Despite her protests, Elizabeth May's 4 Facts are still based on speculation

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posted March 28, 2014

Elizabeth May has chosen to respond to my critique of her Green Party website post "4 facts about Keystone XL" here on the Huffington Post Blog. It's gracious of Ms. May to engage in those who may disagree with her positions. Alas, I'm afraid that I can't quite let Ms. May have the last word, as there are still some problems with her claims regarding Keystone XL that need examining.

I did, by the way, read the original letter which she sent to Senator Kerry, but I chose to focus on her "4 facts" post because it is, presumably what she felt represented the most important messages in her original letter, and is the anchor for a petition site in which Ms. May is asking Canadians to join her in sending the message to Senator Kerry. In fact, the link from Ms. May's blog post that would seem to lead you to her original letter leads to the petition rather than the original letter. I am also glad for this opportunity to delve further into the original letter. I should point out that the original letter does not have citations that would allow anyone to validate claims made therein.

Ms. May suggests that I misconstrued her first point, and that she was not discussing Dutch Disease, so much as a "Carbon Bubble." Having spoken to various economist colleagues, I'll concede her point "Apparently, as an environmental scientist, I have a more expansive view of  'Dutch Disease' than do economists. However, if Ms. May wants to focus on the "carbon bubble" then let us do so. The idea of a "carbon bubble" seems to have arisen from a 2012 report by a group called "the Carbon Tracker Initiative." The idea behind the carbon bubble is that the world's investment community is making its investments based on a false assumption, which is that the world will exploit its remaining fossil fuel reserves. Those postulating a carbon bubble assert that, on the contrary, a massive amount of the world's remaining carbon-based fuel deposits must go unburnt. Not surprisingly, that assumption reduces the value of such assets tremendously, and, if it were to play out that way, could lead to significant economic losses. In her rebuttal to my op-ed, Ms. May suggests that the carbon bubble is truly massive, insisting that two-thirds of all known fossil fuel reserves have to remain in the ground until 2050. I would respectfully suggest that the idea of such a thing happening is extremely unlikely.

Virtually every international greenhouse-gas control effort to date has fallen apart over wealth transfers and economic impacts that are a small fraction of the global losses that would ensue were a sequestration regime to lock fossil fuel assets in the ground to the extent Ms. May projects. Fortunately, it's highly unlikely to happen. Does Ms. May really think that OPEC and all of the other oil and gas producing countries of the world, including those trying to lift billions of people out of grinding poverty, are simply going to let two-thirds of their potential fossil fuel reserves sit underground untapped, while millions die in energy poverty every year, and while efforts to promote development stagnate? I don't think so, and I hope Ms. May does not think so, for such an action would cause human suffering on a shocking scale, particularly afflicting women and children in developing countries. The International Energy Agency recognizes that insufficient access to energy is recognized as a direct threat to the attainment of the United Nations Millennium Development Goals of ending poverty.

Ms. May then adds in her concerns that Canada won't reap benefits from exports of raw bitumen. But recent studies contradict her. In "The Taming of the Skew: Facts on Canada's Energy Trade," Trevor Tombe of the University of Calgary School of Public Policy neatly dispensed of this argument:

Value-added is an important consideration, to be sure, as it represents what is available for Canadians' income in the form of wages, rent, or capital returns such as interest and dividend payments. It is completely false, however, to claim raw energy exports do not represent "high-paying value-added jobs." The opposite is true.

Professor Tombe points out that not only are extraction workers better paid ($100.00/hr) than people in the general economy ($32.00/hr), they're also better paid than jobs in refining ($70.00/hr) as well. He also points out that on a metric of value-added per hour worked, the numbers are still more revealing. Citing data from Statistics Canada, Tombe shows that the mining, oil, and gas sector is "far and away" the most productive sector in the Canadian economy.

Ms. May then defends her invocation of what I would call a Saudi Arabian bogeyman in her petition to Mr. Kerry by responding "As one of the sales pitches south of the border is that this is a friendly Canadian product, I thought it was worth pointing out that at least some of the diluents will be coming in from OPEC." This seems less than a great selling point with anyone other than anti-Saudi interests in mind, particularly south of the border. Saudi Arabia is an ally and major trading partner of the U.S.; the first country to which the U.S. turns to help mitigate things when global events cause oil price shocks. I would also point out that Ms. May's claim that Canada will be using Saudi diluent is itself based on an (unreferenced) claim made by an Enbridge representative in a submission to a hearing of the National Energy Board, based upon a speculative future. I'd hardly call that a fact. Between now and when the pipelines are built and the bitumen flows, any number of sources of diluent could develop that are more economical for Enbridge to use than diluent from OPEC.

Finally, Ms. May strongly disagrees with my statements on climate change, and the importance of Canada's efforts to limit greenhouse gas concentrations fair enough, I'm sure we differ there. What she does not dispute is my point that Canada's impact on global climate change is tiny on a global basis, the oil sands are miniscule on a global basis, and anything Canada does to reduce global atmospheric greenhouse gas concentrations will be rendered unmeasurable by increased growth of China and India.

In conclusion, I welcome this chance to have an exchange of opinions with Ms. May. We are unlikely to ever see eye to eye, but at least we've managed to air our differences to advance the discussion in a civil fashion.

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