A ?If-Nil HSIUN I'Al'lili ON
GLOBAL WARMING
RESPONSE 
April. 

 

 

 

 

Foreword

s a leading industrial company in Canada and a major producer of fossil fuels,
petrol~um products and petrochemicals, Imperial Oil Limited has a vital
stake in the development of environmental public policy and is committed to taking an active role. In this spirit, Imperial published "A Discussion Paper on Potential Global Warming" in March 1990 to contribute to public understanding and sound public policy to "deal with
the threat of climate change. The paper also dutlined an extensive
work program by Imperial to further enhance this understanding and to help define
response options for Imperial and Canada.
This second discussion paper on global warming contains a summary of the results of
lmperial's work program over the past year on the seven commitments outlined in the
March 1990 paper.
Despite extensive efforts nationally and internationally, much work remains to be done by
governments, induatry, academia and the public. There is an urgent need to reduce uncertainties and to improve understanding and awareness of both the scientific and socio-economic
dimensions of the threat of climate change and potential mitigative and adaptive strategies.
In the face of.these uncertainties, Imperial believes that Canada's response should he
cautious and flexible. However, there are sensible actions that can be taken now to mitigate the build-up of greenhouse gases in the atmosphere. These arc steps that make sense
in their own right, such as economic energy efficiency improvements. They can be taken
-now without weakening Canada's ability to compete in a global trading economy, while
uncertainties are being reduced and potentially more decisive international acti<>nis being
designed and coordinated.
The paper concludes with a series of recommendations and a commitm 1nt to ·action.
The rr:commendations, directe(l to various stakeholders, arc designed to be executed within
the framework of Canada's federal Green Plan and National Action St:ategy on Global
Warming. The commitments relate to specific actions Imperial is undertaking.
We welcome your comments and further suggestions.

- ----·

-

J.D. McFarland
V10: Prrns1m:vr,

A.R. I lames

EN\ IHO\ME iYl'

C111EF
ExEn Tim

CJTA!R!\.IA\ A\TD

OFFICER

3

 Cont nts

I. EXECliTIVE SlJMMARY
II.
III.

INTRODUCTION
L\1PERIAL'S GREENHOUSE GAS EMISSIONS

IV. RESPOl\SE OPTIOl\S FOR IMPERIAL A.l\D CAN ADA

VII.

8
10
13

Research

14

Energy Efficiency

15

Underground Disposal of CO2

18

Alternative Transportation Fuels

19

Policy Measures

22

V. KEY OBSERVATJ01 SAND CONCLUSI01\S
VI.

6

24

RECOMMENDATIO:':S AND COMMITMEKTS

26

REFERENCES

27

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·5

 Exe,..t ti· e Summary

6

his discussion paper
is one in a series being
prepared by Imperial
Oil Limited ("Imperial") to contribute to
public understanding
of key environmental

and the indirect greenhouse gases, namely
nitrogen oxides (NOx) and volatile organic
compounds (VOCs). NOx and VOCs are
precursors of ozone (0 3 ), a greenhouse gas.
Imperial contributes about 2 percent of
Canada's CO 2 emissions from fossil fuel
combustion and a lesser share of the other

challenge~ facing Canada and sound public
policy to address these. The paper is a
sequel to lmperial's March 1990 publication
"A Discussion Paper on Potential Global
Warming" and reports on work carried out
by Imperial over the past year to better
understand the implications of the threat of
global warming and the response options for
Imperial and Canada. It provides a private
sector perspective on the issue and how one
company might be able to deal with it.
In the past year, Canada and a number of
other industrialized .countries ha;e co~mitted to the establishment of national strategies to stabilize carbon dioxide (CO 2 ) and
greenhouse gas emissions at 1990 levels by
the year 2000. These goals are embo _died in
Canada's Green Plan and National Action
Strategy on Global Warming, even though
some scientific uncertainties remain and·
only limited progress has been ma!}e in
understanding the socio-economic implications of such a commitment:
As a first step in understanding the size
of the challenge for Imperial, the company
has completed an inventory of greenhouse
gas emissions resulting from its operations.
It includes CO 2 , methane· (CI-14 ), nitrous
oxide (N 2 0) and chlorofluorocarbons (CFCs)

direct greenh?use gas emissions. The inventory has highlighte4 the need for an
improved understanding of CI-14 emissions
which may be more larger than previously
believed. Also, the contribution of 0 3 - and
its precursor gases, NOx and VOCs - to any
enhanced greenhouse effect could be significant and needs to be better understood.
In terms of potential response options for
Imperial and Canada, the company h_as
examined how it can best contribute to
research efforts to resolve scientific uncertainties. As a result, Imperial has emba.rked
on a number of new progra~s that address
both the basic science of climate change and
possible mitigative and adaptive strategies.
The company has also conducted a com·prehensive examination of the potential for
further energy efficiency improvements to
reduce CO 2 and other combustion-related
greenhouse gas emissions in its operations.
This study showed that Imperial could
at:;h_ieve a relatively modest 6 percent reduction in otherwise projected CO2 emissions by
the year 2005 from energy efficiency investments that achieve a five year economic payback at prevailing energy prices. This is
partly a reflection of the significant energy
efficiency improvements over the last two

 decades which achieved a 28 percent reduction in otherwise projected CO 2 emissions.
Imperial believes it is technically feasible to
dispose of about 3.5 percent of Canada's CO 2
emissions into subterranean formations at a
cost of $15 to $50 per tonne of CO2 . Further
studies are underway with the Alberta and
Saskatchewan governments and other industries to confirm this outlook.
Imperial and affiliated companies have carried out studies of the greenhouse gas emissions from various alternative transportation
fuels, including methanol blends, compressed
natural gas, liquificd petroleum gas and electricity. These fuels offer somewhat limited
potential to reduce - and in some cases actually increase - greenhouse gas emissions when
"life-cycle" effects on CO2 and CH 4 emissions
are considered. Electric vehicles promise
lower overall emissions of greenhouse gases
and other air contaminants, depending on
how the electricity is generated, but substantial engineering dev~lopment will be required.
Nonetheless, Imperial believes there will be
increasing opportunitit>s in the marketplace
for alternative fuels, even though gasoline
and diesel fuels will continue to play the
major role in meeting Canada's transportation
needs in the foreseeable future.
(

Imperial commissioned ORI/McGraw Hill
flr to examine the macro-econom~c impacts on
1
V
Canada of a number of potential policy mea11 sures - including gree~, fu;i, gas guzzler and
carbon taxes - to reduce CO 2 emissions. The
study illustrated that it would be difficult
and costly for Canada to st~bilize CO2 emissions, requiring a carbon tax of about $200
per tonne of carbon or $55 per tonne of CO 2 •
It indicated that such a tax would reduce
Canada's gross domestic product by $100 billion in real terms over the 1990 to 2005 period

and result in a 7 pcnn1t reduction in personal
incomes by the year 2005. Serious regional dislocations, particularly in Alberta, would result
and international competitiveness would be
weakened if such a step was taken in isolation
from Canada's major trading partners.
These studies reinforce the need for
Canada to carefully design its strategy on
global warming, to ensure that it is scientifically sound, comprehensive, cost ·effective, regionally sensitive, internationallv
coordinated and flexible.
Such a strategy will require the development of a more extensive and reliable data
base of Canadian greenhouse gas emissions,
including sources and potential sinks. Additional research focused on the key scientific gaps and on mitigative and adaptive
strategies is also important in establishing
a full range of options and their relative
costs. A much improved understanding of
the structural reasons for Canada's energy
intensity, and a realistic assessment of the
potential for energy efficiency improvements, are critical components in m:iderstanding the size of the challenge for Canada. An improved understanding
of the
complex interrelationships between global
warming and other air quality issues is
required in order to design effective action
strategies. Finally, more definitive actions
. should be designed to sort out Canada's
broader environmental priorities in a way
that balances the environmental and economic needs of our societv.
For its part, Imperial is committed to
making further contributions to sound pubI lic policy on global warming and to under-

I
I
j

Itaking actions now that make sense in their

9wn right. This will include widely sharing
I these findings, updating its inventory of

I
1

i

.1
7

 greenhouse gas emissions, funding climate
change research 'programs, implementing

pursumg CO 2 disposal opportunities and
enhancing the technical and commercial·

economic en.ergy efficien<ey opportunities,

potential of alternative tr~nsportation fuels.

lnt1~ocl11.ctio1:
his discussion paper is
one in a series beiug
prepared by Imperial

the Canadian Council of Ministers of Envi-

Oil Limited ("Imperial") to contribute to

ronment (CCME) released a draft "National

public understanding
of key environmental

(national action strategy) designed to be a
strategic framework for governments to

Action

Strategy

on Global

Warming"

challenges facing Canada and sound public
policy to address these. As a leading indus-

develop and implement specific measures
wit~in their jurisdiction, in consultati'on

trial company in Canada and a major pro-

,With stakehold~rs., to meet this commitment. The elements of the national action

ducer of fossil fuels, petroleum

products_

and petrochfmica:ls, Imperial has an important stake and keen interest in fully participating in the search for realistic and costeffective solutions to these challenges.
The paper is a sequel to lmperial's March
1990 publication ''A Discussion Paper on
Potential Global Warming" which addressed
the threat of climate change in the context
of energy use. It also included a commitment to assess-the implications of potential

strategywere

Plan of December 1990.
At the international level, the Intergovernmental Panel on Climate Change (IPCC)
reported its findings to the Second World
Climate Conferenc,e in Geneva in November
1990. The findings served to give_additional
emphasis to the development of an international framework

convention

on climate

global warming for Imperial and Canada. In
this second paper, Imperial reports on the
results 'of these studies carried out over the

of the U.N. with the objective of having ~
convention ready for signature at the 1992

past 'year.
Since the March 1990 ·paper was pub:

U.N. Confere11:ce on Environment

and,

J?evelopment.
As a backdrop to this quickening pace of
initiatives by _Canada and other nations, the

both the national and international level.
At a U.N. conference in' Bergen ,in May

scientific debate on global warming con-

1990, Canada made a commitment, as a first

tinues and there appears to be emerging

step to limit emissions, to establish national

scientific consensus. A notable element is
\
the position of the IPCC that increasing

strategies to stabilize carbon dioxide (CO 2 )

l

embodied in Canada's Green

chang~. Negotiation for this convention
began in February 1991 under the auspi~es

lished, there have been key developments on

8

and other greenhouse gas emissions at 1990 "\
levels by the ye.ar·2000: In November 1990,

'

\\
)
i

 j atmospheric
1

1

concentrations

1

of

CO 2 ,

methane (CH 4 ), chlorofluor:ocarbons (CFCs)

!

an eye t._o reducing CO 2 emissions;

I 3.

Determine, in dialogue with governments

.

.

I

and nitrous oxide (N 2 0) will enhance the I' and the scientific community, how its exten· natural greenhouse effect and lead to higher · sive research capabilities and facilities and

" global temperatures
in the future. This
could have significant impacts on agricul-

I external

research programs can be utilized to

address pot,entia:l global warming. Th~ pritil~e, forests, fisheries and water resources - 1 mary context will be energy usage, consid,

and, on low· lying coastal and island com- j ering both input and output implications;
I
in unities from changing sea levels.
I 4. Determine the technical and economic
',."\he scientists acknowledge, however, that . potenttal for CO 2 "sinks," or mechanisms .to
uncertainties

remain,

particularly

with

regard to th<, timing, magnitude and regional

~emove CO 2 from the atmosphere, such as
underground injection into oil-bearing reser-

patterns of climate change. Nevertheless,

voirs to support enhanced oil recovery oper-

many nations, including C1mada, are taking
the view that the risks of waiting for further
research results before taking action to limit
greenhouse gas emissions ,are too great.
While these co~mitments
are being
made by · governments and precautionary

ations or into deep saline aquifers for disposal purposes;
5. Develop · "life-cycle"
greenhouse

assessments

of

gas emissions for fossil fuels

and . their alternatives in various end uses;

steps are being planned, many gaps remain
in understanding both the impacts of an

6. Carry out a comprehensi".e assessment.
of the technical and economic potential for
fuel switching with emphasis on the trans-

increase in global temperature and the socio-

portation sector, including an assessment of

economic consequ(lnces of potential strate·gies to limit and adapt to this change. Nor

the full range of environmental

does Canada's . national

action

strategy

clearly define how the nation could actually
achieve a greenhouse gas emissions stabi-

conse-

quences; and
7. Assess the macro-economic consequences
to Canada of options being contemplated by
governments to reduce CO 2 emissions, such
as carbon or Juel taxes. ·

lization target. '
r Imperial presents this second disyussion I
This is now substantially
complete,
paper on global warming within "this evolv- I- although work to more fully satisfy the orig- _
inal commitment is still underway in some
ing context. The paper contains a summary
of work completed to date in connection
areas, such as dlternative fuels. In other
with seven commitment areas outlined
the original paper. These were to:

111

1. Develop an inventor;y of greenhouse
gases that are emitted in Imperial's operations and identify feasible opportunities and
costs to reduce these emissions;

areas, follow-up actions are being taken or
initiatives are being extended as described in

I
I

later sections of the paper. Six background
technical papers are ·being prepared to
accompany this summary, and will _be avail-

I

2. Determine the technical and econoq!,ic

able on request.
Efforts by the company over the past

potential for additional energy efficiency
opportupities in all of its operations, with

year hav0 been extensive and have better
defined the -.challenge Imperial could face as

.1

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1

,

_J
9

 well as sorrie potential response opttons for

• cost effective in an international context ,
recognizing that some of Canada's resources
- financial, technology and know-how -

both Imperial and Canada. The results will
help to fill in some of the major gaps that
still remain in understanding the size of the
task for Canada and the socio-economic con-

might well have more leverage directed out-

sequences of potential response options in

• designed in concert with other nations to
appropriately reflect the nature of Canada's

side its borders;

limiting greenhouse gas emissions.
lmperial's extensive wor~ has focused qn
its own operations, with emphasis on CO 2

economy which is -Jieavily geared to the
·

export of energy intensive commodities to

emissions, because that is what it knows

world marke,ts;

bes!. Much work remains to be done by governments, the private sector, the academic
community and the public, to help ensure

• internationally coordinated i!1a way that
does not jeopardize Canada's competitive
position, particularly with the U.S., our

that any actions

Canada might

take to

.

major trading partner; and

,

respond to the threat of global warming are:

• flexible, to take into account evolving sci-

• scientifically sound in their justification
and design while recognizing the pot_ential

entific and socio-economic understanding.

for some action in the face of scientific

The paper concludes with commitments
by Imperial and recommended actions that

uncertainty;
• comprehensive in terms of examining all

can further contribute to an appropriate
Canadian strategy for consideration by gov-

greenhouse

'-

.

gas_es and theu

sources . and

sinks;
I

• fully defined, both in terms of cost and
socio-economic impacts;
• designe·d with due recognition to Canadian regional differences;

ernments,

the private sector and the aca-

demic community. These reflect the above
principles, many of which are incl,uded in
Canada's national action . strategy, and the
lessons learned by Imperial ,in its global
warming study work over the past year.

Imp :.rial's Greenhouse

G-as Emiss ·lo11"s
s a first step in understanding
the scope of the qhallenge,
Imperial has completed an
inventory of greenhouse
gas emissions from the
facilities it operates in
the production, refin-

10

ip.g, marketing and chemical sectors of its
business. This has provided a catalogue of
sources and volumes of emissions as a basis
to assess reduction options and a benchmark to measure progress.
Defining what constitutes a greenhouse
gas from a public policy standpoint is not a

 trivial mailer. Jn its inventory work, Imperial has includ,~J its emissions of nitrogen
oxides (N Ox) and volatile organic
pou11ds (VOCs),

whi('h

have

<·om-

indirect

IMPERIAL'S CO2EQUIVALENT
EMISSIONS
SHARE
OF
(THOUSAND
TONNES/YR)
(TONNES/YR) CANADA(%)

GREENHOUSE
GASES

10.454X 103

1. DIRECT CO2

---

impacts only on any enhanced gret~nhouse

44,371

effect. Thest: gases, if pn~sent together in the
atmosphere, can react under the influence of
sunshine

2.0
·---··

1.1

1.040

a11d heat to form o;r,011c(O:i)-

CFCs

-

-----

1.0

10.454

----

2.800
280

--- ------

15.3

0.1

110

28.025

1.5

4,200

64,336

3.4

1.990

Although O;i is a greenhouse gas, its contri. but ion to climate changt· is not well defined

2. INDIRECT:NOx

by the IPCC. Therefore,
the inclusion or exclusion of 0 3 and its preas acknowledged

voes

cursor gases, NOx and VOCs, in natio11al

protocols,

greenhouse gas inventories is an issue that

progress.

needs to be resolved.

propriate to establish emission caps that are

Developing a greenhouse gas inventory is

setting

targets

and

tracking

For example, it would be inap-

hmwd on poor inventory data.

of

The results of Imp\ \rial's inventory work

greenhouse gas emissions is not practical in

are sumrnari;r,ed iu Figure l. hnperial's CO 2

most situations because of the large number

emissions

of sources and the physical limitations

mated to be 10 ..5 million tonnes in 1989.

an indirect process. Direct measurement

measurement

techniques.

of

from its operations

These represent about 2 percent of Canada's

be calculated by applying so-called '\:mis-

CO 2 emissions from fossil fuel combustion

sion factors". These arc ha~wd on the heat

which Imperial estimates wen· 529 million

content of fossil fuds in the cast: of com-

tonne,. in 1988 • They also represent about

bustinn-rP,lated emissions and on equipment

6 percent of Canada's i11dustrial sector emis-

type and process configuration

sions which Imperial

1

estimates

in 1988

1
•

were 179

of process losses, leaks and other fogitive

million tonnes

emissions. Much of this is subject to

c:011-

emissions arc generated almost exclusively

siderable

with

from the <'Ombustion of fossil fuels in boil-

uncertainty,

particularly

lmperial's

CO 2

rt\spect to fugitive emissions, and a single,

ers, furnaces and engines used to generate

widely accepted tiet of factors is not avail-

heal and power throughout

able. As a result, these calculatt:d ernissiorn,;

opc:rations.

have a wide range of unc·.ertainty. l\"onetheless,

I lu:y

provide sufficient. basis for an

improved understanding

of the fuller dimen-

sion s"of greenhouse gas Pmissions.
The impli('ations

of these short<'omings

Impcrial's

the company's

CH,; emissions in 1989 wt~re

about 44,000 tonnes or ahout l percent of
Canada's

total. Almost all of these emis-

sions are generated in the production st\clor
from combustion

losses in engines, losses

in measurenwnt te<'hniques and 1p1estions of

from hca\'y oil and other production

sc:ope will need to be taken into <'onsidcra-

casings and fugitive emissions from valves

tion in establishing

and fittings. Calculations of ClJ 4 emissions

tional emissions

national and interna-

i11ventori1:s, negotiating

IMPERIAL'$
GREENHOUSE
GAS
EMISSIONS
- 1989

were esti-

Emissio11s must

in the case

FIGURE
1

well

arc approximation;. only, sint'c the emission

J
11

 ,--------

-

--------------DIRECT

10.5
a:

INDIRECT

10

and product distribution systems. lmperial's VOCs emissions are about 3.4 percent
of the national total.
lmperial's emissions of direct and indi-

<(

w

>;:;; 8
w

z
z

0
f-:

z

6

~

·O

4.2

__J
__J

2.8

2.0

CO2

:FIGURE
2
IMPERIAL'S
CO2
EQUIVALENT
GREENHOUSE
GAS
EMISSIONS
~ 1989

CH4

0.3

0.1

N20

CFCs

NOx

voes

factors and number
of individual sources are.
highly uncertain .. Neither are data on total
Canc1dian emissions of CH 4 as well <level. oped as they are for ·co2 • Imperial will be

supporting planned work by the Canadian
Petroleum Association to validate a number
of CH 4 emission factors and · to confirm
· emission s~urces in the productio~ sector.
lmperial's emissions of N 2 0 are also
FIGURE
3
related to. combustion of fossil fuels and
IMPERIAL'S
CO2
,
were about 1,000 tonnes in 1989 or about 1
EQUIVALENT
percent of Canada's total. C!3-nad;'s N 2 0
EMISSIONS
OFDIRECT
GREENHOUSE
GASES emiss/ons are also subject to considerable
uncertainty.
BYREGION
-1989
lmperial's emissions of CFCs, resulting
from process losses in refrigeration and f1re
suppression_ systems and from laboratory
so.lvent use, primarily in the refining sector,
'
'
were relatively small at 15 tonnes in 1989.
Imperial's emissions of indirect green-

.

SASKATCHEWAN
8%
ATLANTIC5%
BRITISft·
COLUMBIA3%
- OTHER2%

13.6x 106 TONNES

12

--

..

occur in...all sectors from sources such as process ·losses and evaporation from tankage

house gases, N,Ox and VO Cs,. are also shown
in Figure 1. In 1989, they were estimated at
28,000 and· 64,000 tonnes respectively. Emissions of NOx result primarily from combus_tion processes throughout lmperial's
op·erations ·and repr~sent about 1.5 percent
of the national total. VOCs emissions also

rect greenhouse gases have heel! converted
to a CO 2 equival~nt b,asis in Figure _land are
displayed in Figure 2 to permit relevant
.comparisons; Conversion factors are based
2
on IPCC estimates but these are not precise.
On this basis, lmperial's CO 2 equivalent
emissions of dire.c! greenhouse gases were
13.6 million tonneq in 1989. .Of this total,
CO 2 makes up the largest contribution at
10.5 million tonnes or 77 percent. Although
emissions of CH 4 represent a lesser share at
21 percent, these are equivalent to about one
quarter of lmperial's CO 2 'emissions.
lmperial's CO 2 equivalent emissions of
the indirect greenhouse gases, NOx and
VOCs, were _6.2 million tonnes in 1989 or
about 46% of the total direct greenhouse gas
emissions. While-t~e actual impact of these
indirect greenhouse gases on any enhanced
greenhouse effect is highly uncertain, the
potential co11tribution could be significant.
This highlights the need to develop a better
understa~ding of the impact of these indirect greenhouse gases on any enhanced
greenhouse effect as an · important step in
establishing effective national and international action strategies.
As shown in Figure 3, 58 percent
?f lmperial's CO 2 equivalent emissions of
direct greenhouse gases originate in Alberta
and 24 percent in Ontario, with much
smaller shares in other .i-egioris. The rela_tively high share in Alberta reflects theco,ncentration of lmperial's productton facilities
in the prnvince.

 In terms of next steps, Imperial .
will widely share what it has learned in
I
developing this preliminary
inventory
of greenhouse gas emissions
and will

co'ntinue to refine and periodically update the i'nvento'ry in concert with steps
evolving from Canada's national action
strategy.

l

Response O ions for

Imp ria

1dCanada

ith the knowledge of greenhouse gas emissions in hand,
Imperial has begun to investigate
some of the global
warming response options available to both
Imperial and Canada in· ·more detail. The
results to date have helped to define some
initiatives that Imperial and Canada can
sensibly act on now. Others should more
appropriately remain held in abeyance until
justified and coordinated with stakeholders
in Canada and with other nations.
The fundamental need for sound sc(ence
in understanding
the threat of climate
change and designing approprjate mitigative
. and adaptive strategies cannot be overstated.
Many uncertainties remai_n and Canada's
evolving response strategy needs · to be
linked , to an improved understanding in
many areas. Areas of understanding include
the fundamental physical, chemical and bi9logical processes, the techniques to model
climate change and the assessment of
\
regional impacts. These needs, and the
appropriate role for international and Canadian research programs, are addressed m

Canada's Green Plan. As outlined m the
next section of this paper, lmp~rial has
examined how it can best contribute to the
~ecessary research efforts.
In ter~s of initial action, Imperial
believes steps that make sense in their . own
right are most appropriate, such as energy
efficiency improvements that can achieve
economic returns , at least equivalent to the
cost of capital. This allows simultaneous
progress as, vncertainties are reduced in
global warm~ng·science and socio-economic
impacts and as the negotiation of international protocols proceed. This strategy is also
a cornerstone of Canada's current strategy as
outlined in the Green Plan.
lmperial's energy efficiency record and
opportunities for the future are set out in a
later section of this paper. And although
opportunities· are limited, there is potential
to reduce number of lmperial's combus- .
tion-related emissi .ons of direct and indirect
greenhouse gases including CO 2 , CH 4 , N 20

a

and NOx.
. ' Other emission reduction steps have
already been initiated under national pro ~
grams that, in effect, serve multiple policy
objective~. For exa_mple, Canada has committed to eliminate the production and

13

 consumption

of CFCs by 1997 and to sig-

nificantly reduce NOx and VOCs under the
CCME's October 1990 management plan.

the I PCC scientific reports and have had

on mitigating an enhanced greenhouse effect

extensive discussions with representatives

and therefore need to he appropriately
linked to Canada'~ national action strategy

of government and the scientific community
who are involved in climate change research.

on global warming.

This has helped to crystallize lmperial's perspective on where the key uncertainties lie

management plan is the most significant
for. Imperial. Imperial estimates that its

within the context of where Imperial can

emissions of VOCs will be reduced hy 9 per-

best contribute. It is clear that major uncertainties remain with regard to the funda-

cent by 1993 under "stage one" controls.

mental phenomena associated with climate

However, extensive stakeholder consultations
will be required on any extensions beyond
"stage one" to ensure that goals are well

change including the physical, chemical and
biological processes involved and the com-

substantiated and the means to achieve them

geosphere and hydrosphere of the planet.
Much work also needs to be done to design

are effective. Further, Imperial believes that
this must be done as part of a more comprehensive approach to responding to multiple and interrelated air quality issues in
Canada, as outlined in lmperial's April 1991
companion paper, _"A Discussion Paper on
Air Quality."
Beyond these initial steps that arc economic in their own right, or already underway to serve well-substantiated multiple policy . objectives, more far-reaching global
warming response options require very careful study. Some of the dimensions to these
options and their implications, such as CO 2
disposal, alternative fuels and policy instruments that impact energy d.cmand and the
energy supply mix in Canada, are described
in later sections of this paper.

RESEARCH
Imperial has examined how it can best contribute to an improved understanding of climate change science by utilizing its extensive
research capabilities and facilities as well as its

- --·-··

in Calgary and Sarnia have closely examined

These will also have some beneficial impacts

Of these programs, the NOx and VOCs

14

financial capacity to fund external programs.
As a starting point, lmperial's researchers

plex interactions

between the biosphere,

effective mitigative and adaptive options to
respond to the threat of global warming and
to define their relative costs and benefits.
Imperial has unique research capabilities
in many areas that can contribute

to solu-

tions. For example the company's Calgary
research organization has leading expertise
in process design for oil sands development
which can contribute to less energy intensive
and more energy efficient recovery processes. In addition, the organization has
unique expertise in some clements of the
Arctic environment, gained from many
years of exploration and development in the
north, which can contribute to an improved
understanding of the implications of potential climate change in this particularly sensitive region . In the company's Sarnia research organization, expertise in automotive
fuels and lubricant design can make important contributions to mitigative measures
such as vehicle fud efficiency and emissions reduction.

 As a result of this review, Imperial has
put a new emphasis

on some important

research programs currently underway and
has embarked

on a m1mhcr of new pro-

_f?;rams. The company is also in the process
of exami,ning its university research grant

(

plans to apply its expertise on frost heave
· and thaw settlement as part of this effort.
Imperial

is also carrying

out in-house

research on sea ice dynamics aml the fate of
sea ice in a warmed earth scenario, in order
to understand important variables in designing facilities for oil and gas production

in

program -- currently some $700,000 annually ---to assess opportunities to selectively

the Arctic. As these research studies evolve,

refocus funds on climate change research.

Imperial will remain alert to opportunities

In terms of the basic science, Imperial is to extend these efforts in areas where the
sponsoring a study of the recent geological company can make a valuable contribution.
past in an area of southern British Columbia
ENERGY EFFICIENCY
in an attempt to evaluate the natural climate
variability in the Halocene period and its Imperial has completed a preliminary but
impact on natural flora. This will contribute
comprehensive assessment of energy effito the development of an historical analog to ciency opportunities in the facilities it operwhat might be in store in the future. The ates, encompassing the production, refining
company also plans to undertake a detailed
and chemical sectors of its business. This
study of the impact of global warming on study included a retrospective review of
CII 4 trapped in Arctic permafrost in the energy efficiency progress since 1973 and a
form of ice hydrates. At higher temperaprojection of potential improvements to the
tures Cl~4 could be released, enhancing the year 2005.
greenhouse effect.
Attendant impacts on CO 2 emissions
In terms of mitigative measures, work have been assessed, using the combustion1s underway to examine innovative new .related emission factors described previprocesses to develop Canada's oil sands
ously. These include impacts on both lmperesources, including bore-hole mining con- riaF sown CO 2 emissions and on emissions
cepts and cold-water extraction of bitumen
associated with power generation facilities
from oil sands. These offer the potential to that supply Imperial with electrical energy.
reduce the energy intensity of bitumen
Coal was assumed to he the marginal fuel
recovery operations, thereby reducing CO 2 source to generate this electrical energy.
and other greenhouse gas emissions. The The associated CO 2 emissions from these
company is also contributing to a two year power generation facilities were not instudy by the Alberta Oil Sands Research and cluded in lmperial's inventory described
Technology Authority to evaluate the poten- in an earlier section of this paper. Impacts
tial for underground disposal of CO 2 •
of energy use on other combustion-related
lmperial's contribution to adaptive mea- greenhouse gas emissions such as CH4 , N2 0
sures includes plans for partial funding of a and NOx were not assessed for the purmajor study by the Canadian Climate Cen- poses of this study, although these would be
tre of the impact of warming on the Macken- reduced as well through energy efficiency
zie-Peace-Athabasca basin. The company
improvements.
15

 \

~ ~ ---

/

in Imperial's operations. Scenario C includes
only those new energy efficiency _improvement:,, employing currently available technology, that achieve a simple five year economic payback of increased capital and
operating exp-enditures, through anticipated

STUDYSCENARIOS
FJATURES

#

TYPE ..
ACTUAL

ACTUAL
ENERGY
USEHISTORY
1973-1989

-- ---·--

--

HISTORICAL RESTATED
HISTORY
WITHOUT
ENERGY
EFFICIENCY
1973-1989

A

NONEWENERGY
EFFICIENCY
IMPROVEMENTS
1990-2005

energy savings. Scenario D includes all technically feasible energy efficiency improveC FUTURE
ENERGY
EFFICIENCY
IMPROVEMENTS
WITH5 YEARPAYOUT
----ments· employing currently available techENERGY
EFFICIENCY
.IMPROVEMENTS
WITHTECHNICAL
FEASIBILITY nology, but with no economics test.
D FUTURE
All projections are based on Imperial's
views on currently available energy effiAs shciwn in Figure 4,- one retrospective and three prospective scenarios were ciency . technology and assume minor real
' ENERGY
•
IMPERIAL'S
developed to describe the influe~ce of energy growth in crude oil prices, no alteration of
EFFICIENCY
HISTORY
' · efficiency in Imperial' s operations Qn asso- electricity pricing structures, stable demand
ANDOUTLOOK
ciated CO 2 emissions . .Scenario A is a retro- for petroleum and chemical products; declinspective assessment of what Imperial's energy ing convent-ion<;1l
crude oil production, conuse and ass.ociated cc\ emissions would have tinued development of ctude bitumen probeen if no energy efficiency improvements . duction and increased natural gas producdon.
FUTURE

B

-1

1

had been made over the 1973 to 1989 period.
'
. This serves to indicate.the important contrib-t~tionthat energy efficiency improvements
have made to CO2 emission reducti?ns, as a
response to oil price shocks 'in the 1970s
HISTORICAL
CO2
and early 1980s. Scenario B presents a
EMISSIONS
FROM
IMPERIAL'S
ENERGY prospective case in which . n_o new energy
efficiency improvements are implemented
USE-1973-1989

~ 15

w

.

>(/)

· SCE~ARIO
A

.

w

z
Z

~
z

10
I

!Clill
iiliii&l'filAlilliiill

0

ACTUAL

_J
_J

73

77

79

81

83

85

87

I

CO2"SAVINGS"
FROMENERGY:
EFFICIENCY

16

+--· -·

S9

The retrospective results illustrated in
Figure 5 highlight the important contribution that energy efficiency improvements
in
Imperial's operations have made in reduc.
,
.
ing CO 2 emissions over the 1973 to 1989
period. These steps -have contributed to a 28
percent reduction in otherwise projected
CO 2 emissions in 1989, equivalent to 5.2
million tonnes per year.
Despite these substantial reductions, CO2
emissions have risen by about 49 percent
over this period for a number of reasons,
many of which will be important in the
future a.s well. Imperial has experienced significant exp~nsion in all sectors of its business which ·has increased its demand for
energy: The energy intensity of Jmperial 's
crude oil production operations has in- .
creased with the growing contribution of ·
. crude bitumen in its supply mix. The energy
intensity of c_onventional oil pr~du~tion has
also increased as ever larger v~lu~es of water

'

 are produced in conjunction. with declining
I
oil volumes. The energy intensity of the
company's refining operations has increased
in order to handle heavier crude oil feed-

--

5

D

· 4.3

PRODUCTION

D

4CI:
<:(

w

-

REFINING

3.3

>-

3sto~k~ and to produce cleaner burning trans(/)
w
z
portation fuels. Energy efficiency savings,
z
0
although significant, were unable to off set
·•. f2z
0
this growth in the scale and energy intensity
-'
-'
. of the company'.s operations.
~
1Figure 6 looks to the future, ·showing the
g~owth in CO2 emissions associated with
energy use in lmperial's _operations over the
1989 to 2005 period for the .three prospec1
tive scenarios . .Actual CO2 emissions in
()
SCENARIO
8
SCENARIO
C
1989;' the base year, were estimated at 13,4' energy requirements and ·associated CO2

million, tonnes; this in.duding; 10.5 millioi;i •emissions by up to 2()0,000 tonnes per year.
tonnes from lmperial's operations and the
Scenario C, ~hich includes those energy
remainder from power generation sites of efficiency improvements with a five year
payback, shows a growth in CO2 emissions
. others supplying electricity to Imperial.
Scenario B, which does not include any of 3.3 million tonnes. This represents a 6
new energy efficiency improvements after percent reduction from .scenario B emis1989,·shows a project~d growth in CO2 emis- sions in the year 2005. This relatively modest reduction is a 'reflecti~n of the significant
sions of 4.3 inillion tonnes, or 32 percent,
over 'the period. This' increase is driven pri- . achievem~nts over the last two decades and
marily by the production sector based on an the more marginal nature of the remaining
outlook of conti~ued gro~th of more energy opportunities that can achieve a five year
intensive crude bitumen in the supply mix. economic payback at current ene~gy prices.
Scenario D, which includes all ,technically
To illustrate, the production process for con~
ventional crude oil consumes the . equiva- feasible improvements with current techlent of about 3.5 percent of the energy con- nology, shows a growth in CO2 emissions of
.
tent of the crude oil. This increases to 18.5 1.6 million .tonnes. This represen~s a more
percent for ·crude bitumen. Growth in CO2 substantive 16 percent reduction from scenario B emissions in year 2005. This case
emissions .also takes place in the refining
includes a number of cogeneration facilities,.
· sector as crude oil feedstocks are predicted
to become Heavier and more energy inten- which simultaneously produce useable heat
sive to refilfe. Refining energy intensiW will and electric~ty. This is a more energy effialso increase in order to produce cleaner cient process ~ince heat ~ormally lost in elec' burning fuels. For example; new desulphurtrical generation is usefully emplo)'.ed in the
11-f ~zation f~ci~ities th~t will likely _he requ.ired production, refining or che'mical process.
However, in none of these scenarios is
f
m lmpenal s operat10ns to meet future ~:hesel
fuel emission standards could increase
the growth in CO2 emissions resulting from .

CHEMICALS

2.1

(0.5)
SCENARIO
D

CO2EMISSIONS
GROWTH
FROM
IMPERIAL'S
ENERGY
USEBYSECTOR
.
·2005 vs1989

.

~

17

------ ..

 1---

_·

STUDY
SCENARIO

CAPITAL
COSTS
(MILLION-1990$)

977

70

2.751

830

C-5 YEAR
PAYOUT
[

0-

i energy efficiency and energy intensity, the

CO2REDUCTION
(THOUSAND
TONNES/YR
IN 2005)

~~~~~~LLY--

lattt1r being a reflect ion of the very s1ructurc
· of the business or in national terms, the
structure

of Canada's

eronomy. This dis-

tinction doe;; not appear to he well understood by many Canadians when they continue to 1:ategorize themsdves

as energy

wasters. The country can do itself a disservice by using misleading indicators, such as

the increasing energy intensity oflmperial's

energy use per capita, as a rationale for tak-

. IMPERIAL'S
COSTS
FORENERGY
EFFICIENCY
IMPROVEMENTS

to reduce

ing initiatives

energy

use in

Canada that are out of step with our t.racling
partners. Further analysis and communica-

1990-2005

tions

efforts

required

at the

national

level are

to more appropriate!

y portray

Canada's energy use.

UNDERGROUND DISPOSAL OF CO2
In contrast to the indirect steps to reduce
CO 2 emissions
be toward the low end of this cost range.

energy

through

efficiency,

improvements

in

has also ex-

Imperial

amined direct steps to remove CO 2 from
the atmosphere
ciency improvements

in lmpcrial's

"sinks".

opera-

has

levels and with current technology. To the

evant to its business and unique expertise.
The first of these involves injection of

Canada

CO 2 into subterranean

tations that energy efficiencies can significantly r~d uce future greenhouse

t(

1

the~e hydrocarbons.

based on this study and a

e_viewof where it can best contribute to solu-

aquifers.
where

These options are only relevant
there

are large,

single

"point"

sources of CO 2 emissions which can be cap-

economic energy effi<"ien<"y tured, processed and pipelined over a rea-

opportunities. Ac<'ordingly the company will

sonable

ncgiving new emphasis

access subterranean

+
l-r'

The second involves

j deep subterranean formations such as saline

j lions, Imperial is committed to implementing
the remaining

contain-

gas emis- \ straight disposal by injection of CO 2 into

om, in the industrial sector.
Nonetheless,

reservoirs

ing oil and gas to enhance the recovery of

needs to be cautious when it comes to expec-

and priority to energy

--·

distance

to injection

wells that

formation1,,.

This 1,,tudy focuses

cfficicrwy in its capital CXf-wnditureplanning.

Impcrial's work has also highlighted the
I importance of making distinctions between

18

the company

examined two options which are highly rel-

of other companies and industries,

/

In particular,

so-called CO 2

tions is modest at prevailing energy ·price
extent that the results may be representative

/

employing

on CO 2 emission

soun:es in Alberta where there arc a number
of large coal-fired power generation facilities,

~- ---------

------

j

 oil sands procluct ion and refining plants and
other fertilizer and petrochemical plants. As
shown in Figure 8, CO 2 emissions from these
facilities are about 142,000 tonnes per day -

I

VOLUME
(THOUSAND
TONNES/DAY)

SOURCE

97

29

30

9

FERTILIZER
& PETROCHEMICALS

15

4

TOTALPOINTSOURCES

142

42

~

~ER GENERATION

!~

L_SANDS

about 12 percent of Alberta CO 2 emissions
and 10 percent of the Canadian total.
lmperial estimates that it would be technically feasible to develop, over a five to 10
year period , the infrastructure

to perma-

nently dispose of up to 50,000 tonnes per
day of CO 2 . This represents about a third of
the aggregate

emissions

from the larger

----··-

idcutify enhanced oil recovery opportunities. This study, which could lead to CO 2
pilot demonstration

projects, will benefit

point sources in Alberta or about 3.5 percent of Canadian CO 2 emissions. Capital

from the extensive engineering analysis carried out by Imperial in the early 1980s to

costs would be about $7.5 billion

annual operating costs of up to $225 million.
The cost per tonne of CO2 disposed is

examine the feasibility of a large scale CO 2
enhanced recovery project at the company's
Judy Creek oil field ·in northern Alberta.

with

shown in Figure 9. For the hydrocarbon

That concept was subsequently rejected and

recovery option, the net cost could range
between $] 5 and $50 per tonne, depending

a hydrocarbon based enhanced recovery
scheme was implemented, due primarily to

on incremental recovery of hydrocarbons to
offset some of the disposal costs. For the

the high projected costs for a CO 2 recovery
scheme. Costs arc likely to remain a prob-

straight disposal opt~on, net costs could range

lem in these current studies.

between $35 and $45 per tonne of CO 2.
lmperial's preliminary work shows that
there are large net costs to society in the
underground disposal of CO2 which need to
, be carefully assessed and weighed with other
response options. In this regard, Imperial is
currently participating in collaborative studies with other industries and government
agencies in Alberta and Saskatchewan that
will more definitively assess the costs and
benefits of CO 2 disposal for specific pro-

ALTERNATIVE
TRANSPORTATION FCELS
Canada's Green Plan advocates other direct steps to move towards less carbon-intensive energy sources, including alternative
transportation fuels that promise to reduce

POINTSOURCES
OF
CO2EMISSIONS
IN ALBERTA

FIGURE
9
UNDERGROUND
DISPOSAL
COSTS
FORCO2
UNITCOSTS
($/TONNE
OFCO2)

HYDROCARBON
RECOVERY
PROJECTS

jects. These studies will also identify areas
for joint technology developmrnt where this

GROSSCOST

is appropriate.

HYDROCARBON
RECOVERY
BENEFITS

Imperial is conducting a follow-up program in its own operations to identify and

NETCOST

evaluate the most attractive CO 2 injection
projects as part of a larger program to

SHAREOF
ALBERTA
EMISSIONS(%)

65- 75
(25)-(50)
15-50

STRAIGHT
DISPOSAL
NETCOST
-

~-----~------------

35-45
---

- --·-

------

..

19

 greenhouse gas emissions and other air contaminants. However, Iinpcrial and affiliated
companies have jointly carried out studies
of variow, alternative transportation fuels
and found that there are limited possibilities
to reduce greenhouse gas emissions by
switching fuels.
These studies involved the examination
of five alternatives to gasoline and diesel
fuel for motor vehicles. These were pure
metharnrl (MlOO), a blend of 85 percent
methanol and 15 percent gasoline (M85),
compressed natural gas (CNG), liquified
petroleum gas, (LPG) -- largely propane and electricity· from batteries or fuel cells. It
is recognized that there is ~ need to include
ethanol in fut11re studies, since it represents
another alternative that deserves analysis in
a similar context . .Passenger cars and heavy
truck8 were examined and an extensive literature search and engineering analysis were
required to develop relevant comparisons.
Of particular importance in this analysis
is the need to consider the emissions of
greenhouse gases - principally CO 2 and CH 4
·- from all steps in the fuel chain including
original production, transportation,
pro-

CO2EQUIVALENT
GREENHOUSE
GAS
EMISSIONS
FROM
ALTERNATIVE
FUELS
(PASSENGER
CARS)
•

D CH4BURNED

FUELPROCESSING

COMPRESS.
POWERGEN.
2.0 ....-------------1.8
0
<./)

<t:

1.4

LU

RANGE
OF
UNCERTA
INTY
ONCO2· CH4
EQUIVALENCE

1.6

-

I

z

:::::; 1.2
0

Cf)

<t:

1.0

0

0.8

<.!l
I-

1.0

O
O

COMBUST'.
IN VEHICLE

T

-----------,

1.4
1.1

0.9'.=1~-

i=

<t:
_,
LU

l

the battery powered passenger cars, there · 1
arc no CO 2 emissions from the vehicle; CO 2
emissions from the,power generation so~rce I
supplying electricity for recharging the bat-1

I

needs to be viewed in the <~ontextof how any j /
increased electrical demand from the trans-

0.6

portation sector might be supplied.
Grecnho.usc gas emissions were converted

0.4

a:
O.?.
0.0

GASOLINE

M85

CNGLOW

CNGHIGH

FUEL'

20

r

teries were included. For purposes of this
study, c~ectricity was assumed to be generated from a supply mix of 55 percent coal,
CH4LOSTIN TRANS,
TAILPIPECH4EMISS. 31 percent nufclca~ andd rcnewal >les mT1dh_7~
percent eac 11 or 01 1 an IH\tura1 gas.
1s
composition is representative of the average
mix in the u.S. In Canada the mix is somewhat different with nuclear and rcncwablcs l
(hydraulic) accounting for 76% of electric- j
ity generation. However, this difference ) /
0.9

LU

>

ccssing, d istributiou and final consumption
in the vehicl1~.The result is a so-called "lifocycle" analysis. In this particular study,
because it was comparative, (imissions were
not calculated for all the fuel chain steps for
all fuels. However, calculations were carried
out where significant differences in emissions were expected in the fuel chain compared with gasoline or diesel.
In the results that follow, comparative
CO 2 emissions are included for ths fuel processing step and \or combustion in the vehicle. For the CNG alternative, Cll 4 emissions, which have a higher heat trapping I
capacity than CO 2 , were calculated for leaks
in the distribution system (a range from 0.1
percent to 1.0 percent) and losses out the
vehicle tailpipe (1.4 percent). CO 2 emissions associated with burning fuel to compress CNG in the distribution system and at 1
the refueling stations were also included. For /

!.PG

ELECTR
IC

to a CO2 equivalent basis. Emissions were cal-

1
(BATT
_rn_v ___

<_:u_l_a_t_cd as a CO 2 equivalent

1,
1

J

per rnilc of J

J

 vehicle travel, to enable the results to be normalized against gm,oline and diesel fuel as
the base. This required a detailed assessment
of vehicle energy efficiency using the various
fuels, irn)uding the unique combustion characteristics of each fuel and ancillary impacts
on vehicle weight to accommodate these fuels.
Figure 10 shows that for passenger cars,
CO 2 equivalent greenhouse gas emissions
are reduced by 20 percent for, LPG, and 10
percent for M85 and electric power, compared to motor gasoline. However CNG can
result in a 10 percent to 40 percent increase
in CO2 equivalent greenhouse gas emissions
primarily due to CH 4 losses fro"m the
tailpipe and in the distribution system .
While CO 2 equivalent greenhouse gas emissions appear initially unfavourable compared to gasoline, it is important to note the
degree of uncertainty that exists in determining the greenhouse effect equivalency of
CH 4 to CO 2 and also the determination of
distribution losst~s: Further, a significant
reduction in tailpipe emissions might well
be anticipated from the application of
research and development efforts to optimize CNG combustion in vehicles.
Figure 11 shows the results for heavy
trucks. In this case, only the electric powered vehicle achieves a 10 percent reduction
of CO 2 equivalent greenhouse gas emissions
compared to diesel fuel. Greenhouse gas
emissions from M85 and LPG increase by 10
percent, while those from C:\fG increase by
60 percent to 90 percent.
On balance, nom· of these fuels stands
out as a clear winner or loser in terms of
greenhouse gas emissions. Electric vehicles
promise overall lower emissions of greenhou"''e gases, depending on how the eleetricity is generated, but substantial engi-

•

FUELPROCESSiNG

D

COMPRESS.
POWER
GEN.

D CH4LOSTINTRANS.
COMBUST.INVEHICLEO TAILPIPECH4EMISS.
CH4BURNED

1.8

Cl

UNC~~~21~~~1
ONCO2- CH4
EQUIVALENCE

1.6

en
<t
_J

1.4

LU
U)
lJ.J

1.2

D
0
I-

1.0

LO

0.8

>

1.6

1.1

i==
<t
0.6
_J
LU

er

0.4
0.2
0.0
DIESEL

M100

MBS

'CNGLOW CNGHIGH

FUEL•

neering development is still required. Also,
CNG vehicles will likely benefit from current technology efforts. Other factors, particularly the impacts of the fuels on air quality issues such as ozone and air toxics, are
also important in considering the implications of the study. However, a quantitative
assessment of these other air quality impacts
was beyond the scope of this study. It should
also be considered that the benefits associated with increased vehicle fue_l efficiency
developments in the future may far outweigh the advantages of switching fuels, in
terms of both results and costs.
The study only touched on some aspects
of the complex interrelationships among
fuel composition, combustion characteristics
and emissions of greenhouse gases and other
air contaminants. Some of these interrelati,onships are further explored in lmperial's
April 1991 companion paper "A Discussion
Paper on Air Quality." Further, a major
joint automobile/oil industry research program underway in the U.S. will provide an
extensive quaptitativc assessment of the
impacts of a range of alternative trans- j
portation fuels and reformulated gasolines /

LPG

ELECTRIC
(FUELCELL)

CO2EQUIVALENT
GREENHOUSE
GAS
EMISSIONS
FROM
ALTERNATIVE
FUELS
(HEAVY
TRUCKS)

21

- ..·~-.

 on air quality. These results will also be
very useful to Canada by helping to unravel
the complexities and sort out priorities.
There will be increasing opportunities
for alternative transportation fuels to meet
particular needs in the marketplace and
their use will grow. Imperial believes, how-

meet such a commitment in the face of these
"trends continue" forecasts would undoubtedly require major policy interventions to

reduce energy use and, in particular, fossil I
fuel combustion. Such st~ps would come
with significant implications for personal 1
lifestyle and, if done in isolation, would
ever, that ;eformulated versions of gasoline damage Canada's international competiand diesel fuel will continue to play the 1 tiveness. As a consequence, costs and benefits of any such actions would need to be
major role in meeting Canada's transportacarefully weighed, in concert with other
tion needs in the foreseeable future.
nations, and the fuller implications on our
societal values would need to be addressed.
POLICY MEASURES
To better understand the costs and benThe final area of Imperial's work effort dealt
efits
of these policy options, Imp erial comwith possible policy measures to reduce CO 2 ,
emissions. Most "trends continue" projec- missioned DRI/McGraw Hill ("DRI"), a
tions for CO 2 emissions in Canada, including major economics consulting firm, to carry
those by Imperial, the National Energy Board out an independent study of the overall
and Energy Mines and Resources Canada implications for the Canadian economy of
show a r.ontinuing growth in fossil fuel con- four types of policy measures intended in
sumption and hence imply increasing CO 2 various ways to reduce fossil fuel consumpemissions. This is not surprising in the light tion and associated CO 2 emissions. These
of general expectations of continued long measures are summarized in Figure 12.
term economic and population growth with
The first was a "green tax" on all conimplications for both increased industrial out- sumption designed to reduce aggregate
pu~ and personal consumption and given the demand and economic activity, with some
energy intensive 1~ature of the major indus- revenues used to fund non-fossil based
tries at the core of the Canadian economy. energy development. Two tax levels - 10 perYet many nations, including Canada, have cent and 25 percent, applied in a manner simcommitted to goals such as stabilization of ilar to Canada's new GST - were examined.
The second was a higher motor fuel tax on
CO, and othn grnenhouse gas emissions. To
gasoline and diesel designed to reduce fuel
consumption. Again, two tax levels - 10 cents
and 50 cents per litre (real) - were assessed.
_B_O_TT
_O_M_R_A_N_GE_T_O
_
P_~
The third was a "gas guzzler" tax,

I

1

I
J

POLICY
MEASURES
TOREDUCE
CO2
EMISSIONS
ORISTUDY

I

I

POLICY
MEASURE

r

--------

--

25

10

GREEN
TAX(%)
- ---··

- --

·-- -·-- --- ---· ----- --- - ....----

-·

-----

·---- -· --- -·--- -1

designed to reduce the use of automobiles
with lower fuel economy.. Again, two tax

:ifJ:i:l~f
~:~~~::§~~~{L
=!'':::~
~~
~~::,;~
jl
1

I'

I

levels were examined. The first included a I
$5,000 tax on the purchase of such auto- ,

mobiles and $500 per year in registration

I

..···------ ------ --------------- ---------· - ..-------- -------.- - --- I fees (real); the second envisaged a $20 ,000 .

22

-----..

 tax on purchase and $2,000 per year in fees.
The final measure was a "carbon tax"
designed to increase relative prices of energy
sources with carbon content. This would
have the effect of stimulating overall reductions in energy use and the switch . to less
carbonaceous fuels. Two tax levels were
examined, S50 and $200 per tonne of carbon
(real), or $14 and $55 per tonne of CO 2 .
The options involve tax measures that
have the effect of changing relative prices
and, in turn, reducing energy use and fossil
fuel consumption. The study did not identify specific technologies to apply to energy
demand reductions, but modelled the operation of market forces to stimulate reduced
consumption, more effective technology and
greater efficiency. In all cases, some of the
additional r'evenues from the tax measures
were recycled back into investments in non/
fossil energy sources - such as nuclear - to
further reduce CO 2 emissions.
The results of the. DRI study. are shown
in Figure 13 in terms of the effects of the
various policy measures on Canada's CO 2
emissions from fossil fuel combustion. !\"ine
scenarios were modelled, including a reference or "trends continue" case. The results
show that of all of the policy measures considered, only the carbon tax of $200 per
tonne of carbon or S55 per tonne of CO 2
achieves approximate stabilization of Canada's CO 2 emissions. A tax at this level is
equivalent to $24.40 per barrel of crude oil,
(about 15 cents per litre of gasoline) $5 per
giga joule of natural gas, o_r Sl0 per giga
joule of coal and results in a 21 percent -· or
132 million tonnes per year - reduction in
CO 2 emissions by the year 2005.
A carbon tax of $200 per tonne of carbon
achieves significant reductions in CO2 emis-

116
100

er:

98

92

95

~

--

68

ff3
z
z

~

52

59

50

z

0

24

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~

(16)
TRENDS 10',
CONTINUE GREEN
TAX

10¢/L 50¢/L $5.000/AUTO$20,000/AUTO $50/T $200/T
MOTOR MOTOR GAS
GAS
CARBONCARBON
FUEL FUEL GUZZLER GUZZLER
TAX
TAX
TAX
TAX
TAX
TAX

sions through three principal mechanisms.
First, energy conservation and increased
energy efficiency result from higher prices.
These higher energy prices represent both
a substantial tax on Canadians and, given
the continuing importance to the Canadian
economy of energy intensive industries, a
serious drain on Canadian competitiveness.
Second, fuel switching occurs as a result
of higher relative prices for more carboniferous fuels. For example, 7,200 megawatts of
new nuclear generating capacity are added
as utilities switch from coal. This is admittedly controversial, but if increased nuclear
capacity was not an option, the contribution
from other factors, and the economic costs,
would be higher. I.n addition, these higher
relative prices result in a large negative
imp.act on the real output of the coal and
crude oil "mining" sector. This has severe
regional impacts; for example, mining output in Alberta is down 3] percent by the
year 2000 and the unemployment rate is
boosted from 5.5 to about 10.4 percent on
average, over the 1990 to 2005 period.
And third, slower economic growth
results from higher energy' prices and

CANADA'S
CO2
EMISSIONS
GROWTH
2005vs1990
ORISTUDY

23

- ---.,

 reduced Canadian competitiveness.
The overall cost to the Canadian economy
of such a carbon tax policy would be a cumulative reduction of about $100 billion (real)
in the gross domestic product over the 1990
to 2005 period; average personal incomes
would be 7% lower in real terms by 2005. It
is possible that these costs could be mitigated somewhat by self-actuated behavioural
changes induced by increased understanding
and awareness. H~wever, it is unlikely that
this would significantly diminish the size of
the challenge. These potentially large costs
serve to reinforce the need for Canada to
carefully design its global warming strategy
and to ensure that any actions ·Canada takes

are internationally coordinated.
The ORI study is an example of the type
of comprehensive analysis that Imperial
believes is vital to understanding the socio-economic implications of potential policy options,
before the actual choices are made. Much
work remains, however. For example, it was
beyond the scope of the ORI study to fuily
assess the impacts of the various policy measures on the international competitivenes of
particular industrial sectors. Th~s will need to
be a vital consideration in Canada's national
action strategy. Also, the effect of various
assumptions relating to the use of increased
government revenues, resulting from these
policy measures, could be examined.

l(ey Observations
and Concl11sions
mperial's work on global warming over the past year has significantly enhanced the company's undeFstanding of the
challenges it could face. It has
also provided a new perspective
on the implications of a number
of potential respo_nse options for both Imperial and Canada. Imperial believes this work
can contribute to public understanding of
the issue and to sound public poli?Y to deal
with it.
The key observations and conclusions
inay be summarized as follows:
• From Imperial's perspective, and reflecting on the events over the past year, many
gaps still remain in the science of climate

change, in the impacts of an increase in
global temperatm:e and in the socio-economic consequences for Canada of potential
strategies to limit and adapt to this change
should it occur. Imperial believes these gaps
require urgent attention to ensure Canada's
evolving res'ponse strategy is sound and does
not weaken the country's ability to compete in the international marketplace.
• More specifically, Imperial's inventory
work indicates that the company contributes
about 2 percent of Canada's emissions of
CO 2 from fossil fuel combustion. Surprisingly, based on this preliminary assessment,
Imperial's emissions of CH 4 are estimated
to be equivalent to one quarter of its CO 2
emissions. The company's results highlight

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~--------''-----~~~~~~___J

24

 the need for further work by all sectors to
more acc;urately define the contribution of
other gases, including CH 4 , N 2 0 and 0 3 -

energy prices and currently available technology, reinforces the· need fo; Canada to
be cautious in its expectations for future
economic energy efficiency improvements
- and related CO 2 emissions reductions from the industrial sector.
• Imperial believes it is-technically feasible
to dispose of about 3.5 percent of Canada's
CO 2 emissions into subterranean formations. This requires an investment of $7 .5
billion and results in a net cost of $15 to $50
per tonne of CO2 . Further studies are underway with the Alberta and Saskatchewan gov-

and the 0 3 precursor gases, NOx and VOCs
- to any enhanced greer1house effect.
• Imperial has identified where its technical expertise and financial capability cari
best con!ribute to global warming research.
New and ongoing internal and_ external
research programs are underway in areas
that span the basic science and point to possible mitigative ang adaptive measures.
• Energy efficiency programs in lmperial's
operations since 1973 have resulted in a 28 ernments to confirm these costs and bene'
percent reduction in otherwise projected
fits and to facilitate comparisons with other
CO 2 emissions in 1989,,,equal to a saving of potential response options.
5.2 million tonnes per yegr.
• Alternative transportation
fuels offer
• Despite these significant 'energy effi- somewhat limited potential to reduce and
ciency related sayings, Im_perial's CO 2 emis- in some cases actually increase - greenhouse
sions have grown by 49 percent over the gas emissicms when "life-cycle" effects on
1973 to 1989 period due to business expan- CO 2 and CH 4 emissions are considered.
sion and increased energy intensity. Energy However, there can~be benefits in reducing
intensity will continue to increase in' the other emissions that impact air qua_lity.
future as crude bitumen contributes a grow- Imperial believes that there will be increasing share to Imperial's crude oil production,
ing opportunities for alternative fuels to at the same-time as the refining sector _pro- meet particular needs in the marketplace.
cesses heavier crude oil feedstocks and pro- • The J.?RI study, which focused on CO2 ·
duces more environmentally friendly but emis~ions only, illustrates how difficult and
energy-intensive fuels. This illustrates the costly it would be for Canada to stabilize
importance of an improved understanding of these emissions. Such a step would require
_the distinctions between energy intensity
major policy interventions, such as a carbon
and energy efficiency at the national level, tax of about $200 per tonne of carbon or $55
in order to properly portray Canada's
per tonne of CO 2 , to reduce energy use and
energy use.
fossil fuel combustion. This would be a sig• Future energy efficiency improvements in nificant cost to the Canqdian economy,
lmperial's operations that yield a five year reducing Canada's gross domestic· product
economic payback could result in a rela- by $100 billion_ in real terms over the 1990
tively modest 6 percent reduction in other- to 2005 period, and reducing personal
wise p_rojected CO 2 emi~ions by the year inc_omes by 7 percent in real terms by the
2005 while requiring an investment of $70 year 2005. Serious regional dislocations
million. This outlook, based on prevailing
would result, particularly in Alberta. The

25
--·-·-

 international competitiwness of the Canadian economy would also be wPakenc<l if

action strategy 011 global warming to ensure
that it is scientifically sound, comprehensive,

such steps were taken in isolation. Therefore, j cost cffectiw, regionally sensitive, intt~rnaCanada needs to carefully design its national

I

tionallv coordinated and flexible.

Recommendations
and Conrnritment
ased on what has been

is underway and believes it is essential to

learned and its per-

provide a benchmark for international negotiations and tracking.

spective, Imperial offers the following for
consideration by governments, the private
sector and the academic community. The company believes
these recommendations will serve to extend

order to better understand

Canada's net

contribution to any enhanced greenhouse
effect. This will also help to define a

understanding and help define sound action

broader set of mitigative options and their
relative costs.

steps to respond to the threat of global
warming. Canada's Green Plan and the

• Refocusing some of Canada's extensive
rt'fcarch on climate change modelling and

National Action Strategy on Global Warm-

forecasting with additional emphasis on a
wider range of possible mitigatiye and adap-

ing can provide the framework to encompass these initiatives: ·

tive strategies and on the basic physical,

Imperial recommends:

chemical and bilogical phenomena. This will
need to he coordinakd internationally to

• Establishment, in consultation with key
stakeholders, of a comprehensive set of guid-

make effective use of limited resources and
to define Canada's unique contribution.

ing principles, along the lines of those on page
10 of this document, in designing Canada's
~ational Action Strategy on Global Warming.

• Extending the analysis and improving
national and intt:rnational understanding
of the structural reasons for Canada's rela-

• Developing a more extensive and reliable

tively high energy intensity

data base of Canada's greenhouse gas emissions for each sector of the economy. This is

realistic potential
improvements.

critical in understanding

• Improving understanding of the complex
interrelationships between global warming j

the true signifi-

cance of the various types of gases and their
sources. Also, Imperial understands thd't
work to define an international methodology

26

• Extending the work on CO 2 and other
greenhouse gas sources to include sinks in

for energy

and of the
effic.iency
1
J

and other air quality issues to facilitate bot~ j
an understamling of the basic phenomena o:J

 cause and eff ed and the design of effective

dat e its i nvenlory of greenhouse gas emis-

action strategies to address th ese issues.

sions and ~upport the Canadian Petrol eum

• Designing more definitive action: to sort
nut Canada's broader environmental prior-

Association and others in their efforts to
develop accuratt~ and comprehensive inven-

ities in a way that balances the environ-

tories for th e petroleum industry and other

mental and economic needs of our society.

sectors of the economy.

• Giving more emphasis to int ernational

• FuIJd the climate change research progra1n
identified in this work effort and remain alert

considerations

1n designing

Canada's

National Action Strategy and iu developing
Canada's negotiating position on a climate
,..,- --~:hange convention.
(
• Giving consideration in Canada's action
/

strategy to mechanisms that facilitate and

I

provide credits for investments in and technology transfer lo other nations and to
inventory protocols that distingui sh between

I
\

\

greenhouse gas emissions associated with

goods produced for domestic consumption
\ . and those ·which are export ed.
For its part, Imperial

is committed

to

contributing to the best of its ability, to all
of these areas.

-to new opportunities, including those in its
univer:;it.y research grant programs.
• Give new emphasis and priority to energy
efficiency in its capital expenditure

)

plan-

ning, '.Y.:i~_h_~he
goal of implemen _ti~!;t~ll eco~ 1ic e~gy efficienc r_op portunitie ~--:-~ • Pursue opportunities to inject CO 2 into
underground formations to enhance hydrocarbon recovery and continue to collaborate with other industries and governments
in studying other CO 2 disposal options.
• Continue its work on examining and
enhancing the technical and commercial
potential for alternative fuels in the transportation sector.

Imperial commit~ to:

• Continu e to play an active role in con-

• Widely share this discussion paper and the
supporting material with other stakeholders.

tributing to public understanding and sound
public policy which addresses the threat of

• Continue to refine and periodically up-

climat e chang e.

Referen es
1. Imperial Oil Limited , Mar ch 1990, A
Discussion Paper on Potential Global
Warming.
2. Int er governmental Panel on Climate
Change; the TPCC Scientific Assessment of Climate Change (Cambridge
University Press, New York. 1990).

27

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..