Carbon Price Sensitivity Analysis On The Alberta Oil Sands: An Environmental And Economic Study

Abstract

This paper provides an overview of the oil sands industry including the associated environmental impact, Alberta’s greenhouse gas (GHG) regulations, and the economics of bitumen production. The impact of the GHG regulations is examined using the emissions intensity of the oil sands industry relative to the provincial GHG reduction targets. The economic impact of GHG regulations on industry is analyzed by determining the average cost of compliance per barrel of bitumen produced. For comparison, the carbon pricing systems in British Columbia and Norway are discussed and the outcomes of the policies are provided as examples of the impact of higher carbon pricing and more stringent regulations. Norway’s relatively high carbon price is applied to Alberta and the economic implications are discussed. Through these analyses and findings, a number of policy recommendations for Alberta’s GHG regulations are provided to address the environmental issues of the industry while considering important economic factors.