The Economic Costs of Canada's Oil Obsession

Canada’s dependence on fossil fuels not only contributes to climate change it represents a serious threat to the economy. As oil prices plummet to a five year low, the Canadian economy is feeling the heat. The declining price of hydrocarbons have driven down the value of the Canadian dollar and impacted stock prices on the TSE.

Canada’s ruling Conservatives have bet on oil and this has disastrous implications for all Canadians. The fact that Canada is so closely tied to fossil fuels means that the nation’s petro-currency is subject to profound market volatility.

The ramifications of Canada’s dependence on oil will reverberate across the country making it more difficult to balance both provincial and federal budgets. The current market volatility indicates that an economy based on dirty energy is destined to falter which also imperils Canada’s economic recovery.

By investing so heavily in fossil fuels the federal government risks the future of all Canadians. While other nations are moving towards cleaner sources of energy the Conservatives under Prime Minister Stephen Harper have doubled down on the tar sands which are some of the dirtiest energy on Earth.

The science is clear, humans are the cause of global warming and fossil fuels are the primary cause. As the world begins to move towards cleaner energy, Canada remains mired in the old energy economy. Independent of the powerful environmental logic of moving away from fossil fuels, there is a strong economic case that has been made for moving towards cleaner energy.

The carbon bubble is growing and our carbon budget runs out. There is a growing consensus that more than two thirds of all the oil, gas and coal reserves are unburnable if we are to have a chance at keeping temperatures within the internationally agreed upon 2 degrees Celsius upper threshold limit. The combination of lower demand, higher supply and growing global pressure to reduce emissions will strand trillions of dollars of oil assets.

The need to address climate change is being driven home by significant increases in costly extreme weather events.

The calls for more responsible governance are coming from every quarter, not just environmental groups. Reputable organizations around the world have issued warning stating unequivocally that we must stop burning fossil fuels and step back from the brink of a climate disaster. These warning come from a wide range of sources including PricewaterhouseCooper, AGU,
World Resources Institute,
International Renewable Energy Institute,
International Energy Agency (IEA), World Meteorological Organization,
World Bank, and
UNEP

Even the former head of the Bank of Canada (currently the head of the Bank of England), Mark Carney, acknowledges that we cannot burn most of the known fossil fuel reserves. He further cautions investors about the long-term threats.

Canada must change direction so that it can capitalize on the nation’s abundant renewable resources and begin to develop a low carbon economy. Unless Canada changes its perilous course they will be the authors of their own ecological and economic demise.