Up to $500 billion in damages from Keystone XL oil
The climate pollution from the oil flowing through the controversial Keystone XL pipeline -- if approved by US President Obama -- could inflict half a trillion dollars in damages to society.
Earlier this week I wrote about the new "social cost of carbon" (CSS) calculations from the United States government. They estimate that each tonne of CO2 released this year will cause $36 in "monetized damages" to society from changes to the climate and oceans.
In addition, this social cost per tonne is estimated to rise about a dollar per year as the "physical and economic systems become more stressed in response to greater climatic change." The mathematical result of increasing social costs is accelerating accumulated damages.
These damage estimates are dollar costs to human society. They aren't about dying polar bears or pikas.
I was curious what these newest US "social cost of carbon" estimates could tell us about the damage from 830,000 barrels of oil per day that Keystone XL would pump out of the Alberta oilsands. The answer can be seen in my chart above.
Here are some milestones for the accumulated costs to society from this new "spigot" of carbon:
- $100 billion in damages after 14 years;
- $200 billion after 24 years;
- $300 billion after 33 years;
- $400 billion after 40 years and
- $500 billion after 48 years.
As of the world's top climate scientists, Dr James Hansen, highlights in a Los Angeles Times opinion piece:
Keystone XL is "a big spigot that will hitch our country to one of the dirtiest fuels on Earth for 40 years or more ... Not only is it a bad marriage but a long one: TransCanada's estimated annual depreciation rate for "oil pipeline and pumping equipment" is 2% to 2.5%, which means a pipeline with a useful life of 40 to 50 years."
Obama's approval of Keystone XL would "lock in" a generational debt that could exceed half a trillion dollars in social costs.
If the next generation finds a cleaner energy source or doesn't want to live with that much damage they will be forced into an expensive divorce that abandons the pipeline's remaining capital investment. They face a lose-lose economic choice: either lose money by stranding assets or lose money from ever increasing damages to society from the pollution it pumps out.
It is hard to see why President Obama would force the next generations into a multi-decade marriage to dirty energy when shorter commitments exist -- like rail.
Consider also that the potential for half a trillion dollars in damage to society from Keystone XL's oil is probably a serious underestimate.
As I explained previously, these new "social cost of carbon" estimates are likely too conservative because they leave out all the climatic impacts we can't quantify very well yet. For example we don't know what the weakening of our polar jet stream will cost in new extreme weather impacts. We don't understand where the tipping points are for methane releases from permafrost. We don't understand ocean acidification well enough yet to know its impacts on fisheries.
We aren't counting the damage from all these unknowns … yet.
The geeky math
- Keystone XL designed to pump 830k bbl/day = 303m bbl/year
- Wells-to-wheels CO2 per bbl of oilsands (Swart & Weaver) = 0.572 tCO2
- Combined = 173 MtCO2/year
- US 2013 SCC = $38 /tCO2 in 2015 rising ~$1 per year
- Ex: $6.6 billion in social costs in 2015; $12.3 billion in social costs in 2050