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Friday, September 19, 2008

Climate Risk of Oilsands Questioned

Just days after Canada's oilsands moved into the federal election spotlight, one of Britain's largest investment firms is launching a campaign to convince petroleum giants BP and Shell to scale back their plans to exploit the controversial energy source.

Widely seen as a future driver of the Canadian economy in a world confronting oil scarcity and premium prices, North America's oilsands and oil shales have also been targeted by environmentalists as "dirty oil" that produces far more carbon pollution than conventional sources, and requires massive inputs of energy and water to extract.

Co-operative Asset Management, a leader in the U.K.'s fast-growing ethical funds sector, revealed plans on Sunday to campaign against oilsands and other "unconventionals" as a too-risky investment given the financial and ecological drawbacks, as well as looming anti-climate change regulations that would drive up costs even farther.

The campaign is meant to pressure companies "that are expanding oil sand exploration" to reconsider the strategy, CAM spokesman Andy Hammerton told Canwest News Service on Sunday. He added that the industry is being targeted because of "our environmental concerns, and our concerns as an investor" representing millions of Britons.

"The worry is that, within five years, it will be unstoppable," Paul Monaghan, head of sustainability and social goals at Co-operative, told Sunday's Observer newspaper ahead of a seminar this week aimed at discouraging major institutional investors from backing oilsands projects. "I think it is stoppable now."

Investment analyst Niall O'Shea also told the Observer: "We believe that companies investing heavily in unconventionals are too focused on short-term profit and their strategy is too defensive. They are becoming increasingly expensive to produce."

The planned push to deter further investment in the oilsands follows a joint report issued in July by Co-operative and the World Wildlife Fund.

"The current rush to invest in unconventional fossil fuels is wholly inappropriate and due to their carbon intensity, these projects risk dangerous levels of climate change," Monaghan said at the time. "Our long-term future and economic stability depends on the development of a low carbon economy within our lifetimes. We intend to use this report as the basis of our shareholder engagement with oil companies, and will be working with our 6.5 million customers to ensure that the U.K and the EU have a robust legislative framework in place that will prevent these climate hostile fuels from entering the domestic market."

Read it all here. Hap tip to Ron Robins at Investing for the Soul.

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