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

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.

Are Harper’s dreams of Canada as energy superpower going up in smoke?

Jeff Rubin | Globe and Mail - June 2nd 2014

Press Clipping: In the last decade, Prime Minister Harper's Conservative government has done everything but roll out the red carpet for the energy sector. Unfortunately for Canadians, it’s becoming clear that despite his best attempts at economic intervention, their government is playing a losing hand. As the rest of the world is realizing that it must wean itself off fossil fuels, the Harper government wants to double down on Big Oil.

Oil sands expansion not inevitable after all

Feature

Hannah McKinnon | Environmental Defence - June 1st 2014

Blog Post: For the past several years, the oil industry has been telling Canadians that the expansion of the tar sands is inevitable. But the indefinite delay of the Josyln North tar sands mine is a clear indication that industry’s growth forecasts are not accurate and a sign that the continued expansion of the tar sands is anything but inevitable. Tar sands are high cost, high risk, and high carbon. Josyln North’s mothballing is the latest in a developing trend that doesn't bode well for the industry's future. The economics of the tar sands are marginal today. And in a carbon constrained world, they become increasingly unviable.

Is Canada headed for a pipeline bubble?

Feature

Andrew Leach | Maclean's - May 27th 2014

Press Clipping: Andrew Leach: “In their haste to contain the scope of their analysis, the NEB has overlooked a key area of their responsibility—that of the needs assessment for the pipeline.... So far as I can tell, in both the assessment of Enbridge Northern Gateway or the TransMountain Pipeline Expansion, the NEB did not request or note the absence of analysis of a case in which Canada meets its national climate change goals or in which global climate change policies become more significantly more stringent than they are today."