 levels by the year 2005. Imperial has not studied the desirability, feasibility or the full range of costs and benefits of this scenario; nor is it suggesting that such steps be taken. What the analysis indicates is the tremendous diffi~ult y and cost to significantly reduce Canadian carbon dioxide emissions from fossil fuel combu stion. The following adjustments • were made to Impe rial's current energy-outlook in developing this stabilization scenario, labelled "Aggressive Case", in Figure .lO: • Assum e Canadian automobiles in 2005 will be sized and powered to deliver the same . average automobil e fleet energy·efficiency as exists toda y in Italy. Thi s implies about a 50% improvem ent in efficiency from today's levels in Canada , or mor e than double the gains incorporat ed in Imp erial's base case energy outlook. To achieve this incremental increase could requir e up to 15 years lead time for retooling and automobil e turnover. • Assume all existing indu stria l thermal coal use is converted to natural gas and 70% FIGURE 10 CANADIAN CO2EMISSIONS CHALLENGE __ j 15 of coal-fired electricity generation facilities Let's assume that Canadians agreed to expected to be in operation in 2005 are replaced by nuclear power and or hydraulic accept the costs, changes in lifestyle and ·ignificant economic dislocation caused by power facilities. An all-nuclear program of this magnitude, for example, would require adding the equivalent of four Darlington radical constraints on energy consumption. \'fould the global warming issue be resolved? Regrettably, no. The fact is that in the absence of coordinated interna- plants by 2005, in addition to the plant projected in the Imperial base case outlook. Such a program would bring it own set of environmental is ues and may or may not be appropriate or necessary. Additional capital outlays of about 50 billion would be tional action, Cana- -z r.n LU z 0 The relationship I- betw een expected car- ~ b on d'10x1 'd e production ...J nomic growth, ::::; Si - 2005 expressed growth and ecoas a ratio for the 1988 to 2005 period, is shown in Figure 12 • Th' IS ratio · ,IS · a measure of the relative dependence on fossil fuel use in achieving ~onornic growth. The developing natio~s willrequire significant increases in energy, and particularly in carbon-based energy 10 l- 3: 0 , forms, as a prerequisite for realizing their . ~ Cl.. full economic potential. 2 The challenge is perhaps even greater for developing countries if they are to achieve the economic growth required to raise living standards to levels comparable to more advanced, industrialized countries. Less energy intensive economic opportunities are likely more limited and implementing energy efficiency measures will be constrained by lack of capital. Clearly, Canada has a part to play in mitigating the potential impacts of global warmI ing. Some of these steps will likely be costly and require significant investments of capi tal, time and labour. However, if Canada acts alone in the absence of an enforceable international accord, its actions may well be ineffective and have negligible global impact if industries simply redirect their operations to other countries to reduce their costs. Unless producers and consumers in competing countries make the same effort, Canada will be at a distinct competitive disadvantage. As a first priority, therefore, Imperial believes that Canada's efforts should be focused on significantly increasing the , understanding of the scientific consequences and the eosts and benefits to Canada and to the world economy of actions that might be 1 contemplated to reduce the buildup of carbon dioxide and other greenhouse gases in lhe atmosphere. This will help to build a solid foundation for public policy development and planning to address this potentially serious environmental issue. Government and industry should also place pri.9rity on stepping up research and development of cost-effective technologies that "Ou]d reduce greenhouse gas emissions or mitigate the potential impacts of in- 1-EXCLUDES CENTRALL Y PLANNED ECONOMIES :c 0.8 C!J .._ 0 6 :c 13: 0 a: C!J 0.4 N 0 <..) LJ... 0 0 02 j:: <( a: NON-OECD COUNTRIES CANADA KEY OBSERVATIONS AND CONCLUSIONS • The possibility of global warming 1s a complex and potentially serious issue for the world community; however, many scientific contradictions and uncertainties remain. A commitment to responding positively to the issue of potential global warming is no guarantee that the particular solutions will have the appropriate effect. Therefore, high priority needs to be placed on improving the · deficient areas of the science to better guide potential responses. • Canada contributes only a relatively .small 2% share of global carbon dioxide emissions from fossil fuel combustion, and this share is expected to remain unchanged in the future. Further, no one country makes a dominant contribution to these emissions. This means that cooperative actions among countries, rather than unilateral actions by individual countries, is the essential route to a constructive outcome. • In addition, growth rates of carbon dioxide emissions are expected to be greatest in developing countries as they industrialize and achieve significantly greater rates of economic growth than the relatively more mature indus- trial economies. Accommodating the economic aspirations of developing countries adds ~reased concentrations of greenhouse gases to the complexity of any potential accords to · reduce global carbon dioxide emissions. 10 the atmosphere. OTHER OECDCOUNTRIES FIGURE 12 RELIANCE ONFOSSIL FUELUSEFOR ECONOMIC GROWTH 1988-2005 • Potential global warming, the~efore, is an international challenge. In response, Canada should not act unilaterally. This is not only because such action would likely damage Canada's international competitiveness and, at best, achieve negligible improvement in mitigating the potential for global warming. Of even greater importance is the possibility that costly unilateral Canadian action would be ineffective, whereby industries simply redirect their operations to those countries which are not taking constructive action. • While market forces will lead to further improvements in energy efficiency, steps to appreciably reduce carbon dioxide eI?issions from fossil -fuel combustion in Canada would likely be difficult and costly, partl y because of Canada's energy intensive economy, cold climate and long distances. In addition, as a result of market forces and the country's well-endowed sources of energy, Canada's energy economy is already ·less fossil fuel based than most other industrial nations. • Imperial has examined one possible ' scenario to stabilize carbon dioxide emissions in Canada at .1988 levels by 2005 as an illustration, only, of the size of the challenge. This could require an expenditure of about $50 billion to replace 70% of coalfired electricity generation facilities expected to be in operation in 2005 with the equivalent of four new Darlington nuclear plants. In addition, a 50% improvement in average automobile fleet energy efficiency would be required, or double the gains Imperial forecasts over the period. Such steps may or may not prove to be appropriate or necessary. They ' ~ould, . in any event, require very significant intervention into the economic marketplace in Canada, carry very substantial costs for Canadian consumers, and, if done in isolation, could jeopardize Canada's ~onal competitiveness. • Canada's first priority should be to foster the development of a significantly improved understanding of the scientific and economic consequences of actions that might · be contemplated to reduce the buildup of greenhouse gases in the atmosphere. Priority should also be. placed on stepping up research and development of the most cost1 effective technologies that could reduce greenhouse gas emissions or mitigate the potential impacts of increased concentrations of greenhouse gases in the atmosphere. ,..- - -- ~-~-~~~~~~-=-~~~~~~~~---, Comniitlllents and Recommendations · , mperial makes the following commitments and recommendations to address both the issue of potential global warming and the process to develop a new environmental policy framework for Canada that is credible and workable, nationally and internationally. IMPERIALOIL their alfernati ves in various end-uses; • carry out a comprehensive assessm ent Qf the technical and economic potential for fuel switching with emphasis on the transportation sector, including an assessment of the full range of environmental consequ ences; • assess the macro-economic conse~ ences to Canada of options being contemplated by governments to reduce carbon dioxide emissions, such as carbon or fuel taxes. Imperial shares the view that the possibility of global warming is a potentially serious issue and is committed ·to understanding the implications for Imperial and for Canada. More specifically, Imperial will: Imperial : expects to be in a position to share the results of this work, as they become available, beginning in mid 1990. · • develop an inventory of greenho1;1segases that are emitted in its operations and identify feasible opportunities and costs to reduce these emissions; In leading the overall process of developing • determine the technical and economic potential for additional energy efficiency opportunities in all of its operations, witn an eye to reducing carbon dioxide emissions; • determine, in dialogue with governments and the scientific community, how its extensive research capabilities and facilities and external research programs can be utilized I to. addre~s potential global warming. Th~ pnmary context will be energy usage, considering both input and output implications; • determine the technical and economic potential for carbon dioxide "sinks," or mechanisms to remove carbon dioxide from theatmosphere, such as underground injection into oil-bearing reservoirs to support enhanced oil recovery operations, or into deep ~ aquifers for disposal purposes; ~ '!lifecycle" assessments.of green-~- for fossil fuels and FEDERALGOVERNMENT the new environmental policy framework for Canada, the federal government may wish to consider: • Spearheading a broad consultative process in 1990 among the three tevels of gov- · ernment, industry, public interest groups, academia and the general public to help create the new environmental policy framework for Canada. This process should address: - the larger context of the environmental ~challenges that face the nation, including potential global warming; - the state of the science associated with the challenges and dynamics of its evolution; international, national ~md regional dimensions to key environmental issues; potential initiatives and associated social and economic costs and benefits, internationally, nationally and regionally; the mechanisms to foster change and the appropri?te time frames; 19 the strat egies to adapt lo climate 1·~i;111g1· which may occur despit<• our effor tH to mitigate the effects. • Facilitating th e national cons,•nsw;- building by: furthering th e und ers tanding of the science and th e risks, particularly for evolving issues such as potential globa l warming; increasing public awareness to enable Canadians to support rational choices; developing cost and benefit assessm ents for potential actions to address the environmental challenges; - leading international dialogues to develop market-oriented mechanisms that could be applied multilaterally to meet global environmental challenges. • Establishing a dialogue with industry and stimulating a sector-by-sector analysis of opportunities to respond to the environmental challenges, in partnership with government, to: develop a broader, more cost effective set of ideas and options; enhance Canada's effectiveness internationally by demonstrating the broadly based approach Canada is taking. A framework similar to that employed by CIPEC to facilitate improvements in energy efficiency might be helpful m achieving these goals. 20 i -References 1. NASA/Goddard Institute of Space Studies, New York; Geophysical Fluid Dynamics Laboratory, Princeton Uni versity, New Jersey; Oregon State Qniversity; and the National Centre for Atmospheric Research, Bolder Colorado. 2. Ramanathan, V., "The Greenhouse Theory of Clirriate Change: A Test by An Inadvertent Global Experiment"~ Science, Vol. 240, Number 7, p.93, 1988. 3. Houghton, Richard A. and Woodwell, George M., "Global Climate Change", Scientific American, Vol. 260, Number 4, p.36-44, 1989. 4. International Comparison of Residential Energy Use and Efficiency, Lawrence Berkeley Laboratory, University of California. Footnotes to Figures , Figure 1 Adapted from: Ramanathan . "The Greenhouse Theory of Climate Change: A Test by An Inadvertant Global Exp~riment", Science, Volume 240. Figure2 Adapted from: Houghton, Richard A. and Woodwell, George M., "Global Climate Change", Scientific American, Vol. 260, Number 4, p.36-44, 1989. 21