Report: Rules Can Resolve Oil Sands Energy, GHGs

In the midst of heated debate over the future of the Canadian oil sands, a new report from the Council on Foreign Relations (CFR) says that prudent greenhouse gas regulations can safely limit emissions while allowing for robust development of the oil sands.

The report argues that oil sands production delivers both energy security benefits and climate change damages but warns that both are often overstated.

"For the near future, the economic and security value of oil sands expansion will likely outweigh the climate damages that the oil sands create," it says, "but climate concerns cannot and must not be ignored, and will become more important over time."

Policymakers, it emphasizes, must carefully balance the two concerns. "Smart regulation can place a fair and reasonable price on the oil sands' greenhouse gas emissions, providing the right incentive to reduce them," says Michael A. Levi, CFR's David M. Rubenstein senior fellow for energy and the environment and the report's author. "But ill-conceived regulation could undermine U.S. and Canadian climate and security goals." He argues that it is important to integrate U.S. and Canadian cap-and-trade systems, while warning against the risks of a Canada-only cap-and-trade scheme and against an ill-designed U.S. low-carbon fuel standard.

"The Canadian Oil Sands: Energy Security vs Climate Change," the latest publication of CFR's Center for Geoeconomic Studies, explores the energy security and climate change implications of expanded oil sands production, assesses the trade-offs between them, projects the likely impact of different policy measures, and makes recommendations for U.S. lawmakers on how to craft balanced policy.

In the contentious debate about oil sands—a massive but emissions-intensive source of oil— some argue that the United States should discourage the development of oil sands because its operations generate more climate-damaging greenhouse gas emissions than conventional oil production. Others argue that the United States should actively encourage their development because it would strengthen U.S. energy security with a supply of oil from a friendly and stable neighbor.

This report contends that both arguments are exaggerated—but neither is without merit.