Canada’s oil sands in a carbon-constrained world

Abstract

The oil sands have dominated Canada’s domestic energy conversations for most of the last 50 years. More recently, the resource has become an important factor in Canada’s foreign relations, in particular with respect to Canada’s commitments on climate change. Environmental concerns are not new to the oil sands, with endangered species impacts and tailings pond mitigation presenting pressing domestic concerns. This paper argues that climate change presents a unique challenge, even as prices for oil rise dramatically. Domestic action threatens to increase the cost of production and to erode cost-effective access to markets, and policy uncertainty has made investments more challenging. More importantly, global action will change the market for oil itself and shape the willingness of investors to commit to the oil sands. This paper examines the state of the oil sands industry in the context of Canadian and global commitments to action on climate change and the potential for a global energy transition. The paper concludes with a discussion of potential solutions and pitfalls for Canada’s oil sands in a carbon-constrained world.