For both the US and Canada, Alberta’s oil sands pose a delicate dilemma. The emissions-intensive, unconventional resources mostly enclosed within the Western province are at once both a welcome source of energy supply and an unattractive climate change quagmire. The tradeoffs that arise in addressing the issue – unfettered production in the oil sands would increase greenhouse gas emissions but strengthen American energy security and Canadian industry; while sharply curtailed oil sands operations would harm security and industry, but cut emissions – are the focus of a new Council on Foreign Relations report entitled “The Canadian Oil Sands: Energy Security vs. Climate Change,” authored by Michael A. Levi.

In Canada, the oil sands have been an important ingredient for growth, and given their significance, changes in oil sands regulation carry weighty consequences for Canada’s economic interests. Fortunately, Levi submits that Canadian and Albertan policy, as opposed to US planning, will play the “larger role in shaping oil sands’ development.” Currently, Alberta maintains low royalty and tax rates supportive of greater growth and production.

However, greater production also means greater environmental damage in a country that recently finished last among G8 nations on the World Wildlife Fund’s climate change scorecard. Emissions from the production and upgrading stages of oil sands crude are nearly three times higher than for the average barrel of oil consumed in the US; this makes the crude from Alberta’s oil sands the most emissions-intensive oil consumed in America (its natural export destination). The Albertan government has imposed a carbon tax on oil sands producers emitting more than 88 percent of their historical CO2 average, in preface to what is expected to be an increasingly stringent – though still industry-friendly – carbon regulatory regime. Additionally, recent studies and technological developments have spurred hope that the oil sands crude may become one of the cleanest fossil fuels.  Still, Canada will not meet its Kyoto Protocol emissions target any time soon.

With studies showing that Canadian oil will increase from comprising 19 percent of total American oil imports to an estimated 37 percent by 2035, it seems apparent that the two NAFTA partners will be inextricably linked in addressing the prevailing tradeoffs. As prospects for a coordinated North American carbon market elucidate in the coming months, so too will the effects of greater oil sands regulation on North American economies and environments become clearer. Time will tell whether non-market actors in Canada and the US will be able to find the right balance between oil production and environmental protection.

Related:

• Current Feature: Cleaner Energy, At What Cost?
  
• Past Feature: Combating Climate Change through Energy Exploration and Cap-and-Trade
  
• Past Feature: North America's Oil Addiction
  
• Read: Big-league players step up for oil-sands
  
• Read: US official says oil sands need not fear energy policy

(Image credit: Flickr user isurusen)