Wednesday, 11 June 2008

Will High Oil Prices Save the Planet?

The scientific academies of thirteen countries yesterday issued an unprecedented joint statement urging faster, more decisive action to limit greenhouse gas emissions. The carbon reduction specialists at Carbon Clear applaud that sentiment, and are committed to helping businesses and individuals, measure, reduce, and offset their carbon emissions. And yet more remains to be done.

Many pundits are hoping that help will come from the rising cost of fuel. With oil prices skyrocketing, firms around the world have a strong incentive to reduce consumption. Emissions reductions are sure to follow - won't they?

At first glance, the signs are encouraging. Fuel purchases in the U.S. are down 7% from a year ago, and consumers can't seem to ditch gas guzzling cars and trucks fast enough. Last week, auto giant General Motors announced that it was closing four truck and SUV production lines and was considering abandoning its signature Hummer SUV brand. Meanwhile, the company has announced the launch of two new small cars, and a new electric-hybrid vehicle called the Volt.

The airlines are economising, too. Northwest Airlines is parking its workhorse DC-10 airplanes, in favour of newer A330 models that are 38% more efficient. Southwest Airlines claims to have saved millions in fuel costs simply by cleaning its engines more frequently, and Delta is flying its planes 20 mph slower to save fuel.

To be sure, high oil prices strengthen the economic case for demand reduction in the form of increased fuel efficiency or fewer journeys. But they also strengthen the economic case for increasing supply - in the form of oil substitutes. While some substitutes, like biofuels, show promise to reduce greenhouse gas emissions when used correctly, others are the stuff of environmental nightmares.

In the remote regions of Canada's Alberta province lie vast deposits of thick, tarry sand and soil. These tar sands hold the equivalent of 175 billion barrels of oil - nearly as much as Saudi Arabia. The challenge has been getting to it. In order to convert the oil in the tar sands to usable form, the solid granules must be mined, crushed, diluted and cleaned - and then manufactured into synthetic oil in an energy-intensive refining process. According to an estimate reported by the Financial Times, this process means that oil from the tar sands has five times the carbon intensity of conventional fossil fuels. On an individual level, while a round-trip flight from London to New York might normally result in 1.3 tonnes of CO2, a flight fuelled by tar sands-derived kerosene would result in a whopping 6.5 tonnes of CO2. Driving 10,000 miles in a car would result in a 15-tonne carbon footprint. And this says nothing of the vast tracts of forest wilderness that must be cut up to reach these fuel resources.

But the global implications are even more serious. Alberta's 175 billion barrels of oil equivalent, if it were all consumed, would result in the release of about 35 billion tonnes of CO2.

That's 30% more than all the CO2 released from fossil fuels worldwide last year.

Extracting oil from the tar sands is dangerous and expensive work. So long as oil was relatively cheap, the tar sands were safe. But at $120 a barrel, $200 a barrel, or even more, the tar sands begin to look like a viable option. Six million hectares of oil sands - 43% of the total - have already been leased to oil companies for exploration and development. The oil majors are lobbying regulators to include these resources on their balance sheets, signaling their intent to exploit them.

With high oil prices likely here to stay, more energy efficiency measures will be pursued, but the tar sands are more likely to be tapped as well.

And that's bad news for the environment.

A high oil price can be a mixed blessing. We need to bring other tools to bear in the fight against climate change. We'll present some more ideas in subsequent posts.

(Carbon Clear website)