A recent announcement by Canada's federal government that it plans to reduce greenhouse gases (GHGs) by 30 percent below 2005 levels by the year 2030 is at once laughable and distressing. The goal, according to critics is the weakest among G7 countries.
The plan is to introduce new regulations on methane emissions by the oil and gas industry as well as implementing new rules for natural gas-fired power generation and for the chemical and nitrogen fertilizer industries. Oddly, there has been no tangible proposal put forward for anyone to study. In fact, there wasn't a single mention of these plans or even the words climate change in the federal budget that was passed last week. Leona Aglukkaq, Canada's Environment Minister said, "The target is an ambitious commitment based on our national circumstances, which include a growing population, a diversified, growing economy and Canada's position as a world leader in clean electricity generation."1
When asked by the media to respond to her statement with some sort of facts or plans, particularly on the subject of whether or not Canada would purchase international credits to meet its targets - something that would be a change from long-standing policy, Aglukkaq declined to answer.
Canada's target is hardly ambitious. It is slightly weaker than the one proposed by the U.S., which has pledged to cut its GHGs by up to 28 percent from 2005 levels by 2025. According to the group Environmental Defence, the European Union, already with per-capita emissions well below Canada's, has a 40-percent reduction target for 2030 - more than five times greater than Canada's.
Canada, the U.S., and other countries are taking their targets to the United Nations conference in Paris this coming December. This is where a new international emissions regime will be negotiated. We must not forget that Canada is one of the few countries on the planet that rejected the Kyoto Protocols.
"To keep our people, communities, and economy safe requires that Canada join the global community in making deep cuts to carbon pollution by shifting away from burning coal, oil, and gas," states the Climate Action Network.2
This past weekend, I read a fascinating article by author and lecturer Jeff Rubin, who spent twenty years as Chief Economist at CIBC World Markets. Referencing his latest book entitled The Carbon Bubble: What Happens to Us When it Bursts, he explains that the decline in world oil prices is a preview of what's in store as the world wakes up to the perils of climate change. He states that the collapse in oil prices resembles other financial bubbles. The following is from this article:3
What is a carbon bubble?
The carbon bubble, the subprime mortgage bubble, and the dot-com bubble are all based on a fundamental premise that turns out to be false.
Within the carbon bubble, the implicit assumption here is that we can burn and emit as much carbon as we can afford. That view has become increasingly under fire by the link between what we emit and the climate change we are seeing.
Has the carbon bubble already burst?
For all intents and purposes, the bubble has burst. If you look at the Blackrock's iShares Oil Sands Index ETF, which is an exchange-traded fund the covers all the Toronto Stock Exchange (TSX)-listed oil sands producers, it has lost about 70 percent of its value since early 2011.
Not only has that been a huge negative for investors in energy stocks, it's also been an albatross around the index. It has brought down TSX returns relative to other indices.
What lie ahead for the oil sands?
I think what lies ahead is what's happened to coal stocks. Three years ago, investors in Peabody Energy (the world's largest private-sector oil company) would go to sleep every night confident there would never be a global agreement on carbon emissions. Three year later, they woke up to a nightmare. Even though, there was still ne global agreement, China and the U.S. - the two largest coal-consuming countries in the world - both took actions (to curb emissions) that were as devastating to the valuations of coal stocks as any global binding treaty on carbon emissions would be. It's a small step to go from coal to oil.
What's in store for Canada as the world moves to limit carbon emissions?
I think that one of (Stephen) Harper's greatest failings is his denial of climate change. It turns the blinkers to what could be great economic opportunity in this country.
Climate change is going to have a profound impact on the Canadian Prairies. When you consider the kind of temperature increases being talked about - two or three degrees - that's going to transform the agricultural potential of that region. Growing grain is going to be a lot more value-added than producing bitumen.
How does that create new opportunities for Canada?
The same climate change that will allow you to grow corn on the Prairies will also make it much more difficult to grow corn in places like Kansa and Iowa. When we had that huge drought in the U.S., which is exactly what climate change models are predicting, we saw corn prices rise by fifty percent.
Climate change is not only going to increase crop yields, it's going to open the door to growing higher value-added crops. Climate change is likely to push food prices a lot higher than oil prices.
How prepared is Canada for these changes?
We're not really preparing for the opportunities that climate change is going to bring. We have to start thinking about how are economy is going to operate in the next couple of decades as the climate warms. Water management is going to be our biggest issue. I think we also have to start bulking up in terms of the Arctic and build deep-water facilities and recognize the opportunities there.
Mr. Rubin went on to say in a recent blog:
If Alberta premier-designate Rachel Notley is looking to wean her province's economy from its oil addiction, she may find that climate change, ironically enough turns into an unexpected ally. The Prairies, once hailed as the breadbasket of the world, could find that description gain renewed currency in the years to come. With climate change set to bring about profound changes to global food production, Canada may come to find itself in something of an unforeseen sweet spot.
While the Prairies are a major grain producer, crop production is nevertheless limited by the short growing season that comes with Canada's northern latitude. Turn the thermostat up, however, and the region's agricultural potential begins to look different. And make no mistake - the temperature is going up. Scientists at NASA, for one, identify the Prairies as a climate change hot spot where temperatures will rise by more than the global average.
Indeed, the predicted warming has already started. Average temperatures are up 1.6 degrees since monitoring began on the Prairies in 1895. What's more, the warming trend is accelerating. By mid-century, average temperatures in southern Alberta are expected to rise by 2 degrees compared to readings in the period between 1961 and 1990. On the northern margins of agriculture, in the Peace River region, the temperature increase is expected to increase even more dramatically.
Alberta, even without the sun shining on the oil industry, may yet be the centre of gravity for the country's economy. Instead of bitumen, though, fields of golden wheat, canola, and perhaps even emerald acres of corn will be responsible for generating much of the province's wealth.
1 Lambert, S. "Canada sets new target on emissions." Toronto Star (May 16, 2015): A14
2 Ibid
3 Madhavi Acharya-Tom Yew. "Canada loses when the carbon bubble bursts." Toronto Star (Saturday May 16, 2015): pp B1 and B6
