The Harper government received a stark warning this week that its reliance on fossil-fuel exports to keep the economy humming is an increasingly risky gambit in a world grappling with the need to dramatically reduce its emissions of greenhouse gases.
Faced with scientific evidence that climate change is a real and growing threat, global governments, including the United States and China, are adopting clean-energy strategies to improve the efficiency of resource use and switch from fossil fuel to renewables.
Given the trend, "anyone relying on resource wealth for economic growth ought to be concerned about the high level of risk embedded in that strategy," McKinsey & Co.'s Jeremy Oppenheim told a conference in Ottawa on Tuesday.
Mr. Oppenheim, who leads the management consulting firm's sustainability and resource productivity practice, met separately with senior bureaucrats, bringing his message that Canada is lagging in the race to transform its economy, both by failing to develop clean-tech companies and by relying heavily on carbon-intensive sectors such as Alberta's oil sands.
His warning came as a growing chorus of critics, including major U.S. pension funds, are urging the financial industry to better assess the investment risks that would arise in the oil sands if governments move to reduce greenhouse gas emissions. Pressure on that front will intensify over the next 18 months, in the lead-up to the 2015 United Nations summit on climate change in Paris where global leaders will make another attempt to conclude a climate treaty.
The McKinsey executive – who serves as director of the Global Commission on the Economy and Climate – was one of several speakers at a conference on green growth organized by Sustainable Prosperity, a think tank affiliated with the University of Ottawa.
Mr. Oppenheim said the investment in the oil sands is a high-cost venture for global oil companies, which face a growing likelihood of "stranded assets" there as technologies to dramatically improve automobile mileage and the switch to electric cars become more commercially attractive.
However, University of Alberta economist Andrew Leach said the investment in oil sands remains attractive, even in the face of a drop in global oil demand.
The International Energy Agency has said that, under a low-carbon scenario, the world will still need 76 million barrels of oil a day in 2030 and prices would remain at $100 (U.S.) a barrel, after inflation. At that price, the typical oil sands project would have a reasonable rate of return, Prof. Leach said.
In 2009, Prime Minister Stephen Harper committed Canada to reducing emissions by 17 per cent from 2005 levels by 2020, but the country is not on track to meet that target, with the oil sands representing the fastest-growing source of carbon-dioxide emissions. The Prime Minister has backed off previous plans to impose greenhouse gas regulations on the oil sands, suggesting that the sector would face competitive problems if Canada acted alone.
UN Secretary-General Ban Ki-moon has invited heads of government to a climate summit this September in New York City, and has asked leaders to outline how they intend to meet their climate targets and commit to greater reductions for the post-2020 period.