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Do The Oil Sands Have a “Carbon Opportunity Cost”?

by Michael Levi
September 20, 2010

Joe Romm attacks Lindsey Graham in a post yesterday for Senator Graham’s comments about the Canadian oil/tar sands. Set aside Romm’s broader critique – like him, I find Graham’s claim that oil sands extraction “really blends in with the natural habitat” a touch ridiculous – and focus on his bottom-line technical point:

“The ultimate reason the tar sands cannot be made green from a climate perspective is that Canada is diverting a considerable amount of its natural gas resources to extract and process the tar sands. That natural gas could be used to shut down Canadian and US coal plants, reducing their emissions by some two thirds. Even if the tar sands had CCS, you’d still be wasting vast amounts of natural gas and creating an immense ‘opportunity carbon cost.’  Natural gas is simply too precious a carbon-reducing fuel to waste on making another carbon-intensive fuel like the output of the tar sands.”

I hear this line a lot. But it’s dead wrong. Let’s do the math.

As of 2005, oil sands operations purchased about seven hundred cubic feet of natural gas (PDF) for every barrel of oil they produced. (Oil sands operations use more natural gas than the figure given here. The additional gas is acquired as a byproduct of oil sands production itself; as a result, using it in oil sands operations does not displace gas that might have been used to generate power.) Future projections (same link) show that figure rising to as much as eight hundred cubic feet per barrel or dropping to as low as five hundred cubic feet per barrel by 2020, depending on technology, availability of gas from pipelines, and growth in oil sands operations.

Those seven hundred cubic feet of natural gas contain about 38 kg of CO2. On average, in 2007, a kWh of electricity generated from gas in the United States produced 0.44 kg of CO2, while a kWh generated from coal produced 0.93 kg of CO2, or 2.1 times as much. (These numbers are derived from the 2009 IEA World Energy Outlook.) This means that the “opportunity carbon cost” that Romm identifies is about 42 kg of CO2 per barrel of oil sands crude. Given that the well-to-wheel emissions associated that barrel are about 600 kg, this is an increment of only 7%. This is far less than the total emissions entailed in extracting oil sands. The “opportunity carbon cost”, as Romm defines it, is not a major factor in the oil sands’ emissions.

In particular, it is considerably less than the emissions reductions that would result from using CCS on the oil sands, which is the opposite of what Romm claims. (I do not personally think that CCS for the oil sands should be a priority from a U.S. perspective – the potential impact is relatively small in the grand scheme of things – but that is beside the point here.) Indeed, if one were able to use CCS in the oil sands, one could substitute unprocessed bitumen for natural gas in steam generation (the major place where it’s used) without increasing emissions. That would free up the gas.

In reality, of course, the actual “carbon opportunity cost” will almost certainly be considerably less than the 7% that I’ve just projected. Some of the capacity displaced will not be coal, but, instead, other sources. (Gas and wind are fierce competitors.) Freeing up more natural gas would also lower the price of gas, which would stimulate more consumption; that would offset some of the anticipated emissions savings. Moreover, that lower price of gas would also disincentivize some other gas production; to the extent that Romm is correct to assume that gas displaces coal, less gas produced elsewhere would mean less coal displaced, reducing the emissions impact of the new Canadian gas.

There are a lot of problems with the oil/tar sands. (There are also a lot of benefits.) Policymakers should weigh those carefully in their decisionmaking. A supposed “carbon opportunity cost”, though, shouldn’t rank high on their list.

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  • Posted by Milan

    The problem with the oil sands is actually the sheer size of the fossil fuel reserve.

    The amount of climate change the world experiences depends fundamentally on how much of the planet’s remaining fossil fuels we burn, and how much we leave underground.

    If we are to avoid dangerous climate change, the great majority of the coal, oil, and gas remaining need to be left underground – including in Canada’s oil sands. Moving to renewable forms of energy is not optional, since fossil fuels were always going to run out. Making that transition now, rather than later, will reduce the risks associated with climate change. It will also reduce the harm generated by the toxic air and water pollution associated with fossil fuel use.

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