From a party not known for a forward stance against Climate Change legislation and with many members downright sceptical, perhaps we should be positive when Senator Lindsey Graham (R-SC) visited Saskatchewan last week and declared himself a believer, that Climate Change was a “reality”. The interview, worth reading in full, brings to light some of the thinking of Republicans on Climate Change and the North American energy market.

Senator’s Graham’s views are particularly important for several reasons. Firstly the Climate change bill that passed through the US house and is awaiting its senate hearing is possibly the single most important turning point in getting a global deal on Climate Change. As Graham himself noted, the bill narrowly passed in the house meaning that it dropped Democrats, given the house is often seen as more partisan, the implication is that the bill would need to be watered down to make a passage through the Senate. While this may be true to some extent, Graham is being slightly disingenuous, the House bill passed with enough votes – some Democrats were able to vote against it for their constituency, safe in the knowledge it would pass (i.e. if it had been closer they would probably have also voted for it).

Senator Graham’s views were likewise interesting in terms of the shape of Climate legislation in North America, which can probably be read as a reasonable gauge of Republican thinking on energy policy if not Climate Change policy.

“Carbon sequestration is the key to anything you want to do when you talk about getting away from fossil fuels or controlling CO2 emissions”

Not that this will surprise many, but CCS ( Carbon Capture and Storage) is in the near future at least a political reality– whether its viable or not. For both Canada and the US, CCS is the magic wand which can placate their powerful fossil fuel lobbies – especially Coal in the US and the oil-sands in Canada. Both Obama and Harper have alluded to its necessary use – and with many Democrats hailing from coal states such as West Virginia and Virginia, it will be next to impossible for Climate Change legislation to be passed without it. Similarly in Canada, the powerful geopolitical role envisaged from Alberta’s oil sands including in any North American Cap and Trade, ensures that both countries will create opt outs or subsidies to nurture their particular fossil fuel industries.

On Oil Sands Senator Graham words will disappoint environmentalists:

“the United States should accept it, because every drop of oil that we can receive from our friends in Canada is one less we have to buy from people who don’t like us.”

“I think the future’s on your side when it comes to your U.S. neighbours accepting your products.”

Almost without a doubt, there is a necessary trade-off to be made in environmental issues. Senator Lindsey Graham (R-SC) may be a “believer” in Climate Change, but his language was firmly rooted in pragmatic security and economic issues- cheap and safe energy - if Congress does swing back towards Republicans, future Climate Change debates will be shaped by this kind of language. This isn’t necessarily negative, in order to make Climate Change a permanent legislative priority it needs to be bundled into other issues, to appeal to wide base. In this case, the issue is energy security, while for many this was meant to be about fuel economy standards, reduction in oil for power stations and growth of new green energy industries – yet in the interim this will mean oil sands from Alberta. The battle for environmentalists will be to try to lobby for the clean- up of the Alberta sands and the US coal.

President Obama, in close discussions with Energy Secretary Stephen Chu and Alberta Premier Ed Stelmach is to give the green light for US consumption of oil sand oil, or rather the import of fuels considered among the “dirtiest” in the fuel market. In a meeting last week, President Obama decided that the Canada’s oil sands represented an important part of national security supplies for petroleum in America’s near future.

The move is not without immediate precedent, as Francois Cardinal at cybercress.ca notes, both Hillary Clinton had offered support for oil sands at a recent conference on energy security, and Obama’s national Security adviser General Jim Jones was similarly adamant that the US would be foolish to reject the possibility of a stable source from a close partner in Canada.

The move will disappoint many in the green movement, given Obama has previously been less supportive of oil sands, noting that the Us needed to ween itself off dirty and dangerous oil supplies. In particular at a recent summit with Canada, President Obama described US coal as equivalent to Alberta’s oil sands, given environmentalists hope that the US would take a tough line demanding far reaching cleanup efforts if the oil sands were ever to be imported.

Speaking at a recent energy conference the Calgary Herald noted Energy Secretary’s Chu’s position

“This is energy that one hopes to develop in a clean way, and so that you can decrease the environmental footprint, both in the energy invested in order to recover it and on the local environmental issues,” Chu said Monday in response to a Herald query.

“There are also environmental issues having to do with the recovery of the oil sands, the very tarry stuff that’s left behind, the residues. There haven’t been solutions to that yet,” added Chu, who met privately with Premier Ed Stelmach on Monday for about 30 minutes”

How far the environmental issues are pushed depends on a large number of factors, in terms of Canada’ s federal Climate policy projects such as oil sands are only required to reduce the intensity of their energy consumption in order to keep with Canada’s GHG targets, in short allowing growth in absolute Carbon emissions. Worse, of the projects designed to reduce emissions from critical polluting sectors, most of Canada’s research investment is going to “clean coal” rather than oil sands:

“Alberta Minister of Environment Rob Renner said Tuesday that the lion’s share of $ 2 billion planned for the burial of carbon was destined for the coal industry”

However, environmental movements within Canada, have made strong progress in other states such as British Columbia, Ontario and Quebec which could increase the pressure on states such as Alberta to set more ambitious reduction targets and forcing them to channel greater investment into cleaning up the oil sands. Furthermore, the role of California the US’s biggest car using state has effectively banned Alberta oil unless it cleans up, through regional Environmental alliances such as the WCI such policy could be diffused throughout other key states, potentially even within Canada.

In summary, oil sands as noted previously now look set for a stable future, one albeit without the much feared spectacular growth that marked environmentalists concerns prior to the recession and one in which increasing pressure will probably be put on the oil sands to reduce their environmental impact, but in terms of derailment, the oil sands appear to have escaped that pitfall.

As highlighted by Reuters, Canada’s “dirty secret” is making a comeback, amidst predictions of rising oil prices, as the global recession appears to be bottoming out. This is a classic two sides of the coin issue for those in the environmental movement. The global downturn meant a contraction in emissions but also an excuse for political inaction, the upturn could finally see renewable investment get back on track but could also see the rise of oil sands.

The maths is quite simple: oil sands are not cheap or accessible sources of energy. Quite the opposite, defined as “extra-heavy” the oil is difficult to extract requiring large quantities of energy and a pre-processing stage, before the substance can be sent to a refinery to be converted into petrol. Unsurprising, this process makes oil sands very expensive to produce and they require a large amount of upfront investment before they can begin to yield the profits. The effects are slightly paradoxical; many environmentalists are hopeful of a return to rising oil prices in the hope that it will stimulate demand for fuel efficiency, cleaner vehicles and renewable energy as oil is increasingly seen as a volatile fuel that economies depend upon at their own risk. That scenario is still the most likely, as McKinsey’s report outlines, however it’s not simply that oil prices could dramatically begin to rise by the beginning or end of 2010 (depending on the pace of economic recovery) but that their prices will be volatile, an investors nightmare. This is all well and good for environmental causes, however in the interim, the market will be even keener for stable oil suppliers, making Canada’s oil sands an ever more viable solution.

Green Inc, New York Times blog on green business, recently commented that although the recession has set the oil sands industry back from the steep growth forecasts predicted in 2007, the industry instead consolidated into a steady “sustainable” growth pattern. Most worryingly, is the lack of any political pressure from the main parties to halt the oil sands or force it into a  much more environmentally friendly industry. Liberal Leader Michael Ignatieff, as keen a supporter as Conservative Prime Minister Stephen Harper, sees the oil sands as a tragain a more equal status with the US. Ignatieff has made remarks that the oil sands need to be cleaned up, but unless there is very serious movement with regards to public opinion on acceptable pollution levels, no Government is likely to consider forcing the oil sands industry into reducing their environmental impact.

As Green Inc notes however, there could be one flaw  to oil sands unstoppable growth, a regional Cap and Trade. As it stands, this appears unlikely. When Obama visited Canada earlier this year, Climatico analyst, Derek noted how one of the critical negotiating issues was ensuring the US market remained open to Canada’s oil sands, despite campaign rhetoric from the Obama camp on restricting “dirty oil imports”. Problematically, Obama described the dual problems, America’s coal industry and Canada’s oil sands. Given the US is now likely to pursue clean coal, this is probably assurance enough that the oil sands, possibly with some restrictions will be given the green light as well.

Is there a silver-lining? Actually there could be, as seems to be the case with North American politics, to solely follow federal decisions is misleading. In April, I covered, a move by California to regulate the type of fuels allowed to be used, that bill passed and in theory would prohibit the use of oil sand fuel in California. There are two problems, firstly California is the biggest automobile user in the US and secondly, it often causes a domino effect in other states.

How quickly Climate Change debate moves could be the key. At worst, the oil-sands will have to undergo cleaning adjustments to reduce their pollution use, a compromise for entry, at best California is a bell-weather for future policy and oil sands may never make the major leap and become only a moderately developed source of energy.