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Will Canada’s Oil and Gas Become ‘Stranded Assets?’

Canada’s vast resource wealth could become ‘stranded’ as the world’s carbon reserves become increasingly risky to develop.

A coalition of 70 investors managing some $3 trillion in assets launched an initiative last week petitioning the world's top oil producers to "assess the financial risks" of what will happen to their massive oil and gas investments in a carbon constrained world.

Ceres, which advocates for sustainable business practices globally, launched the initiative in tandem with another environmental advocacy group, Carbon Tracker. Carbon Tracker found in a recent report that 200 of the largest publicly traded fossil fuel companies invested $674 billion on developing new oil and gas reserves in 2012, raising the question of how many billions of those dollars would be left unused and stranded in the ground.

These organizations are arguing that after the latest U.N. climate report, oil and gas companies are investing in resources that are better left in the ground. They believe governments and environmentally conscious consumers are going to make these assets uneconomic and an eventual burden for shareholders.

Where does that leave Canada with its vast carbon reserves, most notably in the Alberta oilsands? Some believe Canada is "playing with fire" and could potentially strand massive investments while ignoring opportunities the rest of the world is seizing.

Canadian Prime Minister Stephen Harper has no plan B, as he clearly indicated in his latest throne speech outlining the Conservative government's legislative plan for the coming months. “We must seize this moment,” according to text from the speech. “The window for gaining access to new markets will not remain open indefinitely. Now more than ever, our future prosperity depends on responsible development of these resources.” 

Yet Canada could pay the price when the carbon bubble bursts and Big Oil reduces oilsands investment.

Jeremy Leggett, author of the recently published book "Energy of Nations," told DeSmog that Canada is missing out on new opportunities by throwing all its efforts into expensive oilsands ventures:

"Given the emphasis they are putting on tar sands, they are playing with fire as these are exactly the type of high carbon, high cost assets where investors around the world are already starting to challenge capital expenditure plans or reduce exposure. Indeed, if a carbon-fuel stranded-asset risk debate takes off globally, and people start divesting en masse even ahead of regulation, as has already started to happen with insurance companies and pension funds in Norway, Sweden and Australia, Canada itself could wind up as some kind of stranded asset: a country with both significant actual stranded assets in the tar sands, and lost opportunity-cost potential assets in all those cleantech companies it could have incubated in the suburbs of Vancouver, and never did."

Canada’s commitment to developing its carbon reserves has led to a common petrostate plight: Dutch Disease.

Canada's currency has soared and is at near par with its giant neighbour to the south, the United States. The manufacturing sector has been hollowed out, severely reducing the breadth of Canada’s overall business sector.

"We have an endowment of a resource and we're just trying to spend it as fast as we can which is a pretty irresponsible," Tim Weis, Director of Renewable Energy at Calgary's Pembina Institute said in an interview. "You wouldn't run your personal finances that way."

Canada, once the envy of the world as an open democracy and protected natural spaces seems to be working hard to tarnish its own brand. The Harper government is gagging its scientists, upending environmental protections and missing targets to reduce greenhouse gas emissions, all in the name of keeping oilsands development on track.

"If the world ever takes climate change seriously, Canada will be revealed to all as a pariah nation," Bill McKibben, the author and founder of 350.org, said in an email. "I don't know what damage a bad brand can do to a country, but I fear that Canada (a country where I spent five years of my boyhood and that I love a good deal) is going to find out eventually."

Image Credit: Kris Krug via flickr

Like a kid in a candy store
When those boxes of heavily redacted documents start to pile in, reporters at The Narwhal waste no time in looking for kernels of news that matter the most. Just ask our Prairies reporter Drew Anderson, who gleefully scanned through freedom of information files like a kid in a candy store, leading to pretty damning revelations in Alberta this spring. Long story short: the government wasn’t being forthright when it claimed its pause on new renewable energy projects wasn’t political. Just like that, our small team was again leading the charge on a pretty big story

In an oil-rich province like Alberta, that kind of reporting is crucial. But look at our investigative work on the Coastal GasLink pipeline to the west, or our Greenbelt reporting out in Ontario. They all highlight one thing: those with power over our shared natural world don’t want you to know how — or why — they call the shots. And we try to disrupt that.

Our journalism is powered by people just like you. We never take corporate ad dollars, or put this public-interest information behind a paywall. Here’s the thing: we need 300 new members to join this month to meet our budget. Will you join the pod of Narwhals that make a difference by helping us uncover some of the most important stories of our time?
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When those boxes of heavily redacted documents start to pile in, reporters at The Narwhal waste no time in looking for kernels of news that matter the most. Just ask our Prairies reporter Drew Anderson, who gleefully scanned through freedom of information files like a kid in a candy store, leading to pretty damning revelations in Alberta this spring. Long story short: the government wasn’t being forthright when it claimed its pause on new renewable energy projects wasn’t political. Just like that, our small team was again leading the charge on a pretty big story

In an oil-rich province like Alberta, that kind of reporting is crucial. But look at our investigative work on the Coastal GasLink pipeline to the west, or our Greenbelt reporting out in Ontario. They all highlight one thing: those with power over our shared natural world don’t want you to know how — or why — they call the shots. And we try to disrupt that.

Our journalism is powered by people just like you. We never take corporate ad dollars, or put this public-interest information behind a paywall. Here’s the thing: we need 300 new members to join this month to meet our budget. Will you join the pod of Narwhals that make a difference by helping us uncover some of the most important stories of our time?

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The Narwhal’s reporters uncover energy stories that send shockwaves throughout Canada. But they can’t do it alone — we still need to add 90 new members this month to meet our budget. Will you support crucial climate reporting that makes an impact?