The Alberta government has more than $120 million ready to spend on projects that will help reduce greenhouse gas emissions, and last month appointed long-time oilsands exec Eric Newell to oversee the distribution of those dollars.
The money has been collected in the Climate Change and Emissions Management Fundsince last year, when emissions caps for heavy emitters took effect. Facilities that produce more than 100,000 tonnes of GHGs must scale back emissions intensity by 12%, or pay $15 into the Fund for each tonne over their reduction targets. (Companies can also purchase carbon offsets.)
I spoke with Newell shortly after his appointmentan appointment that raised a few eyebrows in the environmental community. Newell spent 15 years at oilsands giant Syncrude, as CEO and then as chair. He sits on the board of Nexen today, received more than $230,000 in compensation last year from the energy company, and owned more than $1 million worth of shares as of March. The optics arent exactly great: a guy with strong ties to an industry that is one of the worst offenders in terms of emissions is now responsible for doling out cash in an attempt to curb those emissions.
And so Newell will have a lot to prove. He is still in the process of assembling a board, which will then take submissions from companies hoping to secure some of the cash to fund emissions-reduction projects. Newell wants to start accepting submissions by the end of the year.
So what does Newell have in mind? He is a big supporter of carbon capture and storage, for one, despite the ample funding both provincial and federal governments are providing for the technology. The Alberta government is already pledging $2 billion, and the federal government is committing $650 millionfrom its Clean Energy Fund, established earlier this year as part of the stimulus package. (Federal Environment Minister Jim Prentice is also now saying carbon capture and storage has limited applications in the near-term in the oilands, the fastest growing source of emissions in Canada.)
Newell is going to have to be careful about the makeup of the board. He wants to include a broad section of industry and academia, but the plan so far calls for a large presence from heavy emitting industriescoal-fired power generation, the oilsands and conventional oil and gas production. My initial reaction is that a board consisting of representatives from the traditional fossil fuel industries could have a hard time making a meaningful impact. After all, these are not businesses known to have taken bold action when it comes to the environment.
I discussed this (and more) with Newell below:
What interested you about this position?First of all, I think technology is critical to the future of the energy industry and we need technology solutions to keep making our fossil fuels more sustainable, but also to green the energy mix and develop an appropriate portfolio of renewable energy alternatives.
How big of an impact do you think the fund can have?I dont think our role is to try to allocate money depending on what each individual industry sector or company puts in. I think our role as a boardand Ill encourage peopleis you want people to leave their hats at the door. And really were going to be picking the projects that are going to do the most to reduce our carbon footprint. Thats with the fossil fuels, but also with the renewables. If you went with the other philosophy, where people were in there to support their industry sector, youd never get any renewables going. Fundamentally, my philosophy is weve got tremendous energy resources, but the world is going to need every form of energy it can find. Even when I ran Syncrude, I didnt think of renewables as competitors. But I dont have rose-coloured glasses on here. Most of the energy growth is gonna have to be picked up by the fossil fuelsoil, gas and coaland so we want to put a lot of effort into making them more sustainable and reduce their carbon footprint. At the same time, we gotta look longer-term and start developing an appropriate portfolio of renewables.
How much of a role can renewable energy can play then?It will grow with time, but between now and 2030, if I look at what the International Energy Agency is saying, 80% of the growth during that period will have to come from fossil fuels. So yeah, renewables will grow, but theyre not going to replace fossil fuels, not in our lifetime. Im sorry, I just have to say that. It doesnt mean Im against them. People just dont understand. Mr. Obama in the south, saying hes going to double renewables in three years, hes leading people astray as to what they think is going to happen.
How so?Even doubling it, its still a very small percentage. That doesnt mean you dont do it. I spent a lot of my career in the oilsands and it took 40 years from the time Karl Clark figured out how to separate the oil from the sand until Great Canadian Oil Sands was built in 1967. And then my company started up in 1978. So these things do take a long time to develop and get to a real significant level. But its important that we start now.
Where are the board members going to come from?This is a bit of a debate. I do think that even though it should be predominantly industry, I think it would be critical to have a deputy minister of environment or someone like that from the government. But then, who are the big contributors to this fund? The biggest are the coal-fired power stations. They are the biggest generators, so we want to have very good representation from coal-power areas, but I also will get someone very senior from the electricity generation end, because that will bring renewables in, like solar and wind. The other key areas are of course the oilsands and conventional oil and gas.
Is this just giving money back to heavy emitters?There is the view, and I dont totally share it, that this is the industrys money and they should therefore get to spend it the way they want to. Thats not quite what Im saying. I know well get criticism. But Id rather do it this way, where you have that strong knowledge base with people actually making the best picks, so that we do a good job and get a good end result in terms of the impact of this technology fund.
How do you get people to leave their hats at the door, as you said?People are quite willing to work together. In fact, what you find is a lot of the technology platforms cross over. If you think about whether it be clean coal or the oilsands, its all about carbon capture and stuff like that.
How are you going to decide how to allocate the money?There was work done by Alberta Environment, and the way they think the fund will likely break down is about 20% would go to energy efficiency projects, and maybe 30% will get directed to carbon capture and storagebecause thats so expensive, we just have to find ways to do it cheaper. But about 50% of it would be to greening the energy mix, and that includes more fundamental breakthroughs in the fossil fuel areas, as well as developing an appropriate portfolio of renewables.
What do you mean by fundamental breakthroughs?There are some areas in which applying genomics to the oil business will lead you to fundamentally different technology paths to upgrade the product, and it would be a lot less energy intensive if we make them successful. But the one that has the biggest potential in the short-run is carbon capture and storage. The reality is its very, very expensive. So we need to think up better ways of doing it that are more cost effective.
But is carbon capture really any closer to being a commercial reality than renewable energy?Yeah, it is closer. If you use the big fund that the Alberta government put in place, the $2 billion, theyre looking at trying to come up with 5 million tonnes of reduction by 2015, and not that thats a panacea, but if we could actually demonstrate that, that would give people a lot of base to move that technology a lot faster from there.
The Alberta government is using intensity targets, which means overall emissions can rise if production increases. Is that really doing enough?The answer to that is no, and thats whats driven carbon capture. Its the only thing on the plate that can make a significant overall reduction in the short run. These things are going to take time. Im not just trying to get the monkey off the back of industry. Industry has to perform too, but people have to realize that if were going to really be successful with the targets that have been set, the whole society is going to have to rally together and find ways to reduce our use of energy.