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Economic Factors

The rapid expansion of tar sands development has created tremendous economic risks for Canada. Frenzied expansion – 71 per cent of which is owned by non-Canadian companies – has undermined important sectors of Canada’s economy. Expansion has also lured governments into relying on easy oil revenues and tied Canada’s economic future to the unstable world of global oil demand.

Who benefits from tar sands development? Unlike Norway, which has used oil revenues to pay of its debt and save a public petroleum pension fund worth $600 billion, Canada has no federal savings fund to share this wealth with future generations, while Alberta is currently making cuts to education and health care.

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Overview:
Over-investment in a fossil fuel economy carries numerous risks
Key Issues:
- 71% of the tar sands are foreign owned
- Canada has no national fund from this resource wealth 
Current Status:
When a global price on carbon eventually comes, Canada will be left with an unaffordable product

The $1.3 billion spent to subsidize the oil and gas industry has prevented Canada from pursuing a clean energy economy that can create 10 times more jobs (per dollar invested) than oil and gas development, and spur an innovation rather than raw resource extraction driven economy.

Tar sands development has transformed the Canadian dollar into a volatile petro currency that has contributed to the destablization of its manufacturing base. Rapid tar sands development has arguably resulted in a Canadian outbreak of Dutch Disease, which means the increase in the value of the Canadian dollar has made manufacturing goods in Canada more expensive. As a result, at least a third of Canada's 500,000 lost manufacturing jobs in the last decade are a result of its soaring petrodollar. This has created regional wealth disparities, with Alberta enjoying the economic benefits of tar sands expansion while Ontario, Quebec and the Maritimes suffer the consequences of a less diverse economy.

Canada’s economy is an example of a “carbon bubble” that will likely have significant consequences for its economic future. The International Energy Agency has determined that two-thirds to four-fifths of known fossil fuel reserves must be left in the ground because they cannot safely be combusted without leading to catastrophic climate change. Because Canadian financial markets, and pension funds in particular, have over-invested in fossil fuel industries as part of their portfolios, they are at great risk of economic collapse when the global community finally gets serious about limiting greenhouse gas emissions from hydrocarbon energy sources. 

When a global carbon pricing scheme is eventually created – as it must for the planet to be livable in the future – countries who overinvested in fossil fuels will be left with a product no one can afford to buy, and few other options for wealth creation. 

Many of the ancillary developments necessary to facilitate tar sands expansion, such as refineries, pipelines and oil tankers, provide little economic benefit to local communities while exposing them to the economic risks associated with the inevitable oil spills, such as those in Kalamazoo, Michigan and Mayflower, Arkansas.

Preventing the expansion of the tar sands, and eventually phasing this dirty source of energy out of existence, is the only way to create the sustainable clean energy economy that Canada, the United States and the rest of the world needs to embrace.

Economic Factors Updates & Resources

How low can it go? Collapsing crude in election season

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Hannah McKinnon | Oil Change International - August 26th 2015

Blog Post: In the lead up to the Canadian federal election, the economy is front and centre, but not in the way the incumbent government would have liked. The Conservatives have gone to great lengths to brand themselves as good economic managers, but with the Canadian dollar hitting its lowest point in over a decade, their election case is losing credibility fast. The Harper Government focussed too much attention on the Alberta tar sands, and when crude oil prices crashed late last year, the strategic weaknesses of this plan were clear.

Most Canada oil sands crude being produced at a loss -report

Nia Williams | Reuters - August 24th 2015

Press Clipping: More than three-quarters of Canada's daily output of 2.2 million barrels of crude from oil sands is being produced at a loss at current prices, research from analysts at TD Securities shows, although producers are unlikely to halt operations. Every thermal oil sands player is bleeding cash on every barrel produced with U.S. crude around $41 and the Canadian heavy benchmark, Western Canada Select (WCS), around $24 a barrel.

Climate wonks focus on economics. They need to pay more attention to politics.

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David Roberts | Vox - August 21st 2015

Press Clipping: Citi GPS (a research arm of Citibank) has issued a magisterial new report that is both a detailed exploration of the economics of climate change policy and an attempt to answer the perennial question of whether acting aggressively to avert climate change is "worth it.” The report, written by a diverse group of scholars and analysts, digs deep on dozens of issues, including the size of investments needed to avert two degrees of warming.

Canada’s carbon moment has arrived

Feature

Jeff Rubin and David Suzuki | Globe and Mail - August 20th 2015

Press Clipping: For almost a decade, Canadians have been told massive expansion of Alberta’s oil sands would be the engine of economic growth as the country rode a wave of soaring oil prices during the government’s early years. But the Prime Minister’s strategy of making Canada an oil-based energy superpower has led instead to a made-in-Canada recession, with a dramatic implosion in capital spending in the country’s oil patch.

Oil sands being left In the ground is just a matter of fact, experts say

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Bob Weber | Canadian Press - August 13th 2015

Press Clipping: The furor over a New Democrat candidate's remarks about leaving Alberta's oilsands in the ground reflects how poorly the issue is understood, say energy experts. To many, Toronto Centre candidate Linda McQuaig's recent statement is just the simple fact of the matter. "The shock is that anyone would be shocked by this," said Mark Jaccard, an environmental economist at Simon Fraser University. "It's kind of like we're in a dialogue in Canada that reminds me of Saudi Arabia 20 years ago."

Kinder Morgan’s Trans Mountain expansion plan faces renewed opposition as crude oil price drops

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Brian Morton | Vancouver Sun - August 11th 2015

Press Clipping: As the National Energy Board (NEB) gears up to hear final arguments on Aug. 24 into its embattled review of the proposed Kinder Morgan Trans Mountain Pipeline expansion, opposition is mounting as the price of oil drops, making the project less attractive. “My own belief is that unless there’s another war in the Middle East of significant nature in the major oil producing areas, (then) I think there’s a good chance that oil prices won’t rise significantly for at least a five-year time frame, maybe even 10 years,” said Simon Fraser University energy economist Mark Jaccard. “If prices stay really low, I don’t think (Trans Mountain) would go ahead.”

TransCanada delays pipeline construction

August 2nd 2015

Press Clipping: TransCanada is indefinitely suspending construction on its Heartland line from Edmonton to Hardisty since the Keystone XL and Energy East systems it would supply are delayed, executives said Friday on a conference call. Full expansion of the company’s Grand Rapids line from Fort McMurray to Edmonton, now under construction with startup planned for 2016, is being slowed as production rises more slowly in the oil sands. TransCanada also has pushed back startup to 2020 for the Energy East line to Canada’s Atlantic Coast as it works to redesign the project to address opposition in Quebec.