Exploitation of North Americaâ€™s shale and tar-sand oil reserves could increase atmospheric CO 2 levels by up to 15%, a new report from WWF-UK and the major UK financial group Co-Operative Financial Services (CFS) has warned.

Extraction of the projected 1,115 billion barrels of recoverable oil from unconventional fuel sources such as Albertaâ€™s oil sands and Coloradoâ€™s oil shale, which involve much more energy intensive procedures for extraction than traditional oil reserves, would significantly increase global risks of dangerous climate change, the report said.

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Unconventional Oil: Scraping the bottom of the barrel reported that companies including Shell, ExxonMobil and BP have announced over $CAN 125 billion worth of development in Canadaâ€™s oil sands by 2015. Increasing oil prices are also increasing interest in unconventional oil sources has been given added impetus by rising oil prices.

"The extraordinary lengths some oil and gas companies go to in attempting to make the climate-hostile fuels somewhat less so should be re-directed to bringing forward low-carbon energy," said Ian Jones, head of Responsible Investment at Co-Operative Investments, part of the CFS group.

"Most oil companies have hardly begun to factor in the externalities that are currently imposed on the environment."

These externalities include mass deforestation, such as Albertaâ€™s Boreal forests, which lie above 140,000 square kilometres of oil sands, and are now crisscrossed with seismic lines and open-cast mines.

This region, identified as a "life support system for the planet," is home to 11% of global terrestrial carbon sinks, themselves necessary for mitigating the climate change.

Production of oil sands is also extremely water intensive, requiring three barrels of water to produce each barrel of oil. This is threatening the ecosystem of the Athabasca river by reducing flows to dangerous levels.

Canadaâ€™s indigenous communities are also concerned with water quality in former wetlands now featuring tailings ponds up to 50 square kilometres in size which can be seen from outer space. Only 5-10% of waste water is judged sufficiently non-toxic to be returned to waterways

Risks to investors

Scraping the bottom of the barrel outlines potential risks to investors from the high capital costs of sand and shale to oil projects, looming regulatory restrictions, the likelihood of litigation, environmental liabilities from tailing ponds and restoration requirements and reliance on unproven technologies such as carbon capture and storage. Investors could end up with stranded assets,

The authors of the report themselves call for tighter regulations such as the Emissions Standards in place in California that, by prohibiting sales of fuels with high lifecycle emissions, would effectively outlaw fuel extracted from tar sands and oil shale.

"Companies and investors claim to recognise the need to tackle climate change and support international efforts such as Kyoto. In oil sands we have an activity that is going against this imperativeâ€¦it is time for investors to challenge this strategy" said James Leaton, WWF-UKâ€™s senior oil and gas adviser.

"Shareholders should challenge those oil companies that fail to steward investment responsibly." added Jones.

More information available at WWF.