While Harper dithers, provincial CO2 imbalance problem burns

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Dollars per tonne

The reason SK+AB emit so much more CO2 pollution is because their economy makes so much less money from each tonne of carbon they use. Their economy adds only $1,100 in GDP from each tonne of CO2. The rest of Canada's economy creates three times more wealth per tonne.

 So far it hasn't mattered that SK+AB have built such an inefficient carbon economy. That is because they have yet to be charged for all their carbon pollution or required to reduce it. The absence -- so far -- of effective CO2 constraints has left SK+AB free to do as they wish on carbon pollution. A very carbon-permissive Stephen Harper has handed them a lot of rope.

Free from carbon restraints they have chosen to expand some of the least carbon-efficient sectors of their economy -- like the extraction of particularly dirty forms of carbon. While they have made money in the short term by ignoring carbon efficiency they have also increased their financial exposure to carbon pollution pricing and climate stabilization policies.

What happens when Canada and the world decide it is in their best interests to slow climate change? On the current path the SK+AB economy would end up as a nasty carbon bubble. Assets will be stranded. Central industries will wither.

Maybe having a carbon-permissive Prime Minister hasn't been the best thing for boomtown SK+AB in the long run. Maybe they are getting in over their heads on carbon. Maybe SK+AB need an economic plan that can continue to deliver prosperity when Canadians and humanity act to solve the climate crisis.

Carbon bubbles, stranded assets and fear of acting on climate change

By allowing the carbon divide to grow so large in Canada, the federal government has allowed two Canadas to develop around carbon. These two Canadas have different economic incentives around climate change.

One Canada, with the vast majority of Canadians, produces three times more GDP per tonne of carbon. This Canada can more easily afford to put a price on carbon. They are already cutting their carbon footprints. The pure cost-vs-benefit calculation for these Canadians can tip towards taking climate action much sooner than it can for the SK+AB economy.

The other Canada, with a minority of Canadians, is so inefficient with carbon that big parts of their economy risk becoming a carbon bubble under any effective carbon pricing. They currently need to pollute three times more CO2 to make every dollar of GDP. If there was national carbon pricing today they would have to pay three times more in carbon taxes for every dollar of GDP. Their carbon footprints are massive and growing.

If you had to get rid of a tonne of carbon pollution would you get rid of the one that earned you $1,100 or the one that earned you $3,400? SK+AB are in an exposed and vulnerable position.

Let's look at a specific example: the Alberta oil sands. The Massachusetts Institute of Technology (MIT) did a detailed economic analysis of how carbon pricing would affect them:

The Canadian oil sands industry appears highly vulnerable to climate policy. This vulnerability stems from the fact that CO2 emissions from the production of bitumen and upgrading are substantial … the economic viability of the industry and the value of these large reserves are at risk … The niche for the oil sands industry seems fairly narrow and mostly involves hoping that climate policy will fail.

Unfortunately for the SK+AB economy, most economists say that the most cost effective way for an economy to cut carbon pollution and thus prevent climate change from reaching dangerous levels is to put a price on carbon. A carbon price lets the marketplace, rather than bureaucrats, decide the most efficient way to cut carbon pollution. The least productive carbon gets weeded out first. In Canada, most of the least productive carbon is in SK+AB.

Until the SK+AB economy switches direction and closes the carbon gap with the rest of Canada the stage is set for a nasty and divisive future. As the climate continues to grow more extreme SK+AB risk losing their free ride on climate pollution. The window of opportunity for SK+AB to change direction and try to catch up to the rest of Canada on carbon efficiency is closing fast.

Window closing

Mark Jaccard, a professor at Simon Fraser University and lead author for sustainable energy policy in the coming Global Energy Assessment, wrote recently in the Globe and Mail:

…it’s already too late to prevent a two-degree increase [dangerous climate change] because of the inertia in our global energy system, which is 85 per cent based on burning coal, oil and natural gas. We would have to blow up our factories, electricity plants and vehicles to achieve that goal … the Canadian tar sands must contract immediately as part of a global effort to prevent a four-degree increase in temperature and catastrophic climate change.

Stanford climate scientist Ken Caldeira wrote recently:

… if there is to be any hope of staying in the zone of climate safety (or at least semi-safety), the transition to carbon-free energy must begin immediately

NASA climate scientist James Hansen is clear on what is required avoid dangerous climate changes:

..if emissions from coal are phased out over the next few decades and if unconventional fossil fuels are left in the ground, it is conceivable to stabilize climate.

Terje Riis-Johansen, Norway Minister of Petroleum and Energy:

In just one year, the estimated global cost of achieving the two degrees target has increased with a staggering one thousand billion dollars. Even worse, the objective of limiting global temperature rise to only 2 degrees Celsius is now seriously threatened.

MIT calculated that humanity’s current actions were shoving us towards 5.5 C by 2100. They called for “rapid and massive” action to avoid this and warned:

…there’s no way the world can or should take these risks.

The staid International Energy Agency produces the annual bible for national governments on the state of the world's energy. Their most recent version said that humanity has already built nearly all the fossil fuel infrastructure needed to push the climate into dangerous territory. They calculated that “delaying action is a false economy” because costs today to prevent dangerous climate changes are many times lower than the costs will be in a few years. The bottom line:

The world is perfectly on track for a six-degree Celsius increase in temperature. Everybody, even the schoolchildren, knows this is a catastrophe for all of us.

These aren't the voices of hippies and treehuggers. These are voices from deep within the establishment warning that we are going to have to get serious about cutting back on our carbon pollution very soon. The case is being made with increasing urgency that it is in humanity's economic best interests to act now.

In this quickly changing environment, the growing economic carbon divide in Canada between SK+AB and the rest of our economy is unsustainable and dangerous for us all. If Stephen Harper won't act to heal our nation's carbon divide quickly then perhaps the Conservative party needs to hand the reigns to someone who can.


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