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Energy

Biden chose Venezuela over Canada for oil

Published

1 year ago

6 minute read

From the MacDonald Laurier Institute

By Brian Lee Crowley

Biden is welcoming oil from one of Latin America’s most odious regimes. It’s a big win for Nicolás Maduro, but a bad deal for America and Canada

The United States needs more heavy oil for a whole series of reasons. President Joe Biden could have chosen to have that oil come from a close friend and ally, environmentally-conscious Canada, or from one of the world’s nastiest regimes, Nicolas Maduro’s Venezuela, which doesn’t give a toss about the environment. Which did he choose?

Venezuela, of course.

In exchange for modest concessions on electoral reform, the Biden administration just lifted sanctions on Venezuela, allowing them to export hundreds of thousands of barrels a day of vital heavy oil to the United States. The shale oil revolution has not and cannot change the fact that the US produces virtually no heavy oil, yet many of this country’s refineries, especially on the Gulf Coast, were set up to refine that kind of oil. Most of their heavy oil is from Canada, which is why that country is far and away the largest exporter of oil to America— more than twice as much as Saudi Arabia, Mexico, Russia, and Colombia combined. If America is now a net exporter of oil, it can thank Canada.

The war in Ukraine caused unpopular price hikes at the gas pump. In response, the Biden administration has drawn down the Strategic Petroleum Reserve (SPR). That drawdown focused on medium and heavy crudes. OPEC responded with supply cuts aimed at throttling the supply of these strategically important crudes.

The drawdown of the SPR is reaching its limits but the risk of higher gas prices in an election year is rising. To OPEC and Ukraine, we must now add the heightened risk of conflict spreading in the Middle East.

In this context, recall that one of the very first acts President Biden took on reaching office was to cancel the permit for the Keystone XL (KXL) pipeline, a permit issued by his predecessor. Keystone XL was intended to provide 830,000 barrels a day of Canadian heavy crude to those Gulf Coast refineries. Pipe was already being laid.

Had President Biden allowed KXL to proceed, the supply of heavy oil to the US industry would have been secure, risky drawdowns of the SPR unnecessary and America would have been much less vulnerable to global supply disruptions and OPEC’s manipulations.

Instead, the President colluded with a campaign to vilify oil from Alberta’s oilsands as “dirty oil.” Yes, producing Canada’s heavy oil emits greenhouse gases. But then all heavy oil is GHG intensive, and Venezuela is the highest emitting in the world.

The Canadian oil & gas sector has invested heavily and successfully in emissions reductions. The industry has a $75 billion plan to decarbonize and achieve net zero by 2050, focused on carbon capture and storage and small modular nuclear reactors.

Venezuela has done nada in terms of real improvement in the environmental footprint of its heavy oil production. What it does have is a regime that is world-leading in terms of its human rights abuses and the damage it has inflicted on a once-prosperous economy. Every dollar America spends on Venezuelan oil will prop up one of the most violent and repressive regimes in the Americas, where Amnesty International says in 2022:

The security forces responded with excessive force and other repressive measures to protests…to demand economic and social rights, including the right to water. Impunity for ongoing extrajudicial executions by the security forces persisted. Intelligence services and other security forces, with the acquiescence of the judicial system, continued to arbitrarily detain, torture, and otherwise ill-treat those perceived to be opponents of the government of Nicolás Maduro.

A recent UN Fact Finding Mission to Venezuela talked about the “unremitting human rights crisis” and patterns of crimes against humanity in that country. Nearly 8 million Venezuelans are estimated to have fled the economic and humanitarian crisis there.

Meanwhile, Canada, while not perfect, has robust human rights protections and high environmental standards. It is also a magnet for immigrants (including tens of thousands of Venezuelans), having one of the highest shares of its population born elsewhere in any country in the world.

In 2021 President Biden was happy to offend one of America’s closest allies by blocking KXL because it was inconsistent “with my administration’s economic and climate imperatives.”  Three short years later, behind the fig leaf of Venezuelan electoral reform, he is welcoming much more environmentally damaging oil from one of Latin America’s most odious regimes, all to try and keep the price down at the pump. That’s a big win for Nicolás Maduro, but a bad deal for America and Canada.

Brian Lee Crowley is the Managing Director of the Center for North American Prosperity and Security (www.cnaps.org).

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Ottawa’s proposed emission cap lacks any solid scientific or economic rationale

Published on November 17, 2024

By

From the Fraser Institute

By Jock Finlayson and Elmira Aliakbari

Forcing down Canadian oil and gas emissions within a short time span (five to seven years) is sure to exact a heavy economic price, especially when Canada is projected to experience a long period of weak growth in inflation-adjusted incomes and GDP per person.

After two years of deliberations, the Trudeau government (specifically, the Environment and Climate Change Canada department) has unveiled the final version of Ottawa’s plan to slash greenhouse gas emissions (GHGs) from the oil and gas sector.

The draft regulations, which still must pass the House and Senate to become law, stipulate that oil and gas producers must reduce emissions by 35 per cent from 2019 levels by between 2030 and 2032. They also would establish a “cap and trade” regulatory regime for the sector. Under this system, each oil and gas facility is allocated a set number of allowances, with each allowance permitting a specific amount of annual carbon emissions. These allowances will decrease over time in line with the government’s emission targets.

If oil and gas producers exceed their allowances, they can purchase additional ones from other companies with allowances to spare. Alternatively, they could contribute to a “decarbonization” fund or, in certain cases, use “offset credits” to cover a small portion of their emissions. While cutting production is not required, lower oil and gas production volumes will be an indirect outcome if the cost of purchasing allowances or other compliance options becomes too high, making it more economical for companies to reduce production to stay within their emissions limits.

The oil and gas industry accounts for almost 31 per cent of Canada’s GHG emissions, while transportation and buildings contribute 22 and 13 per cent, respectively. However, the proposed cap applies exclusively to the oil and gas sector, exempting the remaining 69 per cent of the country’s GHG emissions. Targeting a single industry in this way is at odds with the policy approach recommended by economists including those who favour strong action to address climate change.

The oil and gas cap also undermines the Trudeau government’s repeated claims that carbon-pricing is the main lever policymakers are using to reduce GHG emissions. In its 2023 budget (page 71), the government said “Canada has taken a market-driven approach to emissions reduction. Our world-leading carbon pollution pricing system… is highly effective because it provides a clear economic signal to businesses and allows them the flexibility to find the most cost-effective way to lower their emissions.”

This assertion is vitiated by the expanding array of other measures Ottawa has adopted to reduce emissions—hefty incentives and subsidies, product standards, new regulations and mandates, toughened energy efficiency requirements, and (in the case of oil and gas) limits on emissions. Most of these non-market measures come with a significantly higher “marginal abatement cost”—that is, the additional cost to the economy of reducing emissions by one tonne—compared to the carbon price legislated by the Trudeau government.

And there are other serious problems with the proposed oil and gas emissions gap. For one, emissions have the same impact on the climate regardless of the source; there’s no compelling reason to target a single sector. As a group of Canadian economists wrote back in 2023, climate policies targeting specific industries (or regions) are likely to reduce emissions at a much higher overall cost per tonne of avoided emissions.

Second, forcing down Canadian oil and gas emissions within a short time span (five to seven years) is sure to exact a heavy economic price, especially when Canada is projected to experience a long period of weak growth in inflation-adjusted incomes and GDP per person, according to the OECD and other forecasting agencies. The cap stacks an extra regulatory cost on top of the existing carbon price charged to oil and gas producers. The cap also promises to foster complicated interactions with provincial regulatory and carbon-pricing regimes that apply to the oil and gas sector, notably Alberta’s industrial carbon-pricing system.

The Conference Board of Canada think-tank, the consulting firm Deloitte, and a study published by our organization (the Fraser Institute) have estimated the aggregate cost of the federal government’s emissions cap. All these projections reasonably assume that Canadian oil and gas producers will scale back production to meet the cap. Such production cuts will translate into many tens of billions of lost economic output, fewer high-paying jobs across the energy supply chain and in the broader Canadian economy, and a significant drop in government revenues.

Finally, it’s striking that the Trudeau government’s oil and gas emissions cap takes direct aim at what ranks as Canada’s number one export industry, which provides up to one-quarter of the country’s total exports. We can’t think of another advanced economy that has taken such a punitive stance toward its leading export sector.

In short, the Trudeau government’s proposed cap on GHG emissions from the oil and gas industry lacks any solid scientific, economic or policy rationale. And it will add yet more costs and complexity to Canada’s already shambolic, high-cost and ever-growing suite of climate policies. The cap should be scrapped, forthwith.

Authors:

Jock Finlayson
Senior Fellow, Fraser Institute
Elmira Aliakbari
Director, Natural Resource Studies, Fraser Institute
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Economy

COP 29 leaders demand over a $1 trillion a year in climate reparations from ‘wealthy’ nations. They don’t deserve a nickel.

Published on November 16, 2024

By

From Energy Talking Points

The injustice of climate reparations

COP 29 is calling for over $1 trillion in annual climate reparations

  • A major theme of COP 29 is that the world should set a “New Collective Quantified Goal” wherein successful nations pay poor nations over $1 trillion a year to 1) make up for climate-related harm and 2) build them new “green energy” economies. In other words, climate reparations.¹
  • What would $1 trillion a year in climate reparations mean for you and your family?Assuming the money was paid equally by households considered high income (>$50 per day), your household would have to pay more than $5,000 a year in climate reparations taxes!²
  • Climate reparations are based on two false assumptions:1. Free, wealthy countries, through their fossil fuel use, have made the world worse for poor countries.

    2. The poor world’s main problem is dealing with climate change, which wealth transfers will help them with.

But free, fossil-fueled countries have made life better for poor countries

  • Free, wealthy countries, through their fossil fuel use, have not made the world worse for poor countries—they have made it far, far better.Observe what has happened to global life expectancies and income as fossil fuel use has risen. Life has gotten much better for everyone.³
  • The wealthy world’s fossil fuel use has improved life worldwide because by using fossil fuel energy to be incredibly productive, we have 1) made all kinds of goods cheaper and 2) been able to engage in life-saving aid, particularly in the realms of food, medicine, and sanitation.
  • Without the historic use of fossil fuels by the wealthy world, there would be no super-productive agriculture to feed 8 billion humans, no satellite-based weather warning systems, etc. Most of the individuals in poor countries would not even be alive today.

Free, fossil-fueled countries have made the poor safer from climate

  • The wealthy world’s fossil fuel use has been particularly beneficial in the realm of climate.Over the last 100 years, the death rate from climate-related disasters plummeted by 98% globally.

    A big reason is millions of lives saved from drought via fossil-fueled crop transport.⁴
  • The “climate reparations” movement ignores the fact that the wealthy world’s fossil fuel use has made life better, including safer from climate, in the poor world.This allows it to pretend that the poor world’s main problem is dealing with rising CO2 levels.

The poor world’s problem is poverty, not rising CO2 levels

  • The poor world’s main problem is not rising CO2 levels, it is poverty—which is caused by lack of freedom, including the crucial freedom to use fossil fuels.Poverty makes everything worse, including the world’s massive natural climate danger and any danger from more CO2.
  • While it’s not true that the wealthy world has increased climate danger in the poor world—we have reduced it—it is true that the poor world is more endangered by climate than the wealthy world is.The solution is for the poor to get rich. Which requires freedom and fossil fuels.⁵

Escaping poverty requires freedom and fossil fuels

  • Every nation that has risen out of poverty has done so via pro-freedom policies—specifically, economic freedom. 

    That’s how resource-poor places like Singapore and Taiwan became prosperous. Resource-rich places like Congo have struggled due to lack of economic freedom.

  • Even China, which is unfree in many ways (including insufficient protections against pollution) dramatically increased its standard of living via economic freedom—particularly in the realm of industrial development where it is now in many ways much freer than the US and Europe.
  • A crucial freedom involved in rising prosperity has been the freedom to use fossil fuels.Fossil fuels are a uniquely cost-effective source of energy, providing energy that’s low-cost, reliable, versatile, and scalable to billions of people in thousands of places.⁶
  • Time and again nations have increased their prosperity, including their safety from climate, via economic freedom and fossil fuels.Observe the 7X increase in fossil fuel use in China and India over the past 4 decades, which enabled them to industrialize and prosper.⁷
  • For the world’s poorest people to be more prosperous and safer from climate, they need more freedom and more fossil fuels.The “climate reparations” movement seeks to deny them both.
  • The wealthy world should communicate to the poor world that economic freedom is the path to prosperity, and encourage the poor world to reform its cultural and political institutions to embrace economic freedom—including fossil fuel freedom.Our leaders are doing the opposite.

Climate reparations pay off dictators to take away fossil fuel freedom

  • Instead of promoting economic freedom, including fossil fuel freedom, wealthy climate reparations advocates like Antonio Guterres are offering to entrench anti-freedom regimes by paying off their dictators and bureaucrats to eliminate fossil fuel freedom.This is disgusting.⁸
  • The biggest victim of “climate reparations” will be the world’s poorest countries, whose dictators will be paid off to prevent the fossil fuel freedom that has allowed not just the US and Europe but also China and India to dramatically increase their prosperity.
  • The biggest beneficiary of “climate reparations” will be China, which is already emitting more CO2 than the US and Europe combined. (Though less per capita.)While we flagellate and cripple ourselves, China will use fossil fuels in its quest to become the world’s superpower.⁹
  • The second biggest beneficiary of “climate reparations” will be corrupt do-gooders who get to add anti-fossil-fuel strings to “reparations” dollars and dictate how it’s spent—which will surely include lots of dollars for unreliable solar panels and wind turbines made in China.

Leaders must reject reparations and champion fossil fuel freedom

  • We need leaders in the US and Europe who proudly:1. Champion the free world’s use of fossil fuels as an enormous good for the world, including its climate safety.

    2. Encourage the poor world to embrace economic freedom and fossil fuels.

    Tell your Representative to do both.

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1  Scientific American – COP27 Summit Yields ‘Historic Win’ for Climate Reparations but Falls Short on Emissions Reductions
2  Global population was about 8.02 billion in 2023.

World Bank data

About 7% of world population are considered high income, which translates into about 562 million individuals. Considering 3 people per average household in high income households, this translates into about 187 million households.
Pew Research – Are you in the global middle class? Find out with our income calculator

$1 trillion per annum paid by 187 million households means the average household would pay about $5,300 per year.

3  Maddison Database 2010 at the Groningen Growth and Development Centre, Faculty of Economics and Business at University of Groningen
4  UC San Diego – The Keeling Curve

For every million people on earth, annual deaths from climate-related causes (extreme temperature, drought, flood, storms, wildfires) declined 98%–from an average of 247 per year during the 1920s to 2.5 in per year during the 2010s.

Data on disaster deaths come from EM-DAT, CRED / UCLouvain, Brussels, Belgium – www.emdat.be (D. Guha-Sapir).

Population estimates for the 1920s from the Maddison Database 2010, the Groningen Growth and Development Centre, Faculty of Economics and Business at University of Groningen. For years not shown, population is assumed to have grown at a steady rate.

Population estimates for the 2010s come from World Bank Data.

5  UC San Diego – The Keeling Curve

Data on disaster deaths come from EM-DAT, CRED / UCLouvain, Brussels, Belgium – www.emdat.be (D. Guha-Sapir).

Population estimates come from World Bank Data.

6  Our World in Data – Energy Production and Consumption
7  BP – Statistical Review of World Energy
8  UN News – ‘Pay up or humanity will pay the price’, Guterres warns at COP29 climate summit
9  Our World in Data – Annual CO₂ emissions from fossil fuels, by world region
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