The collapse in oil prices, which began over a year ago now, has sent Canada’s economy freefalling into what is almost certain to be an economic recession.
During last week’s federal election leaders’ debate hosted by Maclean’s magazine, Prime Minister Stephen Harper even acknowledged Canada might be in an economic recession because of the low oil prices.
Although the Government of Newfoundland and Labrador has not used the “R” word yet, the economic projections for the next five years outlined in the 2015 provincial budget clearly indicate that low oil prices are plunging our province into recession too.
Last month Bank of Canada Governor Stephen Poloz shocked the financial markets with a cut to its key interest rate in order to offset what he called the “unambiguously negative” effects low oil prices are having on our economy.
Despite the fact the oil and gas sector constitutes only 10 per cent of Canada’s GDP, one thing is certain: as crude oil prices drop the Canadian loonie depreciates, highlighting Canada’s over-dependency on fossil fuels and the consequences of relying on a commodity that is highly volatile. As pointed out by Poloz, our economy is contracting — and the central bank has now dramatically reduced Canada’s economic growth outlook for the remainder of 2015.
There is no doubt that this economic slowdown is hurting Canadians through rising costs for food and shelter, and in job losses, particularly in the oil and gas sector, in which thousands upon thousands of Newfoundlanders and Labradorians are employed.
While this economic downturn is due in part to global economic headwinds, it has been mostly caused by the lack of diversification in Canada’s economic plan. Over the past decade the federal government has heavily invested in oil sands expansion and as a result has not adequately diversified our economy. A new study by Unifor shows that in terms of GDP growth and employment growth, Stephen Harper has had the worst economic record of any Canadian Prime Minister since the end of World War II.
The Conservative Government’s economic action plan has failed Canadians and is out of touch with global market trends, which are inclined towards clean tech energy. This economic downturn represents an opportunity to decarbonize our economy and expand our renewable energy sector, which has the potential to stimulate the economy, reduce greenhouse gas emissions, and secure energy access.
While there are no “silver bullet” solutions to decarbonize our economy, a recent study authored by more than 60 Canadian academics say that this transition is possible, and that carbon tax and cap and trade mechanisms can accelerate the process. In addition, further developments in global markets show that progressive policies can be instrumental in this transition.
The Renewable Revolution
Over the past decade, renewable energy has become an important tool in climate change mitigation, adaptation and economic development. There has been a global shift in the perception that renewables and energy efficiency are critical tools to address climate change and to create new economic opportunities and secure energy access. Countries around the world have already started to decarbonize their economies and move to renewable energy.
According to a report by the Renewable Energy Network for the 21st Century, continuous advancements in science and technology have lowered the costs of renewable production while progressive policies have promoted investments. Within a decade, renewable energy production has sharply increased from producing 3 per cent of global electricity to 22 per cent.
With big economies like China, the United States, Germany and Japan increasing their investments in the sector, renewables have already started to stabilize carbon emissions while achieving economic growth. In 2014 global clean energy investments rose by 17 per cent to $380 billion with wind and solar leading the way.
According to the International Energy Agency, last year, for the first time in 40 years, the global economy grew by 3 per cent while energy carbon emissions stalled, due in part to an increase in efficient renewable technology. Increased commitment to climate action will accelerate this transition as governments set their policy mechanisms to reduce their carbon emissions, which will in turn increase further investment and innovation.
2015 is marking a tipping point in the global transition to renewable energy. At the G7 Summit, the leading industrialized countries pledged to decarbonize their economies by the end of the century, and to double their shares in renewable energy. Last week U.S. President Barack Obama announced his clean power plan, the most ambitious in American history, to move away from coal to renewable energy and to reduce carbon emissions by 32 per cent below 2005 levels by 2030.
This has established a more optimistic outlook for a more ambitious climate agreement to be signed at the United Nations climate negotiations in Paris at the end of the year. Even conservative financial institutions like the International Monetary Fund are calling for cuts to fossil fuel subsidies and increased carbon taxes.
It is clear that the end of the fossil era is inevitable and the renewable energy era has already begun.
As pointed out by Laura E. Williamson, the Communications and Outreach Manager from the Renewable Energy Network for the 21st Century, the transition to a green economy is “not a technological issue, it’s not an economic issue, it’s a political issue.”
Clean energy technology in Canada
Even though the global market for clean technology is booming, Canada lacks a comprehensive policy framework to support clean energy technology development. This is stopping us from taking advantage of global market opportunities for innovation, trade and growth in the renewable sector.
According to a report by Analytica Advisors, the global clean energy tech industry reached nearly $1 trillion while exports of Canadian renewable industries reached $5.8 billion. The clean energy technology industry employs 50,000 people in more than 800 firms in Canada, while last year the renewable industry grew four times faster than the entire Canadian economy. In spite of the renewable energy industry’s promise and potential, a lack of government policy support to stimulate economic upswing is actually holding the sector back from developing. Since 2008, Canada has lost 41 per cent of its global market share, making it the third largest loss of any other country measured.
Restructuring our economy in Canada will require a shift in mindset and a shift in policy development.
Restructuring our economy in Canada will require a shift in mindset and a shift in policy development. For the longest time the national perception has been to hope that oil prices remain high. Some people believe that the development of the oil sands has benefited Canadians by yielding economic gains and generating jobs. However, most of the jobs generated by the oil patch are contractual and the revenues generated have been greatly mismanaged by the federal and provincial governments. When you take into account the $34 billion in subsidies to oil companies that our government spends every year, it is obvious that Canadians are not the ones benefiting from the oil sands.
Our economic reliance on the fossil fuel industry has slowed our transition to clean energy, which could be creating sustainable development and long-term jobs while addressing climate change. It’s time for Canada to move from a resource-based economy into a knowledge-based economy that can provide sustainable long-term growth that meets the current generation’s needs without jeopardizing future generations’ ability to meet theirs.
With the federal election coming up in October, the timing for this recession could not be more critical. Canadians have the chance to elect a new government and to restructure our economic policy. Increased support for grassroots movements and national demonstrations across the country, like the “Jobs Justice and Climate” last month, are clear signs that Canadians are ready for a transition into a more just and sustainable economy.