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Eighth Woodrow Wilson Center Cross-Border Energy Forum

November 09, 2007 // 7:00am1:00pm
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Regional solutions intended to mitigate the potential impact of global warming continue to be developed and implemented throughout the United States and Canada. California, viewed by many as a leader in addressing carbon emissions, recently passed Assembly Bill 32 (AB 32), which mandates the state to reduce its greenhouse gas emissions to 1990 levels by 2020. California faces the daunting task of implementing an effective regulatory framework to meet this mandated target, and is not alone in facing this challenge. Policymakers across Canada and the United States are faced with the difficult task of balancing economic, energy, and environmental goals when attempting to address global warming. This situation raises the unanswered question of how policymakers should attempt to balance economic, environmental, and energy objectives, while recognizing that trade-offs in each area are likely unavoidable.

The Canada Institute's eighth Cross-Border Forums on Energy Issues, sponsored by Chevron and held in collaboration with the Canadian Centre for Energy Information, Global Public Affairs, and the Canadian Consulate General in San Francisco, sought to better understand the linkages between energy, the environment, and the economy. The forum provided an opportunity for 40 Canadian and U.S. government officials, industry representatives, and energy and policy experts to discuss a range of questions facing North American policymakers and consumers alike in a carbon constrained future. The half-day event took place at San Francisco State University on November 9, 2007, and was followed by a luncheon program where Pierre Alvarez, president of the Canadian Association of Petroleum Producers, delivered the keynote address.

An Urgent Call to Action on Energy Issues

"The era of easy access to energy is over," noted Rhonda Zygocki, Chevron Corporation's vice president of policy, government, and public affairs. Drawing on the conclusions of the National

Petroleum Council's 2007 report, Facing the Hard Truths about Energy, Zygocki said that an expected increase in resource nationalism, escalating costs of producing oil and gas, combined with the projected increase in global demand for fossil fuels all highlight the pressing need to find practical solutions to address energy issues. She agreed with the report's findings that promoting energy conservation, finding new supplies of fossil fuels, and developing alternative energy sources will be crucial to meeting future energy demands.

While biofuels and other alternative sources of fuel will likely play an increasing role in the global energy market, it is important to remember that fossil fuels will continue to dominate the energy market for the foreseeable future, said Zygocki. In fact, oil, coal, and natural gas are projected to provide 85% of global energy needs by 2025, a figure that is very close to today's energy mix. This trend is explained in part by the "practical limitations" that continue to plague biofuel production. Zygocki maintained that increased investment is desperately needed to produce alternative fuels at the scale necessary to make a significant impact in the North American energy market. Creating this scale of production will take time, she said, noting that unconventional energy development has historically taken ten or more years to develop. She cautioned, however, that the future use of such fuels will be used in conjunction with traditional sources of energy, and should not be viewed as a replacement for fossil fuels. Zygocki stressed that investment in the production of second generation biofuels, such as cellulosic ethanol, will be critical to avoid the potential political and environmental issues associated with the production of ethanol from food sources.

Zygocki also argued that there is a critical role for government to play in addressing energy issues, particularly in the realm of removing regulatory barriers that impede technological development and implementing policies that mitigate the risk of investing in alternative energy sources. Nevertheless, policymakers are still struggling to agree on the best approach to craft and implement an effective regulatory framework that satisfies economic, environmental, and energy goals. Efficiency by itself, she said, will not meet California's needs. Dan Skopec, president of Climate and Energy Consulting, noted that while challenges and questions remain with respect to how to implement AB32, the State of California is currently pursuing an effective and comprehensive approach to implement the legislation that could serve as an example to follow for other states attempting to reduce greenhouse emissions.

Skopec praised California's government for using a variety of approaches to address the state's energy issues. He noted that California's government intends to use a mixture of direct command and control regulations; market-oriented regulations, designed to introduce industry performance standards; various protocols that provide industry with strong incentives to use environmentally sound methods of production; and government incentive programs designed to spur technological innovation—including an initiative devoting $120 million toward the research and development of alternative fuels. However, Skopec pointed out that California still needs to address several issues in order to improve its energy efficiency. He suggested that California should enhance its institutional capacity to distribute money more effectively toward the advancement of technological projects. In addition, California must take measures to encourage efficient energy use in commercial and residential buildings, as well as aggressively pursue "smart growth" policies that would encourage environmentally sound urban planning and reduce traffic congestion.

While acknowledging California as a leader in energy efficiency, Zygocki argued that solving energy issues cannot be solved merely at the state level; it requires "a national framework with national policies" in order to make significant gains on the energy challenges facing the United States. By acting on their own, states risk creating a regulatory environment that would increase economic and competitive inefficiencies, she said.

Addressing Energy Issues on a National Scale

Kristi Varangu, chief of international energy relations at Natural Resources Canada, outlined Canada's national strategy to address carbon emissions, stating that the strategy was formed within a framework that recognized that energy remains a crucial component of Canada's economy and trade. Though Alberta receives the most attention as an energy exporter, Varangu noted that energy production and development is also of growing economic importance to several Atlantic provinces, as well as to Saskatchewan. She said that the Canadian government is aware of the need to increase its use of renewable energy, but stressed that fossil fuels will remain the country's primary source of energy for decades to come. Consequently, Canada has focused a key part of its efforts to reduce its carbon emissions on research and development projects—such as clean coal and carbon capture and storage—that would make energy production from fossil fuels cleaner and more efficient.

Varangu highlighted Canada's $2 billion investment in EcoENERGY initiatives—intended to promote energy efficiency and provide funding for the research and development of green technology—as a sign of the government's commitment to reducing greenhouse gases and air pollution. These initiatives, combined with Canada's recently announced regulatory framework that sets national emissions limits for large energy industries that produce greenhouse gases, form a central component of the Canadian government's plan to reduce its carbon emissions by 20% by 2020, said Varangu.

When developing plans to address energy issues, policymakers must ensure that the public is aware that becoming more energy efficient will involve sacrifices, maintained Joseph Doucet, director of the University of Alberta's School of Energy and the Environment. All too often, noted Doucet, governments promise their constituents that it is possible to meet increases in energy demand in an environmentally sustainable manner, without having to sacrifice economic growth. However, this ignores the fact that trade-offs between energy, environmental, and economic ambitions will have to be endured in order to move forward on critical energy issues. The longer governments "perpetuate the myth" that environmental challenges can be addressed without compromising economic growth, explained Doucet, the harder it will be for countries to make serious gains toward energy efficiency and reducing carbon emissions.

The results of a recent poll commissioned by the Canadian Centre for Energy Information of 1,000 Canadians and 1,000 Americans conducted by SES research in Ottawa and the University of Buffalo, provided a glimpse into the willingness of Canadians and Americans to sacrifice economic benefits in return for greater energy and environmental security. The poll revealed that a greater percentage of Canadians than Americans were willing to accept mandatory emissions targets that risked higher energy costs. The results of the poll also indicated that a majority of Canadians and Americans were in favor and recognized the importance of working bilaterally on energy and environmental issues.

Aside from the challenge of convincing Canadians and Americans to accept potential economic trade-offs and the need to make choices, Doucet also highlighted several other factors he believed policymakers must consider when developing a strategy to address carbon emissions. He maintained that markets should not always be viewed as "bad for the environment." In contrast, the flexibility and incentives markets can offer industry to promote energy efficiency and the use of advanced technology can be powerful tools to achieve environmental goals, he said. Nevertheless, Doucet cautioned that market mechanisms should not be perceived as able to solve all environmental problems and should only be viewed as part of the solution to pressing environmental and energy issues.

Striking a Balance between Energy, Environmental, and Economic Goals

There is now consensus among constituents in the environmental, energy, and economic sectors that issues such as global warming and energy security are significant problems that require further discussion and collaboration to solve, said Jane Long, associate director at large at the Lawrence Livermore National Laboratory. She suggested that the three sectors must find ways to approach solutions to issues such as global warming in a manner that is beneficial to each. Developing renewable energy can be thought of as one example of an area that each of three sectors can profit from, said Long, noting that developing renewable energy spurs economic development through the creation of new companies, promotes energy security by reducing the need to import fossil fuels, and satisfies the environmental community by developing sources of energy that do not produce carbon emissions. What remains to be seen, said Long, is the extent to which advanced technology can help solve energy and environmental challenges in a manner that is mutually beneficial to each of the three sectors.

Assessing approaches to better understand the linkages between energy, the environment, and the economy was a theme highlighted among participants throughout an active closed-door discussion period, which followed panel presentations. To this end, participants noted the necessity of facilitating increased collaboration among academics, NGOs, government officials, and industry representatives when addressing energy and environmental issues. Participants also cited the importance of effective leadership on energy issues at the federal, state, and provincial levels of government, and commented on the need to ensure that plans are developed to create the infrastructure that will be needed to transport and produce alternative fuels on a large scale. Several participants noted that there is no "silver bullet" to solve this problem.

The future of Alberta's oil sands was another subject discussed at length. One participant asked whether Canada would be able to meet its climate goals and continue to develop the oil sands. Pierre Alvarez, president of the Canadian Association of Petroleum Producers, responded to this question during his keynote address, noting that the oil sands only account for four percent of Canada's total greenhouse gas emissions and should not be viewed as the source of the majority of the country's emissions. Throughout his remarks, Alvarez addressed common misperceptions held by the public regarding Alberta's oil sands. For instance, he argued that although the public typically believes that vast amounts of water is used to produce oil from the oil sands, the reality is that the oil sands' total production uses less than one percent of Alberta's Athabasca River flow. Given the importance of the oil sands to the economies of both Canada and the United States, Alvarez said it is of critical importance to ensure that Canadians and Americans are better informed of the common myths surrounding their environmental impact.

Drafted by Ken Crist, Program Associate, Canada Institute
David Biette, Director, Canada Institute

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