There’s no doubt we are on a wrong
path. Climate change is a serious matter that requires even more serious
attention. The math is pretty simple – if the rate of damage exceeds nature’s
rate of renewal for an extended period of time, we are doomed for catastrophe. The fact of the matter is: yes,
our actions are powerful enough to change nature. Humans can destroy every inch of our planet, and us with it. However,
policies to blindly divest from oil companies and to halt oil sands production,
without critical analyses of the benefits of Canada’s resource sector, are unintelligent.
I like to use the analogy of a
pilot to illustrate the situation we are in. Before the days of computer-aided
control, flight control falls solely in the hands of the pilot. Hence pilots go
through intensive training to handle various emergency situations – and what
dearer situation is there than losing speed coupled with engine failure? But
fear not, a well-trained pilot knows exactly what to do to reverse the severity
of the situation.
Contrary to instinctual action,
“pulling up” when the plane is descending is unadvised – this is because it
reduces the momentum of the plane and causes it to further lose speed. What an
experienced pilot should do is to let
the nose dip and allow gravity to pull the plane towards the earth. In doing
so, the plane gains the necessary velocity for aerodynamic lift. Only when the
critical velocity is achieved, the pilot then muscles to pull up and glide to a
safe landing.
Our society is currently onboard
this failing plane – scientists are the system sensors, and policy makers are
in the pilot seat. But when should we
act. Certainly if we continue on the falling trajectory, we crash. But do we
pull-up now? Or should we pick up some more momentum? How much time have we got
before it’s too late?
As for the last question, Carbon
Tracker, a non-profit organization, and the Grantham Research Institute on
Climate Change, part of the London School of Economics, provide some insights.
According to their report “Unburnable
Carbon -Are the world’s financial markets carrying a carbon bubble?”, a lot
of oil must be left in the ground. Their analysis starts by estimating the
amount of carbon dioxide that could be put into the atmosphere if global
temperatures are not to rise by more than 2°C – the most that climate
scientists deem prudent. The maximum, says the report, is about 565 gigatons
(gTCO2) between 2011 and 2050. Meanwhile, the total carbon potential of
the Earth’s known fossil fuel reserves comes to 2795 GtCO. 65% of this is from
coal, with oil providing 22% and gas 13%. Canada has 12% of world’s reserve.
Canadian policy makers need to understand these scientific constraints to gauge
an appropriate level of production.
The fact that our environment is
able to accommodate more greenhouse gas makes policy option much more complex.
The Unburnable Carbon report reveals
that there is a critical point, but we are not there yet. Therefore, before we
stop all resource extraction, we need to a new perspective to analyze the
benefits of resource sector which positions us better as we approach the
critical point. Only by meticulously assess the benefits can we design sensible
policies to optimize economic benefits while remain environmentally
sustainable. Many benefits of the oil and the resource sector are underappreciated.
Environmental activists often see no further positive impact beyond simply “job
creation”, which is still attacked as “backward” and “unsustainable”. This
perspective of the resource sector is incomplete at best, misleading at worst.
A more accurate analysis needs to incorporate the perspective of social capital
in the context of global economy.
Globalization has led to greater
mobility of capital and trade around the world. While developed countries
transition themselves towards the knowledge economy, the anti-tar sand faction
is quick to point out the loss of manufacturing jobs to oversea economies by
the so-called “Dutch Disease” brought forth by resource sector. Statistics
Canada estimate a total of 322,000 jobs lost between 2005 and 2008, or 1 out of
every 7 manufacturing jobs in Canada. This is true, however, as Bimenyimana and
Vallée have shown rigorously, halting production merely eases the symptom but
does not cure. Rather, policy makers should take advantage of the properties of
the resource sector to gradually prepare our economy for the “pull-up”.
One of the characteristics of
resource sector is its natural market protection – unlike investment into
manufacturing that is mobile subject to global competitive forces, Alberta’s
oil simply can’t go anywhere. This natural market barrier thus ensures investment
into oil sand development directly generates secure jobs for Canadians. But
there’s much more to “job security”. It is necessary to note that the resource
sector has changed over the decades. Extraction and production processes have
become increasingly capital and knowledge intensive. This blurs the line between
primary, secondary, and tertiary sectors in the traditional sense, as more and
more jobs in the resource sector now require professional knowledge and skills.
The notion that ‘resource sector jobs are backward' needs to be abandoned.
Indeed, riding high commodity prices, resource-rich regions
have been generating high-paying jobs. Using data derived from Statistic Canada and Human Resources and Skills Development
Canada, Canadian Business
Magazine ranked the top 50 jobs in Canada in 2013 with consideration of job
growth since 2006, medium compensation, increase in compensation, and projected
demand for those jobs. The study finds that “not surprisingly, several of the
top jobs on our list are in Alberta’s oilpatch” (Canadian Business, April 2013).
“Oil and Gas drilling supervisor” tops the list and “Petroleum Engineer” ranks
third. The resource sector also creates other high value-added jobs indirectly.
Oil and resource companies induce demand for additional complementary service
jobs in engineering, finance, consulting, accounting, and legal fields.
Yet, the picture of job creation is
still incomplete. As hinted previously, job creation isn’t simply a numbers
game; the real benefit that is often neglected is in enriching Canada’s social
capital. A skillful labour force, as OECD identified, is a key factor for
long-term economic competitive advantage. Resource industry boom plays the role
of enhancing Canada’s labour market. Between now and the retirement time for
the last wave of “baby boomers” sits a 15-20 year generation gap. In between this
transition, we are experiencing a shortage of professional jobs for young
people and new graduates. As TD Economist Fong explains, “In addition to the
fact that youths are facing competition from their own age cohorts, they are
now facing competition from people who just lost their jobs during the
recession and have 20 years of experience in the workforce.” The resource
sector is able to make up for some of this excess supply. It could also serve
as a training ground for the up-and-coming generation of Canadian professionals
by giving them real work and internship experiences. These gains are not
subject to diminish with the depletion of resources. Rather, the increased
skills bear permanent effects on Canadian economy for a long time. The resource
sector is a catalyst in building a skillful workforce for the future.
Lastly, one must also consider the impact
of oil sands on socioeconomic mobility. As in any community, there exists a portion
of workers with low skills who normally earn low wages. As such they, and their
children, have limited opportunities and social mobility. But even with a skill
gap, low skilled workers nevertheless benefit from the resource boom as it put
upward pressure on all wages and prices. Thus, these workers benefit from
earning higher wages and having more disposable income compared to people working
the same job elsewhere. Moreover, unlike union-inflated wages and
cartel-controlled prices, the higher income in booming regions is a result of
market forces and generates minimum deadweight loss.
What do all these translate to on a
level we can relate to? It means that single parents no longer need to work
three jobs to keep their family intact. Parents who never went to college can
give their children an opportunity to get post-secondary education. Families
will have the financial means to put their children in sports clubs, summer
camps, and music lessons. College students will face a lower debt from working
at decent-paying summer jobs while gaining valuable work experiences. All of
these social benefits are long-term, and they seldom make it into environmental
activists’ consideration.
While we have yet to climb out of
the post-2008 era of “Great Recession”, policy design needs to take place
within the scientific limits mentioned in the beginning of the article as well
as many others pertaining to health – and those are non-negotiable. With the
luxury of time, albeit finite, Canada does have the position to extract the
benefits of resource economy. The benefits are not only limited to job creation, but also
pertinent to social capital. Having a high-caliber workforce with a sound
economic foundation enables Canada to emerge as a leader as the world embraces for a shift in energy paradigm.
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| CALGARY, ALBERTA (fergie.ca) |
References:
Canadian Business, http://www.canadianbusiness.com/companies-and-industries/canadas-top-50-jobs-2013-edition/
Bimenyimana, Vallée, http://www.irpp.org/po/archive/nov11/bimenyimana.pdf
