A new report from CIBC World Markets, the wholesale and corporate banking arm of the Canadian Imperial Bank of Commerce (CIBC), forecasts that all jurisdictions in Canada and the US will have carbon dioxide regulations in place by the end of the decade to address global warming concerns.
The report predicts that every province and state in North America will follow the lead of California and implement not only a CO2 emissions cap but also an emissions trading system that will allow larger polluters to buy emissions credits from other firms whose emissions are less than what is allowed under the cap.
While North America has ignored implementing the Kyoto Accord, public concern about global warming is growing. I expect this will force governments to declare war on carbon emissions on their own terms. As that campaign unfolds, the economy’s largest emitters of CO2 will become increasingly dependent on the economy’s greenest firms for emissions credits.—Jeff Rubin, Chief Strategist and Chief Economist at CIBC World Markets
The report states that the carbon abatement policies aimed at addressing climate change will have the greatest impact on the energy sector. This will have a significant impact in Canada where the sector accounts for 20% of the country’s CO2 emissions.
That percentage promises to rise steadily over the next decade as emissions-intensive oil sands production doubles and perhaps even triples, replacing depleting but less emission-intensive conventional oil production.
However, the report warns:
The real impact of climate change, and attendant carbon abatement legislation, will instead be felt on the supply curve. If planned additions to bitumen production are delayed or mothballed altogether, oil prices can only move in one direction—higher. To the extent that oil sands production cannot grow, neither can global crude supply, because, net of depletion, oil sands and deep-water wells are where the new supply will come from.
Conventional oil production has now not grown for over two years. Climate change also poses threats to production from deep-water wells. Gulf of Mexico production was spared last year the devastation it sustained in the 2005 record storm season, but most models of climate change predict increasing cyclonic activity in the region—home to 1.5 million barrels per day of crude production.
The Carbon Wars (CIBC World Markets)