Friday, January 23, 2015

The Economic Case Against the Keystone Pipeline

It’s pretty obvious.  If there is meaningful regulatory action on climate change, a majority of existing fossil fuel reserves will stay in the ground.  Given the carbon intensity of the Alberta deposits, their development will certainly cease.  Any investments in them will become valueless.

Therefore the proposal to build the Keystone pipeline is a bet that climate action can be put off until there is a return on the investment.  I don’t know how long its payback period is supposed to be, nor who picks up the tab if regulation turns off the tap before that point is reached.  (This should be a journalistic priority, by the way.)  I do know that (1) the resources devoted to this pipeline are real and will be indisputably wasted if policy shuts it down, and (2) those whose lives and livelihoods are sacrificed, like the Harrington sisters mentioned in this New York Times report, will have paid a price for no corresponding social good.

These are economic arguments, to be added to the environmental one, that building the pipeline, by expanding demand, will likely increase the extraction rate of a resource whose every barrel brings us that much closer to a climate nightmare.


Sandwichman said...

I expect the "fix" is already in. If regulation shuts down the KXL after it is built, that will be a "taking" and we'll all have to chip in to compensate job creators.

Jammer812 said...

"If there is meaningful regulatory action on climate change..."
and if wishes were horses, beggars would ride.