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EXECUTIVE UPDATE

Is It Fair to Take Credit for Reducing Emissions by Reducing Oil Imports

Published on: August 16, 2018

Someone recently asked me about CERI’s assumption of reduced global CO2 emission reported in our study “An Economic and Environmental Assessment of Eastern Canada Crude Oil Imports”. The question is whether we can fairly assume that when Canadian domestic supply replaces imported light oil, that we can “take credit” for the reduction in emissions. We showed that the replacement of much of the imported oil for Canadian light oil reduces CO2 emissions, because Canadian production plus transport has a lower environmental footprint.

The questioner says – won’t those imports just go someplace else? Can we really assume we are all moving toward a lower carbon footprint internationally?

That’s a reasonable question. It’s impossible to say that if Canada substituted its crude for international crude, that the international crude would not go somewhere else.

It’s the same argument in reverse, when Canadians say don’t build additional pipelines to support growth in the oil sector, and yet do nothing about demand. As such, emissions associated with oil will not change regardless of the increase in pipeline capacity. However, that is not the argument that is made by earnest people concerned about new pipelines. This means we already factor in this idea that limiting the movement of oil from one nation to another has some impact on the overall oil market.

This goes to the complicated nature of our domestic and international energy systems. Are they in balance? If you get an increase in supply in one area do you see a decrease in supply in another. We can demonstrate that with the drop of heavy crude from Venezuela to the US gulf coast and an increase in Canadian crude to offset that.

This means there are examples where the supply balance changes. We saw a lot of that over the last two years with a decrease in oil production in some states and a significant increase in inventory.

All you can look at is the specific question. In our case, the question is, if you replaced imported oil with Canadian oil in Canadian refineries what is the impact? In our case, we demonstrate that the net impact is a reduction in emissions. Canadian crude plus transportation to Eastern Canada has a lower emissions footprint than imported oil.

If you insist that there is a rebalancing in the market, then frame the description as Canada’s contribution. If Canada was responsible for the emissions caused by a demand for imported oil, which you could say, we could now say we have found a way to reduce Canada’s overall emissions footprint. What other countries do is outside the boundaries of Canada’s control.

As I say, its complicated. We can only do our best to figure it out one step at a time.

Allan Fogwill, President and CEO, Canadian Energy Research Institute