We investigate the impact of climate policies on Canada's oil sands industry, the largest of its kind in the world. Deriving petroleum products such as gasoline and diesel from oils sands involves significant amounts of energy, and that contributes to a high level of CO 2 emissions. We apply the MIT Emissions Prediction and Policy Analysis (EPPA) model, a computable general equilibrium model of the world economy, augmented to include detail on the oil sands production processes, including the possibility of carbon capture and storage (CCS). We find: (1) without climate policy, annual Canadian bitumen production increases almost 4-fold from 2010 to 2050; (2) with climate policies implemented in developed countries, Canadian bitumen production drops by 32% to 68% from the reference 4-fold increase, depending on the viability of large-scale CCS implementation, and bitumen upgrading capacity moves to the developing countries; (3) with climate policies implemented worldwide, the Canadian bitumen production is significantly reduced even with CCS technology, which lowers CO 2 emissions at an added cost. This is mainly because upgrading bitumen abroad is no longer economic with the global climate policies.
Bibliographical noteFunding Information:
The authors gratefully acknowledge suggestions from two anonymous referees in improving this study. The Joint Program on the Science and Policy of Global Change is funded by the following institutions under various grants: the U.S. Department of Energy; the U.S. Environmental Protection Agency; the U.S. National Science Foundation; the U.S. National Aeronautics and Space Administration; the U.S. National Oceanic and Atmospheric Administration; the U.S. Federal Aviation Administration; the Electric Power Research Institute; and a consortium of industrial and foundation sponsors (for complete list see http://globalchange.mit.edu/sponsors/current.html ). Additional support for this work was provided by BP through the MIT Energy Initiative.
- Climate policy
- Economy-wide analysis
- Energy supply