With the world watching, Canada draws line in the oil sands

Eric Reguly, Globe and Mail, December 16, 2009, Copenhagen --The Canadian government is leaving the door open to special tax breaks for the oil and gas industry to preserve its competitive position once proposed efforts to reduce greenhouse gas emissions kick in.

Environment Minister Jim Prentice said the proposed Waxman-Markey climate-change legislation in the United States might grant special breaks to “trade-exposed” industries – energy-intensive businesses that are vulnerable to international competition.

The bill would help some of these industries adapt to emissions caps and clean-energy regulations by giving them special allowances to cover their higher costs. He said that any U.S. industries that fall into the trade-sensitive category should be granted similar treatment in Canada.

“This is something that we need to consider on the Canadian side of the border,” he said.

Any special treatment for the oil sands is bound to attract fury from climate-change scientists and environmental groups. The oil sands are likely the world's most energy-intensive oil production and have been vilified at the climate-change summit because of their high emissions output.

Officially, the government says no industry will be given special treatment under a national emissions-reduction plan, but Mr. Prentice would not rule out the oil sands falling into this category. “I think any industry that is a trade-exposed industry in the same sense would be an industry that has to be considered in terms of its comparability to the U.S. framework,” he said.

Mr. Prentice also acknowledged that the technology funds contemplated under the Conservative government's 2008 “Turning the Corner” carbon-reduction plan may not necessarily receive international approval under any new global-emissions strategy. “That's an important question,” he said. “But it can only be determined as part of the international framework.”

Effectively, the fund would be financed by an energy tax, which in turn would be used to pay for clean-technology innovation needed to reduce greenhouse gas emissions.

Mr. Prentice's admission that the oil industry's tax burden might be harmonized with U.S. legislation was made as Canada again found itself on the defensive at the climate-change summit for allegedly going out of its way to protect the oil sands, a project that has been vilified by the developing world and green groups as the model of dirty growth.

Documents obtained by the CBC suggested the federal government was considering diluted emissions targets for the oil and gas industry, which is dominated by Northern Alberta's vast oil-sands projects. The proposal reportedly said the industry would have to reduce emissions by 15 megatonnes, rather than the 48 megatonnes under the Turning the Corner plan.

The provinces, opposition parties and environmental groups used the leaked documents to accuse the government of negotiating in bad faith to reach a new, long-term carbon-reduction plan in Copenhagen by Friday. “These documents reveal a detailed plan to allow massive emissions growth from oil producers,” said Matthew Bramley, director of the Pembina Institute's climate-change program.

Mr. Prentice did not deny the existence of the documents, but said he had not seen them and insisted they “do not represent the position of the government of Canada.”

Mr. Prentice said “significant progress” was made Tuesday on a number of issues toward the goal of reaching a new global climate-change deal. But the sentiment did not seem to be shared by many other negotiators.

Negotiations to produce a final draft document have to be completed by Thursday, when the summit of 115 heads of state and government begin the final negotiations. The signing ceremony is scheduled for late Friday, though there were no assurances Tuesday that the developed and developing worlds could overcome their differences on emission cuts and funding for poor countries to fight climate change.

The funding issue is especially tense, with strong rumours that a funding agreement will have to be reached after Friday's deadline, if it is reached at all. Todd Stern, the chief U.S. negotiator, said Tuesday the “parties are quite far apart on a fair number of issues.”

High-profile politicians and diplomats arrived at the summit Tuesday to bolster the talks, including Prince Charles and New York Mayor Michael Bloomberg. Most had similar messages. “Now is the time,” said United Nations Secretary-General Ban Ki-moon. “For three years I have sought to bring world leaders to the table to solve climate change. Now they are coming. Three years of effort have come down to three days of action.”

But two leaders got off the beaten message track. London's bicycling Mayor, Boris Johnson, told a summit audience to relax. “We have to stop being so unremittingly negative and gloomy,” he said. “What I want to advocate is not just a reduction in consumption, but a virtuous pattern of green consumerism. I want to appeal to people's naked financial self-interest.”

Scotland's First Minister Alex Salmond came up with a novel device to motivate the negotiators: a bottle of specially distilled 2020 Scotch whisky. “Every world leader who commits to ambitious targets will get 42-per-cent proof,” he said. “Those who water down their target will get watered-down whisky.”