The tar sands exist because of a perfect storm of conditions. The right markets, the right incentives, the right policies, and governments willing to work to keep the balance tipped in favour of these high-carbon projects. The question is whether Canada is willing to bet our energy and economic strategies on the assumption that the future will look a lot like the past when it comes to the tar sands.
The so-called inevitability of tar sands expansion has dominated the business, political and public narrative in recent years. Government and industry are working overtime to convince anyone who will listen that the oil is coming out of the ground no matter what, and that if it can’t travel by pipeline it will go by rail. The market will make it happen.
But the environmental, political and financial contexts in which the tar sands exist now are significantly different than those of two decades or even ten years ago. The current uncertainty around the future of the tar sands is already shaking investment, most recently with the shelving of Total’s $11 billion Joslyn North, which followed on the heels of a similar delay to Shell’s Pierre River mine expansion project. Despite bullish projections from industry about expansion, it is increasingly clear that the future of the tar sands is far from inevitable.
Economically and ecologically dangerous
It’s time to shine some light on the dark corners of this narrative. Production costs are soaring in the tar sands, transportation options are constrained, social licence is collapsing, regulations at home and in export markets are becoming more costly, and the world is coming to terms with the need for a low-carbon future to avoid the worst of climate change. These are not conditions that favour high-risk, high-carbon, and high-cost oil investments like the tar sands.
Tar sands make up a mere two per cent of our national economy—not insignificant but by no means the economic powerhouse they are often portrayed to be. Now is a critical opportunity for Canada to shift to a more diverse, cleaner energy strategy before we saddle ourselves to the financial and environmental risks of a fuel that has little space in the 21st century.
The story of our energy future is being re-written for good reason. If industry and government were to get their way on expansion, we would be setting ourselves up for a world where global demand for oil would align with a catastrophic four degrees Celsius of global warming. At the same time, the unilateral focus on tar sands development is costing Canada a place on the leader board of the clean, low-carbon economy, and the safer, healthier and more economically stable future that comes with it.
To date, the federal government and industry have been going to great lengths to keep the tar sands marginally profitable. But how far are they willing to go? We have seen dramatic policy changes to our environmental laws to facilitate pipelines, the silencing of scientists and public concern in project hearings, the abandonment of international treaties, billions of dollars made available in federal subsidies, and aggressive lobbying to undermine clean energy and climate policy domestically and internationally in an effort to keep markets pried open for tar sands.
The challenge comes down to the fact that the tar sands are among the most carbon-intensive fuels on the planet; the process to extract them from the sand, clay and water they are mixed with requires over 80 per cent more energy than getting conventional oil out of the ground. Because of this, in a carbon-constrained world the tar sands will be squeezed out of the market as uneconomical.
With major international bodies like the International Energy Agency saying we have to keep the majority of fossil fuels in the ground to avoid the worst of dangerous global climate disruption, the tar sands are being singled out as a dangerous bet. They are simply not worth it in a world that will transition to a safer energy future.
All of these realities are exacerbated by growing public concern about the impacts of the tar sands on the climate, the environment and citizen rights. The net effect is a withdrawal of social licence for expansion. People across the country and the world are realizing that we can and must do better when it comes to creating a cleaner energy future.
Solutions at our fingertips
Carbon Tracker Initiative, a UK- based think tank, recently summarized these threats and pegged the tar sands as the highest-risk oil investment in the world, with billions of dollars at risk as high-carbon reserves become stranded assets in a world cutting back on carbon. Instead of sabotaging the safety of our climate, environment, communities and economy in the name of something that has little to offer in a safe future, we need to start a meaningful conversation about adopting and investing in the solutions that are already at our finger tips.
It is not a matter of shutting down the tar sands tomorrow. It is a matter of working together to design a transition towards a stronger economy based on low-carbon advanced energy. If Canada were to put the right incentives in place, our share in the clean tech economy could leap from $9 billion to $60 billion by 2020.
The International Monetary Fund recently published an analysis that shows that if the tar sands were constrained, Canada would lose only 0.5 per cent of GDP growth between now and 2020—a difference that could be made up by serious investments in a cleaner economy. Juxtaposed with the costs associated with climate change—the Calgary floods alone cost the Canadian economy $6 billion—the right move is to hit two birds with one stone by phasing out climate changing pollution and avoiding the growing costs that accompany increasing extreme weather.
The tar sands are not inevitable, a fact that the Canadian government and industry know better than anyone. While they may want to hold onto dangerous dreams of tar sands expansion, the sooner they wake up, the better off our economy will be.
And the pressures increasing the risks to tar sands expansion are growing. Whether it is the incredible perseverance and success of anti-pipeline campaigns, First Nations on the frontlines of tar sands and infrastructure projects standing up for their rights, or divestment campaigns across the continent pulling money away from high-carbon fuels. The result is diminished social licence for tar sands companies and more fossil fuels being kept underground.
The next step is to rally around something better.
And better is at our finger tips. From better, faster and cleaner transportation, to moving and selling clean electricity instead of dirty oil, to harvesting Canada’s vast potential as a leader in innovation in clean technology like electric vehicles, we are rich in opportunities from coast to coast to coast.
The advanced energy economy of the 21st century is a place we want to be. It is a place where our air and water are clean and our climate is safe. It is a place where our jobs are closer to home and are based on using the same skills to build things that contribute to a stable, long-term economy rather than one tied to high-risk oil. It is a place Canadians will be proud.
We are not starting from scratch. Look no further than transit in Vancouver, clean power moving across the border between Manitoba and Minnesota, or successful clean-tech operations in Ontario. So let’s pick up the pace and build a prosperous future that people want to be a part of.
Hannah McKinnon is the National Program Manager with Environmental Defence.