Terence Corcoran: Cost realities threaten pipelines, climate policy

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeFP CommentTerence Corcoran: Cost realities threaten pipelines, climate policyFrom carbon capture to pipelines, the costs of control are more alarming than the climate threatLast updated 16 minutes ago Despite the costs, risks, and other uncertainties, support for the West Coast pipeline is rising in the wake of the U.S. plan to expand the Venezuelan oil industry. Photo by JOHN LEHMANN/Trans Mountain Corporation/AFP via Getty ImagesEvidence that the global move to save the planet from climate change has fallen apart is now conclusive and ubiquitous. No matter how hard United Nations’ climate bureaucrats, green activists and the media try to instill apprehension and fear across the world, climate change is way down the priority list for governments and much of the corporate world — and in the mind of the public.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountWhen the UN Environment Programme (UNEP) confirmed this week that the world will overshoot the UN’s official 1.5*C increase in temperature target, UN Secretary-General António Guterres issued another of his routine emergency warnings. “This summer’s scorching heat, raging wildfires and deadly floods are a warning of what lies ahead. We must make the overshoot above 1.5 degrees as small and short as possible. That demands an overshoot of ambition.” The temperature overshoot could hit 1.8*C or even 2*C, said Guterres as he introduced the UNEP report. To prevent a rise to more than 1.8*C, UNEP called for a major increase in carbon control action.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againThat the climate issue has fallen off the international policy radar is nothing new. In a commentary in Foreign Affairs magazine last November, University of Toronto Professor Jessica F. Green declared that “Global Climate Policy is Broken.” The cause, said Green, is excessive dependence on meandering political institutions such as the UN and international conclaves such as the aimless and endless Congress of the Parties meetings. What is needed, she said, is greater government control and massive spending supplied by taxing corporate offshore assets worth up to $32 trillion.Taxing trillions of corporate cash is great fossil fuel populist politics, but it fails to acknowledge a fundamental problem: Controlling the climate by removing carbon and other greenhouse gasses from the atmosphere can be destructively uneconomic. The costs are impossible, which is the main reason global carbon emissions are not declining.The cost reality behind the great crusade to transition away from fossil fuels is the main reason Prime Minister Mark Carney openly admitted last June that Canada will not meet its official carbon reduction targets. To do so would have been “too expensive,” he said. The question today is whether Carney’s replacement strategy is also too expensive.A key part of Canada’s new energy superpower strategy is the Carney government’s deal with Alberta to (1) build a new West Coast Oil Pipeline (WCOP) to move oilsands product to the B.C. coast for export and (2) build a pioneering carbon capture and storage (CCS) facility that would at least nominally offset the carbon emissions of the oil flowing through the WCOP. In the many months since the two projects were announced, the real financial, economic and environmental aspects of the projects remain a mystery.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Two recent economic assessments of the WCOP raise serious questions about the pipeline’s viability. On Wednesday the Institute for Energy Economics and Financial Analysis (IEEFA) released a paper that warned of high costs and considerable “execution risks,” along with the likely possibility of 90 per cent government ownership of the pipeline. “Potential benefits of the pipeline are steeped in risk,” the report concluded, “and other investment priorities may offer more economic resilience as the energy transition moves forward.”Pipeline supporters could argue that the IEEFA is a global anti-fossil fuel organization. But similar warnings were issued last week by Desjardins Economics in a report titled “West Coast Oil Pipeline: Is the Next Barrel Worth the Price?” As with IEEFA, Desjardins economists raises a series of red flags, with every aspect of the pipeline’s economic case subject to question.For example: The $35-billion to $45-billion project pipeline could deliver economic benefits “but current estimates of those benefits should be taken with a grain of salt.” The pipeline could deliver net benefits to the economy, but “only if costs are contained,” which is doubtful for a project that will take an estimated six years to build, although skeptics are doubtful about completion dates given past pipeline experience. The TMX pipeline to the coast took 13 years to complete following its announcement and came in with a final cost of $34 billion, more than triple original cost estimates.Despite the cost, risks and other uncertainties, support for the West Coast pipeline is rising in the wake of the U.S. plan to expand the Venezuelan oil industry, which will pose a threat to Canadian oil access to the U.S. market.Calgary Herald columnist Chris Varcoe reported Tuesday that Albertan politicians and oil industry executives see the WCOP as the answer to the threat posed by Venezuelan oil flooding into the U.S. market. “For Canada, we should be doubling down on our pipeline to the West Coast,” said one executive. The question is whether Venezuelan oil flowing into the U.S. actually improves the uncertain economics of the West Coast pipeline.Compounding the uncertainty is the fact that the WCOP is dependant on building the $20-billion Pathways Alliance carbon capture project. Financial and economic details have yet to be released, although both Ottawa and Alberta have acknowledged that the project is uneconomical and will require billions in government subsidies and funding to avoid a major increase in carbon emissions as oil moves through the WCOP to the coast.Add it all up and it is even more obvious that the cost of reducing Canada’s carbon emissions are uncharted. Chances are they will be rising to the dismay of António Guterres. Should — and do — Canadians care?Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.