The urgency to build Keystone

The urgency to build Keystone

The push to build the Keystone XL pipeline may be less about a pending decision in the United States, and more about mounting fears that the opportunity to fully develop the Alberta oil sands could close forever.

Crazy as that sounds, the idea goes back to an interview by one of the pipeline’s strongest advocates, who also happens to be one of the freshest, most straightforward voices in Canadian politics.

When Calgary Mayor Naheed Nenshi spoke up for Keystone [download podcast] in a February 2 interview with CBC Radio’s The House,one of his more memorable arguments was that Canada has only a small time remaining to fully develop the Alberta oil sands, beforea decarbonizing energy system forces us to leave a great economic opportunity forever untapped.

A soft toss?

At first, I thought Nenshi was offering up a soft toss for green energy advocates to hit out of the ballpark. Think about it: If Henry Ford is laying waste to your established business in horse-drawn carriages, do you try for another record sales year for buggy whips, or bow to the inevitable and begin converting your stock?

If that’s the concern, the Calgary mayor has good reason to fret. As we’ve already reported on this blog, energy productivity improvements have already been the biggest contributor to Canada’s energy security over the last 40 years, saving us “more fuel and electricity today than the combined total of all the new sources of oil, gas, coal, nuclear, hydro, solar, wind and biomass energy we’ve developed over the last four decades.” That’s before any serious, sustained effort to reduce greenhouse gas emissions.

The investment community takes note

Still, it’s a stretch to suggest that Nenshi had energy productivity gains on his mind when he had his conversation with The House. It’s much more likely that he was thinking about investment managers like Jeremy Grantham, the legendary co-founder and chief investment strategist with Boston-based Grantham Mayo Van Otterloo, who are paying close attention to the prospect of a looming carbon bubble.

In mid-March, Grantham told TV host Charlie Rose that unburnable carbon will be a serious challenge—since the only plausible alternative is for fossil fuel production to drive climate change out of control. The world’s proven oil and gas reserves already far exceed the global carbon limit of 565 Gt, Grantham said, so a decision to licence Keystone would “start facilitating the flow of such utterly dangerous energy resources that we have no reasonable hope of surviving with the planet as we know it.”

Grantham is not alone in his concerns. And with institutions like HSBC Global Research, Deutsche Bank, Standard & Poor’s, the World Bank, and the International Monetary Fund all paying close attention to climate risk, Naheed Nenshi may be right: for anyone who’s intent on finding new markets for Alberta’s oil sands, the window may be closing fast.

For anyone with a direct stake in those projects, the next step is clear. But the public policy question is slightly different: To place Canada at the centre of the next energy economy, do we bet on the next megaproject, or on a cluster of emerging technologies that are sweeping the planet, proving themselves in the marketplace, and eroding demand for today’s product?

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