Last week the US state department approved an oil pipeline which will carry tar sands oil from Alberta across Canada down to Wisconsin. The move follows long term plans between the US and Canada over energy deals, with tar sands already a key part of the US’s current oil provider. For environmentalists the move is a major setback, with tar sands, considered the dirtiest of all oils permanently and visibility crossing the boundary of the two countries.

Environmentalists both sides of the border and around the world can only greet this with disappointment. It had been thought during the Obama campaign that his rhetoric of “dirty oil” would restrict the development of tar sands to its most likely consumer, the US. However, what now appears likely is that the US has given tacit International approval to the oil sands by creating a permanent pipeline.

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This week WWF-Allianz released their annual scorecard in advance of the G8 negotiations in L’Aquila. Canada came 8^th, under-performing both Russia and perhaps more embarrassingly, the US. The report cited increased efforts by the US such as Obama placing high priority on stopping climate change, and Russia’s recent moves to come to the negotiating table as an example of how Canada was now the bottom placed country.

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California, the US’s most populous and wealthy state and Alberta, a far less populous but nonetheless vital part of Canada’s economy sparred this week, as California seeks to push forward ever bolder Climate Change initiatives. The battle pits two states that could hardly be more dissimilar when it comes to Climate Change. California has trail blazed its way through Climate change, running against the Bush administration and much of his own party, Schwarzenegger reached out to states in the US and Canada in his attempt to direct California’s entrepreneurial dynamism to capitalise on green economics.

Alberta, has been rather different, opting for “reduction in intensity” over actual reductions in its Climate Change reduction, it has been got on well with the Harper administration’s under-whelming Climate Change efforts. The reason lies in Alberta’s not so secret oil sands which have endured a barrage of infamy from protests in Poznan, to a National Geographic report. Tar sands already in development could become an exceptionally lucrative export if as predicted oil prices continue to rise, and the US continues to look for energy supplies to be brought closer to home. While the latter is already underway in some US states and a Climate Change bill currently in discussion, the oil sands future took a different turn as rather than a continually rosier future it met it’s first major clash when one of its largest potential markets passed a bill on Thursday that will eventually ban fuels, that are deemed to emit too much carbon in their production phase.

The Bill, which passed on Thursday, (a neat summary is here) aims to diversify California’s fuel supply with a  move towards expanding the market for low-carbon based fuels, some producers of which are in California and place restrictions on high end polluting fuels.

The principle is typically bold of California, even if in the short term it will only make small changes, it effectively legislates against high end pollution fuels such as Alberta’s tar sands which are likely to become viable in the future of oil prices over the next decade rise as expected to.

The worry for Alberta is twofold, California on its own wouldn’t be a problem , as it doesn’t import any fuel from Alberta at present but a number of other states across the US and even Canada could follow suite (California is already in alliances with US and Canadian states such as in the WCI), and it effectively rules out California and potentially other states as future markets for Alberta. Furthermore, once a few states start, what’s to stop more states taking up their lead?

While ruling out future markets, is one bonus for environmental campaigners, the second is the more immediate investment impact this could have on tar sand development. As it stands tar sand is relatively undeveloped compared with its potential in Canada, but it relies on heavy investment, given the exceptional costs of extracting tar sands, although this won’t be any means derail their development, tar sands could find it increasingly harder to find the willing investors if many of the key north American markets are locked out so early.

Perhaps frustratingly for environmentalists is that this is another example of the Harper Government (who also lobbied with Alberta against the legislation) incorrectly gauging the changing tides in North American Climate Change politics.. As a recent editorial in the Chronicle Herald highlighted, Harper’s like many other politicians saw environmental legislation as a drain on the economy, despite considerable economic evidence and in sharp contrast to the position of many states, within such as Quebec and Ontario, who have been ramping up their investment to capitalise on the future market. The Harper government may well have missed a valuable window of opportunity to consolidate Canada’s position in green

Crude oil production from the tar sands of Canada’s Alberta province are estimated to cause three times the amount of emissions than conventional oil production and was recently described as ‘Canada’s dirty secret’ by environmental activists at the United Nations climate change meeting in Poznan, Poland.

Alberta’s Premier, Ed Stelmach has faced a barrage of criticism over his province’s environmental record.  Managing the public image of Alberta’s oil industry has become a full-time job for Stelmach who has had to deal with mounting public pressure calling for reductions in the pace of development of Alberta’s oil resources.  Emissions from Alberta represent about a third Canada’s annual greenhouse gas emissions (despite having only 12% of its population).  Adding to the public relations challenge for Alberta’s oil patch, a private lawsuit, supported by the Sierra Club of Canada and Forest Ethics, has recently been launched against the Syncrude oil company who’s open air toxic tailing ponds in Northern Alberta resulted in the deaths of 500 birds in the spring of 2008.

With President-elect Obama promising aggressive actions during his administration to reduce US greenhouse gas emissions, the question being raised north of the border in Canada is: how will Alberta’s tar sands industry be affected?

Obama has indicated that he wants to move America away from ‘dirty, dwindling, and dangerously expensive’ oil, a  move that could possibly influence US investment in Alberta’s oil industry. US mayors have signed a statement questioning the carbon footprint of the tar sands oil production which is expected to expand from 1.3 million barrels a day to 3.5 million over the next decade.  Canada is the largest supplier of oil and gas to the United States.  Fearing a withdrawal of US investment Alberta’s Premier has been making numerous trips to the United States touting Alberta’s “affordable energy” during this period of economic downturn.  In order to protect the industry, Premier Stelmach has asked fellow Conservative, Prime Minister Steven Harper for a seat at any future North American climate change negotiations. 

Meanwhile, the Province of Alberta has set greenhouse gas emissions targets based on intensity of production which will allow overall emissions to continue to rise until 2020.  These targets have drawn harsh criticism from environmental groups for not being in line with climate science which suggests that stronger, absolute emissions reductions are required globally over that time period in order to avoid dangerous climate change impacts.  Alberta’s long term targets for greenhouse gases are 14% reductions from 2005 levels by 2050.  Companies can avoid the intensity-targets by buying credits from other firms or paying $15/tonne into a technology fund, presumably to be used towards investments in the research and development of carbon capture and storage technologies.

Federal politicians in Canada also appear to be in no hurry to dramatically slow down the pace of development in Alberta’s tar sands – a pace of development so rapid that it calls into question Canada’s ability to reach the proposed emissions targets of Prime Minister Steven Harper’s government (20% cuts by 2020, based on 2006 emissions) which also include intensity-based targets for the oil industry.  The new Canadian Environment Minister Jim Prentice has made it clear that the government will not harm the weakening Canadian economy in order to pursue environmental progress.  The government believes that the environment and economy are polar opposites (not surprising as Mr. Prentice was formerly the minister for industry).

So for the time being it’s business as usual in Canada – but with a minority government that barely survived the fall session of parliament, a new leader of the opposition, and a confidence vote on the budget later in January, political forces are at play which will shape Canada’s climate change and energy policy in 2009.

To see a slide show of Alberta’s oil sands published by the Washington Post in June 2005 click here.