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Jeffrey Simpson

Why the OECD tore a strip off Alberta Add to ...

Forget Hollywood director James Cameron, who swept through Alberta recently to draw attention to the environmental problems of the oil/tar sands. He came and went, cameras in tow, his visit largely (if wrongly) dismissed by defensive locals as a publicity stunt.

The Organization for Economic Co-operation and Development in Paris, however, can't be so easily dismissed. In diplomatic language, the organization tore a strip off Alberta for its short-sightedness in energy policy. In contrast to Norway and Chile, the OECD found that Alberta isn't building up a fund from oil and gas revenues to be used for the benefit of future generations.

Worse, the government transferred $3.6-billion from its Alberta Sustainability Fund to pay for its deficit this year. Worse still, said the OECD, the government intends to keep drawing down the fund until it has fallen to $4.7-billion from the $16.8-billion it reached in the 2007-2008 fiscal year.

Norway, by contrast, saves all its oil and gas royalties, drawing down just 4 per cent of the fund's value each year - so future generations of Norwegians will benefit from today's bounty. Today's generation of Albertans, however, is hogging the revenues and building up a pittance for the future. Me, me, now, now seems to be the attitude of Albertans and their government.

Serious people in Alberta have bemoaned this approach, including those at the Canada West Foundation and the Alberta Financial Investment and Planning Advisory Commission that the government itself established in 2007. Both wanted a much bigger long-term fund with yearly contributions and no easy access to the piggy bank.

To no avail, because Alberta's Conservatives aren't really conservatives in the classic sense of the word - they're just governing for the short term, scared by the appearance on their political right of the Wildrose Alliance.

If the government's failure to save for tomorrow is sad, so is its much-touted policy on reducing greenhouse-gas emissions. Here, it's fooling people and perhaps itself, as simple math shows.

The government has made a huge bet on burying carbon emissions through carbon sequestration schemes. It's put $2-billion into projects that will start in the 2013-2015 range. Spread out over that period, the cost will be $400-million to $700-million a year.

If all goes well, Alberta would eliminate four million to five million tonnes of carbon dioxide a year. Great, but the government says it plans to use carbon capture and storage to get rid of 139 million tonnes by 2050. Do the math. If $2-billion spread over three to five years achieves a reduction of four million to five million tonnes, Alberta would need $60-billion to $70-billion between now and 2050 to get 135 million more tonnes out of the atmosphere - or $1.5-billion to $1.75-billion each year (in today's dollars) instead of $400-million to $700-million.

Do Albertans realize how expensive carbon capture and storage will be, considering that schemes such as the ones now being planned also take big dollops of cash from Ottawa and the companies? Chances are they don't, because politicians don't like to talk about the long-term financial challenge. It's good enough for the government in a province with many climate-change deniers to waive the $2-billion fund and say the province leads the world. It's also easy to say, yes, today's costs are high, but they'll come down as carbon sequestration technology improves. Maybe it will is the only plausible response, because there are industry representatives who doubt that all four of the identified projects will actually materialize.

The government also heralds energy intensity reduction targets that allow companies unwilling or unable to reduce emissions to put $15 a tonne into a technology fund. Great again, except that, in the first year, the fund earned $122-million - which, given the immense costs of developing new technologies, would mean a decade or more to scale up to something significant.

There are Albertans such as Satya Das and Peter Silverstone who've written intelligent books proposing other tax and royalty policies to "green" the oil/tar sands. Inside the industry, those who think something should be done about emissions want a serious carbon tax. Predictably, the politicians aren't listening; they're dug into policies that look good on the surface but are certain to expensively fail.

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