A Brief Insight Into Paris 2015 and the Canadian Oil Economy

With the low oil prices, one might think how the upcoming Paris 2015 environmental treaty will hurt an already struggling Canadian energy sector. With many analysts agreeing that Paris will be the global success of its predecessor Kyoto, many feel that this would put a strain on Canada’s economy if Canada were to commit to this.

 

Background: Kyoto, Paris 2015 Predecessor 

 

 

The Kyoto Protocol (Signed in 1997 to be effective in 2005) was an international treaty created in order to curb greenhouse gas emissions. Although minority scientists and some politicians disagree, this was created in order to mitigate the effects of global

warming.

 

The countries of the treaty can roughly be classified into the following 4 categories: (1) Small Islands who suffer the most from global warming due to loss of land, (2) economically developed European Nations (and Australia),  (3) oil rich countries who could be hurt by the policy, and (4) developing or undeveloped countries that argue that they need carbon-intensive fuels for their economic growth.

Generally categories 1 and 2 are in favor of curbing emissions with 3 and 4 arguing against it. Countries in 3 argue that global warming may not be manmade, and countries in category 4 argue that developed countries already industrialized using fossil fuels so they should also have the ability to go through their industrialization with fossil fuels even though it may be lagged.

 

Kyoto considered the categories into account in its foundation. It didn’t give developing/developed nations a binding carbon target and it allowed them to emit so they could ‘catch up’ industrially. So what happened to the developed countries? Canada being an oil rich nation (and the 9th highest contributor to carbon emissions) signed Kyoto but withdrew from it. USA being the second highest contributor to overall global emissions did not ratify the treaty, which resulted to Russia backing out after the first round of agreements.

China being in category 4 did not have any set emissions targets to meet. This meant that the largest contributors did not curb their carbon emissions and global amount rose exponentially due to a period of global growth.  Most of the world’s leaders considered Kyoto a failure and change was imperative. In 2009 world leaders met at the Copenhagen Accord which had no agreement until Cancun 2010 where leaders agreed that they would meet to establish binding targets in Paris 2015.

 

Paris 2015 and Canada’s Future:

 

So the leader’s agreed that they would confirm targets in Paris so it should be easy enough right? Wrong! Because Kyoto leads in developing countries emitting more than previous, the new idea is to give cash incentive to developing countries to boost their economies (in the form of investments). However, developed countries cannot agree on how much of a boost is fair to these economies. Emissions Trading Schemes (ETS) work on a EU level as the European Union can monitor and hold countries to commitments but in Kyoto there is limited global monitoring. There has to be stronger commitment mechanisms now.

 

So how does Canada fit into all of this?

Canada has submitted a plan to curb its emissions but whether or not this will be enough for the United Nations Framework Convention on Climate Change is another story. Forecasted low oil prices means that even without implementing new emissions taxes, there could be a significant burden imposed on high-cost Canadian oil companies at home should there be an agreement. Emissions-Trading Schemes worked on a European Level but there has been no mention about how or if they can be implemented at a global level. With the supply glut, a curbing of oil demand from the implementation of such policies could hurt oil companies. But all hope is not lost! Perhaps as a matter of viewpoints, Canadian companies can do what they do best: Invest in these underdeveloped or developing countries, particularly in the sustainable development sectors. This could be done through the creation of low-tax incentives/ subsidies and the provision of clean energy technologies to these countries in order to benefit from their sustainable growth down the road. Whether or not any of this will happen remains to be seen in Paris 2015.

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