Tar Sands Solutions Network

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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

Klein says Canada resources bad investment on land claims

Feature

Greg Quinn | Bloomberg News - August 25th 2014

Blog Post: Anti-globalization author Naomi Klein says global investors should avoid Canadian natural-resource companies because of the growing risk that courts will award more control of land to aboriginal groups, threatening the viability of proposed development projects. “Any resource investment in Canada right now should be treated as an uncertain investment,” Klein said in an interview. “More and more Canadians are realizing that indigenous land rights are the best legal tool to stop projects that are rejected by the majority of residents.”

Fossil fuel economy costs Canada far more jobs than it creates

Mark Taliano | CommonSense Canadian - August 20th 2014

Press Clipping: The current trajectories of Canada’s predominant political economies are increasingly dysfunctional, due in no small part to the fact that we have become, in many respects, a petro state, rather than the much vaunted “Energy Superpower” that we were promised. While Alberta is not a sovereign nation, it does qualify for “petro-state” status under these criterion. So does Norway. But the differences between the two polities ends there. While Norway manages its resource wealth extraordinarily well, Alberta — and Canada, by extension — does not.

Why a moratorium on oil sands expansion makes sense

Mark Jaccard | Maclean's - August 18th 2014

Press Clipping: An effort to significantly reduce global CO2 emissions would likely cause the price of oil to fall, and with it, oil sands development. A full economic analysis gives a strong probability that humanity would not be rapidly expanding oil sands if it were serious about acting effectively on the costs and benefits of carbon pollution. That is one, but not the only, of our reasons for calling for a moratorium on oil sands expansion.

Oil sands mines on list of riskiest projects every investor should know about

Kevin Spake | Spake Media - August 15th 2014

Blog Post: A new report released today finds that seven of the largest publicly-traded oil companies in the world are putting billions of dollars in jeopardy by investing in high-cost, high-risk oil extraction projects. Many of the most risky ventures are tar sands mines right here in Canada and many of the companies named in the report figure significantly in Canadian pension plans and mutual funds.

Scientists Call for Tar Sands Moratorium

Feature

Jane Kleeb | Bold Nebraska - June 25th 2014

Blog Post: In a groundbreaking Nature Journal article, a group of economists, policy researchers, ecologists, and scientists make the case for a moratorium on new pipelines in North America until a “more coherent approach” can be developed to evaluate tar sands projects in the context of a broader energy and climate strategy.