Economists at Royal Bank of Canada (RY) say it will cost as much as $65 billion for the
country’s oil sands to meet their climate change targets by 2030.
RBC says oil companies will need to invest a massive amount of capital over several years to
simultaneously meet domestic emission reduction targets while continuing to supply oil to a
world looking for alternatives to Russian crude.
Oil sands producers will have to invest between $45 billion and $65 billion between 2024 and
2030 to deploy enough carbon capture technology to meet climate goals, says RBC.
Technology is necessary to reduce emissions by the 22-million-ton target established by the Oil
Sands Pathways Initiative, an alliance of the largest oil sands producers that seeks to zero out
emissions from operations by 2050.
These big investments would amount to a reversal in recent capital expenditure, which fell to
$21 billion in 2020 from $78 billion six years earlier. As much as half of the needed spending
could be funded by Canadian taxpayers after the government rolled out carbon capture tax
credits earlier this month that will cover about 50% of the costs.
The planned investments come as Russia’s invasion of Ukraine prompts countries to look for
alternatives to Russian oil. Canada, the world’s fourth-largest producer, could boost domestic
production by 500,000 barrels a day over the next year, RBC said, which would increase
greenhouse gas emissions by 9 million tons annually unless Canadian crude displaced oil from
other producers.
The report recommends governments use windfall revenues during high price oil periods to
sustain investment and suggests companies must also commit to fund decarbonization when oil
is cheaper.