Oil sands, game theory, and jobs

2009-03-30

in Canada, Economics, Politics, The environment

Clothes for sale, Toronto

If we are going to prevent catastrophic climate change, every major country in the world will need to have policies that put a price on carbon and encourage the transition to a low-carbon economy. If the range of estimates for safe concentrations is approximately right (350 – 550ppm, very broadly), such policies will need to be in place within a period of years to, at most, decades. In such a world, projects like Canada’s oil sands would be enough to make the state permitting them an international pariah. It seems quite legitimate to expect harsh trade sanctions against a state that is so blatantly ignoring the need for the world to cut emissions, once many other states have seriously begun to do so. Given that I don’t think Canada has the stomach to be another North Korea, it seems like we would eventually give in to pressure to bring our policies in line with those of the United States and our other allies and trading partners.

As such, there are two possible long-term outcomes that can be envisioned. Either catastrophic climate change will occur or Canada will be forced to cut emissions like everybody else. In the former case, I suppose our current climate policies are not hugely relevant. If the rest of the world doesn’t get its act together, human civilization will probably snuff itself out. In the latter case, further investment in the oil sands will just increase the medium-term economic losses associated with the abandonment of the project. Such investment will also make it more and more politically difficult for the government of Alberta to support sane climate policies, turning it into more and more of an active ‘spoiler’ in domestic climate change negotiations between different levels of government.

Unfortunately, the ‘bite’ in this analysis doesn’t come into effect for some time, probably beyond the political horizons of most Canadian policy-makers today. As a further consequence, it is very hard to get people to take such long-term considerations into account. That being said, if a large majority of Canadians came to understand the issue in these terms – that we are pouring effort into a project that will ultimately need to be abandoned – the political landscape might shift considerably. The discussion may then be less about jobs now versus climatic stability in the future, and more about directing the ongoing development of the economy towards jobs that will still be viable in ten years, instead of ones that will be extinguished along any effective path to a sustainable future.

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{ 4 comments… read them below or add one }

Anon March 30, 2009 at 2:03 pm

You are ignoring the third option, which is favoured by those who want to maintain the status quo on oil sands development: either climate change won’t prove to be a huge threat (very unlikely) or new technologies will make the oil sands compatible with successful mitigation (also unlikely, but very convenient for those who have bought into the current approach).

Milan March 30, 2009 at 2:24 pm

Successfully making the case I describe does depend on:

(a) convincing people of the seriousness of climate change and
(b) convincing them that carbon capture and storage cannot redeem the oil sands, and neither can any other technology likely to emerge in the next few years or decades.

R.K. March 30, 2009 at 6:21 pm

Also, I think a lot of the people working in the oil sands see it as a temporary industry already, at least for themselves personally.

People leave behind their families and ship off to Fort McMurray to earn some fast money. Quite possibly, only a minority of them see the oil sands as a real career prospect.

. March 31, 2009 at 3:54 pm

A poor strategy for halting climate change
Reducing emissions isn’t an economy killer
Posted by Ryan Avent

It’s mind-blowingly wrong, and dangerous to boot — the last thing we need at this juncture is for Americans to begin thinking that efforts to address climate change will plunge the economy back into the throes of deep recession.

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