If there’s one thing that the UN climate change summit in Copenhagen clarified, it’s that the Canadian federal government’s global warming strategy is really pretty simple and can be summarized like this: protect the tar sands, no matter who it hurts.
When the provincial governments of Ontario and Quebec spoke up against federal inaction, Alberta tried to dismiss them by claiming the tar sands are paying the bills. Apparently, those who want a safe climate for us and our children are supposed to be bought off and keep quiet.
But are those who extol the economic benefits of the tar sands for Ontario and Quebec even right about their own arguments? A less flattering picture emerges when you factor in something that doesn’t get enough attention in Canada: how hitching our economy to dirty oil production turns our dollar into a petro-loonie. This hurts manufacturing by pricing our products out of international markets as our currency follows the price of oil ever upward over time.
The graph at right shows how our dollar now largely tracks with the price of oil. We’re not economists, but those who are have estimated the degree to which Canada suffers from “Dutch Disease” – a term coined in the 1970s to describe the hollowing out of manufacturing in the Netherlands following the discovery of a large natural gas field that similarly impacted the exchange rate there.
A recent study by a University of Ottawa professor and others estimates that 42 per cent of the job loss in Canadian manufacturing over the last few years resulting from the rise in the dollar can be attributed to our rise in oil exports, and identifies the computer and electronics, textile, transportation, machinery, paper and plastics sectors as those most affected. Ontario and Quebec are home to the majority of these industries.
Mark Carney, governor of the Bank of Canada, Jeff Rubin, former chief economist for CIBC World Markets, Frank Stronach, chairman of Magna, and many others have pointed to the damaging impact that a high Canadian dollar has on the manufacturing sector. The Ontario government estimates that a sustained five-cent change in the dollar has a $6 billion impact on the Ontario economy.
Instead of being Canada’s economic engine, the tar sands could actually prevent many regions from recovering from the recession as oil prices continue their relentless upward march due to global scarcity.
Fortunately, the solution to both global warming and to lasting economic recovery is the same: leading the next industrial revolution in retooling the world economy to go carbon free, in developing and exporting products that do this, and in the process decoupling our currency from the price of oil.
Unfortunately, due to Prime Minister Stephen Harper’s mismanagement, Canada is falling badly behind in this regard. The U.S. is investing 14 times more per capita in clean energy than our federal government, and countries like Germany and China are even outpacing the Americans. Worse, Harper’s draft climate plans leaked during the Copenhagen summit show his intention to let the tar sands triple in size by giving that sector special treatment when compared to other industries.
Despite Ottawa’s backwardness, Ontario can do its part right now to be at the forefront of the international clean energy economy, influencing the rest of Canada as it does so. Building on the success of the Green Energy Act, the Ontario government must follow through on its commitments to implement a cap-and-trade system for major polluters and a low-carbon fuel standard for transportation fuel like the one California passed.
And instead of seeing this pathway as an economic burden, we must identify the opportunity. We can substitute Ontario-made renewable electricity for oil in our vehicles – a bill that cost Ontario more than $10 billion last year – and keep more of that money here. We can make those electric vehicles in Ontario and also export them overseas to create jobs. And we can build the wind turbines and solar panels that produce the electricity.
Ultimately, though, Ontario cannot go it entirely alone, so Ontarians and our provincial government must also be advocates for policy sanity in Ottawa, since things like currency rates and tar sands exploitation are national issues. We must inspire the federal government of whatever political stripe to steer the country toward the clean energy economy rather than favouring economic activities that not only hurt the environment but also hurt manufacturing jobs.
In the short term, this means Ottawa must design climate policy that requires all industries, including the tar sands, to do their share to reduce global warming pollution, and in the medium and long term invest in the transition away from oil, nationwide.