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Energy and Resources Oil-reliant firms at risk as world moves toward low-carbon future: report

A report for the UN urges a reduction in the use of coal in the electricity sector, among others, to combat climate change.

Martin Meissner/AP

Economic growth and job creation can be maintained even if countries adopt strong carbon pricing to combat climate change, argues an international commission in a report to be released at the United Nations today.

But countries and companies that rely on investments in high-carbon fossil fuels – such as coal and oil sands bitumen – run a tremendous risk as the world moves toward a low-carbon future and those assets are left stranded with an economic marketplace, the report from the Global Commission on the Economy and Climate warns.

The commission was established by eight governments, including Colombia, Indonesia, Norway and Britain, and had as its co-chair former Mexican president Felipe Calderon and British economist Nicholas Stern, who served as a senior adviser to the British government on climate change.

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Its report comes as international leaders prepare to meet at the UN Secretary-General's climate summit in New York next week, a meeting that Prime Minister Stephen Harper will not attend but will delegate to Environment Minister Leona Aglukkaq. Secretary-General Ban Ki-moon is hoping his summit will build momentum for the conclusion of an international agreement at the climate summit in Paris in late 2015.

The Conservative government has adopted some key climate measures, including the phase-out of traditional coal-fired electricity and significant increases in fuel-efficiency standards for cars and trucks. But the Prime Minister is no longer promising new regulations on the oil and gas sector, where booming oil sands production is driving up greenhouse emissions and threatens to swamp progress elsewhere.

In contrast with U.S. President Barack Obama, who has made climate change a cornerstone of his agenda, Mr. Harper made no mention of the issue in his campaign-style speech opening the fall sitting of Parliament on Monday. He has often portrayed a climate action as presenting a trade-off between environmental protection and growth, which is especially worrisome to an Alberta that relies on oil sands expansion to drive its economy.

The report from the international commission concludes that making progress on the climate would not come at the expense of the global economy, but that there will have to be a sharp shift away from carbon-intensive fossil fuels if the world is going to avoid the worst impact of a changing climate. Those impacts would in turn impose devastating costs on the global economy.

"It is possible to get economic growth and at the same time tackle climate change," Mr. Calderon told a conference call last week. "But it will require structural changes in the coming years."

It urged the dramatic reduction in the use of coal in the electricity sector; the end to fossil-fuel subsidies; a strong and growing carbon price; rapid technological change and the adoption of non-GHG-emitting energy sources.

While environmentalists have often focused on the oil sands as a major contributor of greenhouse gas emissions, the commission did not single out the Alberta-based industry. It did, however, recommend a series of measures that would dramatically reduce the use of oil as a transportation fuel, and the project's director, Jeremy Oppenheim, said there are clear implications for the oil sands producers.

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"My view is that betting on a highest-cost, highest-carbon form of oil is a quite a high-risk bet for companies and countries to make at this point given the way in which the technological and market forces are playing out in the global economy," said Mr. Oppenheim, who is on leave as a partner in McKinsey & Co. consulting firm.

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