Canadians (and especially Canadian politicians) seem to often work from the assumption that so much has been spent on developing Alberta’s oil sands that Canada is now committed to continuing with the project.
There are many problems with the argument. Particularly when it comes to new investments, it could be seen as a case of the sunk cost fallacy at work. When you have an investment which may already be unproductive it can be psychologically appealing but not actually strategically smart to invest more instead of working away from the danger you have set for yourself.
One article estimates that $200 billion has been invested since 1999. For comparison, Canada’s GDP is about US$1.53 trillion. That makes all the investment in nearly 20 years equivalent to 13% of one year of all Canadian economic activity. The Economist recently reported that Americans spent $498 billion per year on cars and car parts. That shows how the bitumen sands investment is really pretty small in global terms (and also how much could be gained from discouraging American car use, breaking up the cycle of cosmetic annual vehicle replacements, and discouraging new automobile infrastructure).
Since climate change literally threatens the economic prosperity of the entire planet, there’s no comparison between the losses associated with shutting down the bitumen sands versus the losses associated with unchecked climate change. Of course, the bitumen sands aren’t the only source of climate change. What they represent, however, is the self-destructive determination of the richest, dirtiest states to keep investing themselves in the most destructive forms of energy. That worsens the collective action problem which we all face and suggests to all other states that there is no point on holding back from realizing short-term profits from fossil fuels for the sake of averting global catastrophe.
We can afford to stop new bitumen sands development, and then to go on to gradually close down existing production, making it possible for Canada to follow an emission reduction pathway that represents a fair share of what the world needs to do to keep below 2 ˚C or 1.5 ˚C of warming. We can afford to help the workers who will need new careers.
Unfortunately, politicians, the banks, and the corporate media are terrified about any future where bitumen sands development and pollution do not continue to rise, making the idea politically impossible in Canada for now. Hence the need to change our politics, media, and perhaps our economic system.
“If everything else remained constant, eliminating 1.3bn tonnes of food waste could mean $750bn less in sales for farmers—the value which the UN’s Food and Agriculture Organisation ascribes to all the food spoiled or lost annually between farm and fridge.”
Cleaning up Alberta’s oilpatch could cost $260 billion, internal documents warn
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Alberta regulator privately estimates oilpatch’s financial liabilities are hundreds of billions more than what it told the public
About $200 billion has been spent to develop Alberta’s oilsands in the past 20 years. Analysts say it won’t be government that phases them out
Second, global warming is fuelling more such extremes everywhere (see article). In 2017 Houston experienced its third “500-year flood” in less than four decades, California suffered five of its 20 worst wildfires ever and parts of the Indian subcontinent were underwater for days following epic monsoon downpours. That year insurers paid out a monumental $135bn in compensation. Another $195bn in estimated losses was uninsured. Power plants often run slow because the river water they use for cooling is too hot. Last year commercial traffic along the Rhine, the world’s busiest waterway, ran aground when rains failed to replenish its sources.
When Canada’s oil and gas sector was heaving a few years ago, companies splashed out on workers, equipment and construction.
In 2014, capital investment by the oil and gas industry reached $81 billion. In 2019, they’re expected to be around $33 billion, according to one analysis.
And in 2020? Analysts expect the oilpatch to keep a tight rein on spending.
“I would expect some fiscal restraint,” said Nieboer, speaking to reporters in early December.
Still, there are some bright spots, like Canadian Natural Resources’ announcement it will spend $250 million more in 2020 and Suncor Energy’s $300-million investment toward a newly-sanctioned natural gas power plant.
Analysts will also be watching to see how companies use the money they do have. In 2019, a lot of cash went back to investors as dividends or share buybacks.
For reasons to be pondered by indebted generations yet unborn, the beleaguered Alberta Energy Regulator allowed the petroleum sector to pile up massive unfunded environmental liabilities on the dubious assumption that bitumen extraction would remain profitable for decades into the future. So towering is the tally of unreclaimed tailings ponds that it is possible the largest part of Alberta’s energy sector — heavily hyped as the economic engine of the nation — never actually made any money.
Bitumen royalties paid to the Alberta government back to 1970 total $49 billion. Corrected for inflation, this figure is closer to $59 billion. This sounds like a hefty sum, except when compared to unfunded cleanup costs. Officially the AER estimates total oil and gas liabilities to be $58 billion with only $1.6 billion held in securities. Leaked documents from the AER instead peg potential cleanup costs of the tailing ponds alone to closer to $130 billion.
https://thetyee.ca/Analysis/2020/09/28/Alberta-Oilsands-Owe-Canadians-Far-More-Pay/