On Wednesday, September 30, a group of reporters, business leaders and David Suzuki Foundation staff were treated to a conversation with renowned economist and author Jeff Rubin at the Foundation's Vancouver office. Prior to his standing-room only talk at the University of British Columbia, Rubin spoke passionately about the messages contained in his new book The Carbon Bubble, offering predictions about the future of the Canadian economy and the shift away from fossil fuels. The talk came only one day after Bank of England Governor Mark Carney spoke to Lloyd's of London about climate change posing huge risks to the stability of the global economy.
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Rubin argued that placing all of Canada's economic hopes on oil sands production has been a mistake. The plummeting oil prices of the past year are only a taste of what is to come as nations work to reduce carbon emissions and limit global climate change to 2 C of warming with a binding agreement at the United Nations climate conference in Paris in December. Rubin laid out the facts of oil production in Canada, claiming that when global prices fall, either as a result of oversupply or shrinking demand, the first regions to cease production are the places where oil is most expensive to produce. Canada's oil reserves are among the most expensive in the world to bring to market and obtain some of the lowest profit margins, making growth in the oil sands uneconomical by any measure.
For those interested in growing Canada's capacity to produce natural gas, Rubin warned that the global market is unlikely to need or want what regions like B.C. would be able to produce. Asian markets, especially China, are often portrayed as Canada's future energy trading partners, but they're able to buy gas at 40 per cent of the Canadian price from countries like Russia, which are also looking to diversify their trade relations. At the same time the U.S., historically Canada's biggest trading partner, is ramping up its own production of natural gas, making it unlikely to buy what we're selling.
A shift away from oil and gas production is not bad news for the Canadian economy, however. According to Rubin, as production eases and the Canadian dollar loses value against the U.S. dollar, other major sectors of Canada's economy will start to boom. Industries like manufacturing, tourism and film production, which have suffered in the face of an increased focus on oil and gas, are likely to experience growth given that foreign investors will get more bang for their buck from Canadian goods. Another potential boom industry still in its infancy is renewable energy, which, according to Analytica Advisors, could generate $50 billion per year for the Canadian economy if we are able to achieve our fair share of global markets.
The cornerstone of Jeff Rubin's presentation, however, was the idea that Canada needs to put a price on carbon pollution at the national level. Rubin believes the most effective approach is a carbon tax. Carbon taxes, like the one in place in B.C., make pollution an economic liability for businesses and allow market forces to drive down emissions. Rubin said that B.C.'s revenue-neutral model, which gives the money raised back to taxpayers through annual income tax refunds, is well-structured and easy for the public to support. He did, however, argue that B.C.'s tax and any national carbon price it inspires should be increased from $30 per tonne of carbon pollution to $40 or $50 per tonne to drive down emissions faster and provide incentives for investment in clean-energy production.
As Canada continues to mitigate our contribution to global climate change and adapt to its impacts, the shape of our national economy is likely to change. Industries that have lagged in recent years are likely to come back and new industries like renewable energy and clean tech will likely move in to replace oil and gas. Fortunately, the jobs that will be generated in these new fields require many of the same skills at play in the oil sands today, making the transition for Canada's workforce an easy one. The shift will be rockier for companies that choose to build more fossil fuel infrastructure, as any capital will likely end up as stranded assets. Regardless of where our economy ends up, the message is clear: the smart money is in solar panels and not oil wells.
For more on the impact of Rubin's talk, see: http://davidsuzuki.org/blogs/election/2015/10/economist-says-oil-is-not-the-answer/