One of Canada's top environmental economists has a stark warning for the country's oil sands producers: Find ways to dramatically cut carbon emissions or risk becoming the buggy-whip producers of the 21st century.

Simon Fraser economist Mark Jaccard has worked with governments in British Columbia, California and even Ottawa to fashion climate policies. But on Thursday, he said the federal government and the oil industry are embarked on a high-risk path that could leave billions of dollars in stranded assets, including pipelines like TransCanada Corp.'s proposed Keystone XL.

Governments around the world will eventually move to reduce emissions from fossil fuels, he said, meaning lower demand for gasoline in transportation and lower prices for crude, as well as more pressure for producers to virtually eliminate the release of carbon dioxide from their production methods. That will create survival issues for high-cost producers like those in the oil sands.

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"It really depends on your ability to innovate," he said.

His comments come at a sensitive time for the government on the energy file. Prime Minister Stephen Harper is heading to New York next week to press the case for approval of Keystone, and Natural Resources Minister Joe Oliver has been touring European capitals this week, making the argument in favour of developing the resource, one of the largest crude oil reserves in the world.

Dr. Jaccard joined a dozen scientists and researchers Thursday in releasing a letter to Mr. Oliver, arguing that Ottawa's support for oil sands expansion and the pipelines needed to carry the crude to market is inconsistent with the stated goal of the Harper government and other G20 countries to prevent temperatures from rising more than 2 degrees Celsius. The economist is travelling to Europe on Friday with former NASA scientist James Hansen to rebut the arguments that Mr. Oliver made during his week-long tour.

"The infrastructure we build today will shape the future choices about energy," said the letter, signed by luminaries such as Harvard University physicist David Keith and John Stone, a Carleton University physicist who is a lead author of the United Nations' latest assessment of climate science, due out later this year.

"If we invest in expanding fossil fuel production, we risk locking ourselves into a high carbon pathway that increases greenhouse gases for years and decades to come."

During a visit to London, Mr. Oliver shrugged off the scientists' warning, saying the world will need additional fossil fuels to meet rising energy demand for decades into the future.

"The position of these scientists is unfortunately unrealistic in the real world because what they want to do is to see a diminution of the use of hydrocarbons and they look upon the oil sands as a symbol, as an example of that," Mr. Oliver said.

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The letter represents the latest salvo in an increasingly noisy battle between federal and provincial governments and the oil industry on the one hand, and environmentalists and climate scientists on the other. It comes after former U.S. vice-president Al Gore this week slammed the oil sands for spewing carbon pollution into the atmosphere as if it were an "open sewer."

The federal government says the oil sands can be developed even as Canada meets its target to reduce greenhouse gas emissions by 17 per cent from 2005 levels by 2020, through some critics reject that assertion. Ottawa is working on new regulations to cover the oil industry that will require per-barrel reductions in emissions – but will not stop overall increases if the industry expands production, as planned.

Growing opposition to oil sands is threatening to stall development of the pipelines needed to get the oil to new markets and undermine prices received by producers in Alberta.

With files from Paul Waldie.