Tar sands terrible for environment and economy

Both Stephen Harper and Justin Trudeau believe that getting Alberta’s bitumen to the US Gulf Coast and China is in our “national interest” and is the “Canadian economy’s future.”

Not only is this idea terrible for the environment — Alberta plans on tripling tar-sands development — it is terrible for the economy.

Alberta gets most of the benefits

As the Globe and Mail pointed out, the tar sands are hardly in our “national interest.” Alberta gets 94% of the benefit:

While provinces other than Alberta are projected to benefit, modelling by the Canadian Energy Research Institute projects that 94 per cent of the GDP impact of oil sands development will occur within Alberta. With so much benefit concentrated in one province, one can hardly call fast-tracking oil sands expansion a nation-building project.

Dutch Disease

The tar sands boom has caused the value of the dollar to skyrocket: a 60% increase from 2003 to 2008. Although this might seem like a good thing, fact is Canadians never benefited from lower prices. According to the Globe and Mail:

A decade ago, a product that cost $1 (U.S.) in the United States cost, on average, $1.20 (Canadian) in Canada. A decade later, there has been little change.

But the overvalued dollar made labor costs and exports much more expensive and therefore less competitive. This resulted in many companies packing up shop and moving south of the border — which caused the loss of 500,000 manufacturing jobs.

Terrible job creation

According to the Alberta government’s website, the tar sands employ a total of 112,000 people nation wide. Clearly it was not a good trade off losing 500,000 jobs across the country for far less open-pit mining jobs in remote locations.

Tripling tar-sands development will turn many Canadians into migrant workers who get separated from their families for months at a time to work in remote areas and send their paychecks back home. This is few people’s idea of good job creation.

Low productivity

Canada is suffering from dismal productivity growth. According to the Conference Board of Canada, low productivity growth “hits every Canadian in the wallet.” It says, “productivity growth and innovation must remain a national priority if we hope to maintain our high living standards.”

According to the Financial Post, the overvalued bitumen dollar and focus on the tar sands is hurting Canada’s productivity growth:

“You look at the energy sector and its productivity is just falling apart,” Mr. Cross said. “ The oil sands is a tough way to extract oil. But that just goes hand in hand with the increase in prices. We have found all the easy-to-find cheap oil and the oil you’re going to exploit now is the more expensive stuff.”

That tradeoff may simply be inherent in an economy with strength in resources. High commodity prices, which have pushed up the value of the Canadian dollar, may also provoke a deterioration in competitiveness, Mr. Lascelles said.

Inflated wages

The Conservative party is bragging that “Canada has the richest middle class in the world” based on a recent report from the New York Times.

All propaganda aside, Statistics Canada showed a steep rise in real hourly wages from 2003 to 2010 which is largely founded on two economic shocks: “a strong construction sector, and an increase in the world prices of oil and other commodities produced in Canada. ”

In short, rising wages were caused by a construction boom based on a housing bubble; and rapid tar-sands development fueled by a resource boom — not productivity growth which would make wage growth sustainable.

But the flip side of rising wages is that it makes Canada less competitive. According to the Globe and Mail:

Canadian unit labour costs rose by 67.6 per cent in U.S. dollar terms between 2002 and 2010, while south of the border, they fell by 10.8 per cent. Needless to say, this puts Canada at a huge competitive disadvantage and illustrates the dilemma our country is facing.

Although Harper brags of inflated wages, he is actually using the Temporary Foreign Worker program to drive wages down!

Carbon Bubble

The carbon bubble is another reason it’s bad economic policy to put most of our economic eggs in the tar-sands basket.

Tar-sands proponent Andrew Leach writes how quickly the oil sands can become unviable from carbon policies set outside of Canada (that effect 80% of total emissions from tar-sands oil,) and Canadian carbon pricing as low as $16 a ton (of which oil corporations would pay $3.20.)

The Globe and Mail sums up the carbon bubble conundrum:

Oil sands growth and falling CO2 output are incompatible. … In 50, even 25, years, Canadians will wonder why Alberta and the federal government devoted so much financial, political and regulatory capital to one industry, and a highly polluting one at that, while so much of corporate and industrial Canada received the B-list treatment.

The wonder will intensify when the oil bust comes, and one will surely come.

Conclusion

Rapid tar-sands development is terrible economic policy that threatens our living standards. It’s also terrible for the environment making it impossible to reduce greenhouse gas emissions according to international standards and treaties.

We need real leadership willing to stand up to Alberta, not go “all in” on their dirty, unethical oil.