CALGARY -- Carbon? Carbon dioxide? Low carbon?
1 Carbon is an omnipresent element, and a chameleon at that, due to its tendency to bond with smaller atoms, creating all sorts of outcomes, including the hardest substance in the universe - diamonds - and one of the softest - graphite. While carbon's been a fuel throughout human history, carbon dioxide - a colourless gas emitted by burning carbon - wasn't known until the 1600s. Carbon dioxide is now identified as the leading greenhouse gas - elements that rise up in the atmosphere, trapping heat.
With the issue on every front page this year, the once-obscure idea of a "low-carbon economy" has also emerged. It simply means burning fuels with lower carbon content with the aim to reduce carbon dioxide emissions from electricity generation to transportation fuels.
It's political
More Report on Business Stories
2 Of course it is. California is already hated by the U.S. auto industry, a sector notoriously averse to change.
In Canada, the divide can be seen between what Premier Dalton McGuinty of Ontario agreed to and what B.C.'s Premier Gordon Campbell signed on for: Mr. Campbell is fully on board with California Governor Arnold Schwarzenegger, starting with adopting the state's low carbon fuel standard, as well as the state's tough rules on actual emissions from tailpipes - the part that really irks Detroit's auto makers.
Ontario, with its own large auto manufacturing sector, agreed to pursue low-carbon fuels but didn't make the leap to demanding more from the likes of GM.
In the world of ethanol, the source of the feedstock has become a major political issue in the United States, with a tariff of 54 cents (U.S.) a gallon slapped on foreign ethanol, specifically on the sugarcane-based product from world leader Brazil.
The tariff is intended to protect U.S. producers in the Midwest that use domestic corn.
10 per cent by 2020 - the new math?
3 Mr. Schwarzenegger, the one-time Terminator, brought his ground-breaking "low carbon fuel standard" to Canada this past week, the centrepiece of an executive order he issued in January to help reduce carbon dioxide emissions. The Governor wants the "carbon intensity" of California's transportation fuels cut by at least 10 per cent by 2020.
A technical paper published by the University of California on Tuesday called the goal "ambitious but attainable," yet a precise plan is still under development.
There are a number of ways to achieve the goal, such as using more corn- or sugar-based ethanol to substitute crude oil as gasoline. Refiners in California will be required to calculate the "full cycle" carbon tally of the fuels they sell, meaning the bitumen mined in Alberta that's upgraded into synthetic oil and then gasoline will not be No. 1 on the list of low-carbon fuels.
Low-carbon fuels are one part of the bigger idea of a low-carbon economy. The Governator is taking aim at transport fuels because they account for more than 40 per cent of California's greenhouse gas emissions, whereas in Canada the figure is 20 per cent. Up north, oil, natural gas and coal production accounts for 20 per cent of emissions, while electricity and heating are another 20 per cent. Is it over
for the oil sands?
4 Hardly - the transition to a low-carbon world will take decades and the main fuel during the shift will remain crude oil. At issue is the types of crudes. Bitumen from the oil sands is a "heavy," very low-grade oil. The long-time standard - West Texas intermediate - is a "light" oil, which is more liquid than sludge. Because of this, it takes a lot less energy at the refinery to turn light oil into gasoline than to transform bitumen, which must be upgraded into synthetic crude oil first.
The investments that Canadian companies like Suncor have made in upgrading are significant: The cost for a typical mining project works out to more than $10 a barrel. Generating the electrical power to do the processing emits a bunch of emissions.
So with California's rules, there are questions about whether actual light oil will displace oil sands output. The answer would be "Yes!" if there were plenty of light oil around, which there isn't, as global production grows "heavier" each year.
Gasoline made from oil sands will be around for years - it will just have to be balanced by advances in biofuels and electric cars - and possibly the introduction of hydrogen as a widespread transport fuel.
Oil sands producers are also sellers of gasoline - and to hedge its bets, Suncor has also become one of Canada's top ethanol producers. Last year, Suncor opened Canada's largest ethanol production facility in Ontario, costing $112-million to produce 200 million litres annually.
BP PLC, the green-minded oil producer, in February chose the University of California at Berkeley to help lead low carbon research, starting with biofuels. BP plans to spend $500-million over a decade.
Profiting from low carbon
5 The options to cash in on the world's low carbon future is somewhat limited. In Canada, one is Lignol Energy Corp., a tiny TSX Venture Exchange company with a market value of just $14-million but big dreams. It is working on technology to convert cellulosic biomass, such as farm waste and wheat straw, into ethanol. On the London market is Low Carbon Accelerator, which invests in private companies looking to score in the low carbon market.
15