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Shale gives Obama elbow room on climate change

Why did U.S. President Barack Obama launch his climate change fighting plans when he did?

The timing of his Climate Action Plan speech, on Tuesday at Georgetown University, was indeed curious. Climate change initiatives have all but died in the post-Lehman Brothers world. The 2009 Copenhagen climate change conference was a bust on a global scale and, since then, tapped-out governments have been obsessed with keeping their sorry treasuries intact, stemming job losses and, in southern Europe, keeping demonstrators from burning the place down. Preserving the environment has always been a rich country's hobby.

To be sure, the United States is richer than most, but its recovery has been weak. The point being, fighting climate change is still a tough sell in the United States, especially among the Republicans who control the House of Representatives, where flat earth science is alive and well. Fixing climate change costs money. Even if most people suspect that carbon emissions from human activity are to blame for global warming, these same people also suspect that carbon-reducing policies are more likely to kill jobs than create them.

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Along comes Mr. Obama with fairly ambitious climate change plans: They include imposing emissions standards on existing, as well as new, electricity generating plants, a commitment to double renewable power by 2020, $8-billion (U.S.) in loan guarantees for clean energy innovation, new energy efficiency standards for house appliances, the elimination of fossil fuel subsidies and bilateral efforts with China, India and other big polluters to address climate change.

None of this is blockbuster stuff; taken as a whole, it looks like a slow but determined and balanced approach for the transition to a low-carbon economy.

So why now? Because the U.S. is no longer obsessed with energy security, allowing it to pay some attention to climate change.

Shale oil and shale gas are coming on strong, sending American energy imports plummeting. Thanks to the gas glut, coal, the dirtiest fuel, is (slowly) losing it default fuel status in power plants. According to a May Chatham House report on U.S. energy, natural gas has increased its share of the American electricity market by 5 per cent in recent years, at coal's expense.

The trend is likely to continue, though coal prices are dropping, meaning reports of its eventual demise are vastly exaggerated.

Since gas's carbon content is about half that of coal, the American carbon footprint is shrinking, allowing Mr. Obama to take the moral high ground as carbon output rises in countries bent on polluting their way to prosperity, as North America and Europe did. Minus the shale revolution, his climate plans would have been somewhere between non-existent and window dressing. Shale gas is responsible for the carbon-reduction progress that the regulation-mad U.S. Environmental Protection Agency could never achieve on its own.

The new American energy reality puts a lot of energy-exporting countries in a tight spot, none more than Canada. Canadian gas and oil exports to the United States will never stop, but they are likely to fall substantially. Chatham House says U.S. oil demand has fallen 17 per cent since 2005. The reduced demand, combined with soaring domestic shale oil production, mean that oil imports represented only 42 per cent of U.S. demand in 2012 compared to 60 per cent in 2005. Natural gas imports, mainly from Canada, have fallen even faster because of the U.S. gas bubble.

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In other words, the need for the Keystone XL pipeline to carry Alberta's oil sands crude to refineries along the U.S. Gulf coast is waning for the Americans. Mr. Obama made it clear that it would be of zero use if the pipeline made the carbon output problem worse – Keystone has gone from the energy security file to the climate change file. "The net effects of the pipeline's impact on the climate will be absolutely critical to determining whether this project is allowed to go forward," the president said.

Note the use of the word "net." Prime Minister Stephen Harper now has a big problem. He would be foolish to assume that "net" refers only to American carbon output and he would be wise to assume that Mr. Obama's message to Canada is this: Measure your carbon output accurately and make carbon reduction a serious national goal, or bye-bye Keystone.

The problem is that Mr. Harper has never paid much attention to the climate change file and, oddly for a man who believes in free markets, doesn't seem to be a big fan of market-based solutions (that is, non-regulated) to climate change.

A few years ago, when the United States was obsessed with importing every hydrocarbon molecule it could find on the planet, more pipelines from Canada to the United States seemed a sure thing. The shale story, and America's falling carbon output, has wrecked that scenario. It has also put the onus on Canada to clean up its carbon act, finally. Bravo, Mr. Obama.

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