Obama’s War on Keystone XL: High Costs, Tiny Benefits

Nicolas Loris

Economics, Americas

A bad call: the move will stifle economic growth for little, if any, climate benefit.

President Obama’s rejection of the Keystone XL pipeline exemplifies the main problem with the administration’s push to build a legacy of combating climate change. This decision—like previous decisions to block energy infrastructure, prohibit construction of new coal-fired power plants and impose deep carbon emission reductions on the states—will stifle economic growth for little, if any, climate benefit.

Fresh off rejecting the permit application to construct Keystone XL, the White House officially announced President Obama would participate in the international climate talks this December in Paris. In denying Keystone XL, Mr. Obama said, “America is now a global leader when it comes to taking serious action to fight climate change, and frankly, approving this project would have undercut that leadership.”

Make no mistake, the administration is taking serious action in the name of climate change. But it is action that will yield negligible changes in global warming. Take the pipeline project, for instance. Even if one assumes we are facing catastrophic warming, the carbon emissions from Keystone XL would be 0.2 percent of the “carbon budget” allowable to prevent such warming. Even Obama’s own State Department’s final environmental impact statement says Keystone XL wouldn’t increase CO2 emissions significantly, because Canadian oil is coming out of the ground whether Keystone XL is built or not. In fact, rejecting the pipeline could increase greenhouse gas emissions as companies find less efficient means—such as rail—to transport the oil.