Sunday, February 27, 2011

Is Canada Sustainable?

Some of you may have read recently that Canada is now a Petro state. Barrie McKenna writes, “Canada’s fortunes – and its currency – are now more closely tethered to oil than any other industry, including autos, forest products or agriculture”. Of course, a large part of what explains this statistic is Alberta’s relentless pursuit of bitumen, the so-called oil sands, that is expected to produce 2.36 million barrels a day by 2013-2014.

Should Canadian citizens feel a sense of shame when their wealth is inextricably tied to an unsustainable, dirty, and energy-intensive natural resource (cast your vote to the right)? To incite debate, I put forward 5 provocative questions for why this moment in Canadian history might disturb its citizens:

1. Are Canadians Greedy? Is there something wrong with the fact that we as Canadians grow richer as a country by feeding the growing international demand of a substance that is undeniably linked to climate change, ecological devastation and indigenous community despair? Alberta’s recent budget projections are pegged on the assumption that oil sands production will increase 35-40% over the next three years. Compare this to the meager increase in environmental funding of 1.4% over the same time period. As more money flows into our pockets, we compromise the livelihoods of existing and future generations.

2. Are Canadians Unsustainable? Our success as a country, inappropriately measured by Gross Domestic Product (GDP), is predicated on the extraction of a substance that is inherently unsustainable. Fossil fuels take millions of years to develop as the Earth naturally breaks down dead organisms. Because we are extracting this substance at an astronomically higher rate than it can be reproduced, we’ve pinned our livelihood on adding value to a substance that will eventually run out. Then what? Like a vulture, will we move from one natural resource to another until we’ve exhausted them all?

3. Are Canadians Short-Term Oriented? Other wealthy countries heavily reliant on fossil fuels have massive petroleum funds like Norway’s $400 billion pot put aside for a future without oil exports. Not only that, Norway’s fund is the second largest fund in the world affording them immense power to encourage more sustainable business practices. In comparison, Alberta’s “rainy day” fund is at a meager $17 billion. But recently, Alberta announced that it is using this fund to reduce the deficit, leaving next to nothing for future generations to deal with the onslaught of issues associate with climate change and environmental degradation. The Finance Minister said: “the province’s sustainability fund was created for the purpose of a recession”. The province's energy minister, when asked about Norway's fund, said that Alberta has nothing to learn from Norway. Ironically, a recently released report commissioned by the Alberta government recommended that the province adopt a Norway-type fund. This means stop using resource-revenue for today's revenue fund and to instead increase provincial sales tax and/or increase personal and corporate taxes. As Jeffrey Simpson noted, these recommendations were likely "dead on arrival" as Albertans are quite content with the status quo. Not only is this short-sighted environmentally, but it leaves little capacity for Alberta to diversify economically to other industries when international regulation imposes restrictions on oil sands imports. So social and ecological consequences aside, we are not even considering the economic welfare of future generations when we consider the finite substance we are extracting.

4. Is Canada’s Reputation Tarnished Internationally? Is it not embarrassing that we are becoming known as a petro state in the international community? Because the European Union has instructed its fuel suppliers to reduce the carbon footprint of fuels by 6 percent over the next decade, they are looking to block imports of Canada’s tar sands. In response, the Canadian government is threatening to scrap a trade deal with the EU and is lobbying heavily to be excluded from the EU fuel supply restriction.

There was a time where the international community considered Canadian culture as one that embraced the beauty of the outdoors, treasured the natural landscape, and stood up for human rights between and across generations. The massive plots of dead land in and around Fort McMurray now visible from outer space hardly expresses our respect for nature and future generations. We are becoming known as the source for dirty oil. Combined with our fundamental lack of political leadership in Copenhagen and Mexico, our reputation has undergone a complete reversal from the early 1990s.

5. Are Canadians De-evolving Economically? Economies usually start with agriculture then move to the extraction of natural resources, then manufacturing, then service. Germany, Japan, and the US garner tremendous economic advantage from their intellectual prowess in advanced technologies, not their brute power and force in mining and extraction. Poor countries lacking the educational infrastructure to develop and retain good talent need to rely on their natural resources and then through time evolve to more advanced forms of economic development. I do not mean to insult the mining and oil and gas industries because I recognize the technological innovation they have achieved in extracting seemingly inaccessible natural resources. However, we chose to dedicate our intellectual capabilities to these efforts rather than supporting the development of capabilities in more sustainable sources of energy or other creatively destructive technologies that position Canada as a premier hub for technological advancement and its role in a sustainable society.

I’m sure there are many out there wondering about the benefits associated with oil sands development. The process is labor intensive creating up to 540,000 jobs per year by 2020 and exchanging $170 billion worth of goods and services from other provinces. Isn’t that fantastic for our economy? Isn’t oil sands development, as the conservative and liberal governments would argue, necessary for jobs and the economic welfare of our nation? On top of that, isn’t it our responsibility to make use of the natural resources that we have inherited as the second largest land-based country in the world?

These are indeed important arguments. Yet they suffer from three misguided and often overlooked assumptions. First, the role of oil as an anchor of our economy is by no means an accident or a result of a seemingly uncontrollable set of circumstances. Government policies put in place over lengthy periods of time have fundamental impacts on the subsequent economic behavior of a country. At the time of a chronically weak Canadian dollar we chose to focus on extractive industries to attract foreign markets. Rather than planning for the long-term by instituting policies that would build intellectual capacity in non-energy intensive industries, we took advantage of the 20% discount afforded to the international community through our weak dollar and invested heavily into commodity-based industries. Any politician, business person or economist who claims that we are uncontrollably dependent on our natural resources for the sake of our economy ignores the series of short-term decisions that have and continue to lock us into this scenario.

Second, there are many different ways to achieve economic development, some easier, some harder. There is no doubt that the relatively simple way to develop economically in a country like Canada is to extract natural resources that are so readily available under our feet. Lumber, potash, oil, gold, nickel, copper, you name it. Why take the extra time to endure the physical and intellectual effort to cook a healthy and tasty meal when you can eat ready-to-serve processed food caked with sugar, salt and fat right out of the freezer? Why bother creating new industries, the value of which are based on our intellectual prowess when we can sell commodities and manufacture vehicles that require no need for creative destruction and keep our comparative advantage pinned on readily available resources (e.g. nature and labor)? Why reinvent the wheel when we can simply use sources of economic development already proven around the world?

Finally, and perhaps most importantly, "We don't inherit the earth from our ancestors, we borrow it from our children". What will be the state of the earth when we return it to future generations?

This ultimately comes down to a question of leadership. My fundamental beef with my country is its lack of leadership at the political level, at the business level, and at the individual level. Although there are minor exceptions, the bottom line is that we are no longer known as a country of leadership. We base our growth and development on practices that are based on the status-quo, that don’t question taken-for granted behaviors. Practices that create jobs easily, feed mouths more easily, make money more easily, and grow our GDP more easily all for short-term gain at the expense of future generations. When we think of the most memorable leaders of our past, we think of those who have inspired change in others, those who have led groups of people in new directions that challenge fundamental assumptions in the face of great uncertainty. Canada unfortunately lacks this leadership at a pivotal moment in time when our future requires leaders who inspire such change.

Canadian Flag of oil picture taken from Adrian Wyld of the THE CANADIAN PRESS Reproduced under Creative Commons
Greed photo taken Word Press Reproduced under
Creative Commons
Oil Sands photo taken from Google Earth Reproduced under
Creative Commons
MLK photo taken from reproduced under
Creative Commons

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