The Australian economy shares a few sorry traits with Canada’s. Both countries dig enormous amounts of dirty hydrocarbons out of the ground for export. Both made fortunes doing so, for decades. And both might now be questioning whether those wonder products were too much of a good thing as rising temperatures damage, and potentially devastate, natural systems.
Canada’s hydrocarbons come primarily from the oil in the oil sands, more accurately called the “tar sands” by Europeans. The oil sands enjoy sacred status in Alberta and in Ottawa. The Janus-faced federal government imposes a carbon tax and promises to meet the carbon-reduction targets set out in the 2015 Paris climate agreement yet creates the conditions, such as nationalizing a pipeline, to allow – make that encourage – the oil sands to expand.
Australia built virtually its entire economy on the sale of coal and iron ore to overseas buyers. It is the world’s leading exporter of coal, which has fuelled the industrial revolution in China, the world’s biggest emitter of greenhouse gases. The exports have propelled Australia’s economic growth for three decades with nary a recession to be seen, not even in the aftermath of the 2008 financial crisis.
Today Australia is burning, has been for months. In spite of rain this week in New South Wales and Victoria, the southeast regions hardest hit by the bushfires, some 140 fires have yet to be snuffed out and the scorching Australian summer is far from over. The death toll from the fires is now 27. About 2,000 houses and a billion animals have been destroyed. As of Jan. 8, the burn area stood at 10.7 million hectares. That’s 1.3 times the size of Scotland.
The fires are probably the result of climate change even though the Aussie climate-change skeptics and their social-media bots, without a shred of evidence, are blaming arsonists. Australia past year experienced its hottest, driest year since records began more than a century ago. Rainfall was 40 per cent below average. Worldwide, eight of the 10 hottest years have come since 2010.
The Australian fires should have come as no surprise and may become the new normal as the driest inhabited continent loses moisture. Southeast Australia experienced a severe drought between late 1996 and 2010, depleting aquifers, rivers and lakes, and triggering the construction of a fleet of seawater desalinization plants (Ontario Teachers’ Pension Plan was an investor in Sydney’s plant). In February, 2009, the Black Saturday bushfires in the southern Australian state of Victoria claimed 173 lives.
The 2014 Australasia report by the United Nations Intergovernmental Panel on Climate Change made it clear that Australia was at the forefront of a climate emergency. “Fire weather is expected to increase in most of southern Australia owing to hotter and drier conditions,” it said. “Without adaptation, further changes in climate, atmospheric carbon dioxide (CO2), and ocean acidity are projected to have substantial impacts on water resources, coastal ecosystems, infrastructure, health, agriculture and biodiversity.”
The Australian response was to double down on coal and deny that it was part of the problem. The government likes to point out that the country accounts for just 1.3 per cent of global carbon emissions. What it fails to mention is that Australia represents only 0.33 per cent of the world’s population, meaning its per capita emissions are among the world’s highest. And it doesn’t include its coal exports in its calculation. Were it to do so, its emissions’ share would rise to 4 per cent.
Nor does the government mention that it essentially has no plan to meet the carbon-reduction goals it pledged under the 2015 Paris climate agreement. The UN recently said: “There has been no improvement in Australia’s climate policy since 2017 and emission levels for 2030 are projected to be well above target.” The 2020 Climate Change Performance Index puts Australia at the bottom of its climate policy rating.
As if to prove the point that the government ranks climate change as a minor inconvenience, Prime Minister Scott Morrison went on holiday in Hawaii last month even as the bushfires were spreading and body count rising. His government continues to approve new coal mines, such as the Carmichael mine in Queensland, which will be one of the world’s biggest. This month, the German engineering giant Siemens AG faced a backlash from climate activists and investors for its role in building the mine’s railway to the coast.
As investment managers like to say, past performance is no guarantee of future results, and so it is with Australia. The coal industry helped to bring economic prosperity to Australia just as the oil sands industry did to Western Canada.
But expanding the coal industry just as coal is becoming a pariah fuel seems reckless, for the planet and for the Australian economy. Coal companies are starting to falter. Last year, Murray Energy Corp., the largest private coal company in the United States, filed for bankruptcy. Shares of another big coal player, New York-listed Peabody Energy Inc., have lost 72 per cent in the last year. On Thursday, the German government agreed to pay Germany’s coal-producing regions €40-billion in compensation in return for shutting down coal mines and coal-burning electricity plants by 2038.
The coal era is, mercifully, coming to an end, though the Australian government is in denial about that scenario and might find itself paying a big price for worshipping at the altar of the dirtiest fuel. Ditto Canada. Justin Trudeau’s cabinet will soon have to decide whether to approve Teck Resources Ltd.’s enormous new Frontier oil sands project in Alberta. Will Canada make the same mistake as the Australians? Possibly. Approving these grubby projects is not voting for your economic interests, it’s voting against them.