Bank of England’s Mark Carney: The Exponential Costs of Climate Change

4 10 2015

GARY MASON

Next PM needs to be ready for a postpetroleum world

Throughout his time as prime minister, Conservative Leader Stephen Harper has mostly dismissed dire warnings about climate change as the whinging of environmentalists intent on destroying our national economy.

Canada’s inaction on this file has come at a huge cost to its reputation. It is expected to take another hit when the United Nations Climate Change Conference convenes in Paris Nov. 30 to Dec. 11. Should Mr. Harper still be prime minister then, it will be a fortnight he will endure rather than enjoy.

To say the ground on climate change has been shifting beneath Mr. Harper would be understatement. And it certainly behooves him, or whoever takes the reins of power after the Oct. 19 election, to thoroughly understand the extent to which it has, around the world and in this very country.

This week, for example, no less than the Governor of the Bank of England, Mark Carney, a person known well here, gave a major speech on climate change that continues to reverberate. Mr. Carney, once the governor of the Bank of Canada, warned of the major risks that climate change poses to the global economy and future financial stability of it.

“We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix,” he said. “… In other words, once climate change becomes a defining issue for financial stability, it may already be too late.”

Let those words sink in for a moment.

Mr. Carney went on to call climate change a “tragedy of the horizon.” And he urged businesses and regulators to do more to minimize the predicted chaos and destruction that rising temperatures will produce, even if the benefits of their actions will primarily aid those living on this planet decades hence.

Even though others have issued similar warnings, a caution of this magnitude from one of the most important figures in the world of business is extraordinary and is one Mr. Harper will not be able to so easily dismiss, try as he might. Much of the world is paying attention to this matter in a way the political leadership in this country is not. But whoever wins the federal election needs to understand that public attitudes on this issue are evolving rapidly, and in places we would have least expected them to.

An opinion poll released in Alberta this week found that a majority of people in that province support tougher climate-change policies – even if it means that the struggling oil sector has to take a hit. This would suggest that the surprising election of an NDP government in Alberta this year was not simply the result of a popular desire to get rid of a tired Conservative regime, but instead reflected a new and prevailing progressive view to which Premier Rachel Notley’s environmentally friendly policy platform appealed.

The next prime minister needs to start preparing for a postpetroleum world. By that I do not mean oil extraction will not continue to play a part in this country’s economy, but it won’t play the part it once did. The Keystone XL pipeline may well be dead. Northern Gateway already is. The Kinder-Morgan pipeline proposal is mired in controversy and uncertainty. Quebec Premier Philippe Couillard told a New York investor audience this week that opposition to the Energy East pipeline project in his province is growing, not shrinking.

The good news is that Canada’s economy continues to chug along despite the horrible blow the oil industry has taken in the past year. The low loonie has certainly eased some of the shock and allowed the economy to shift into other growth areas. There are signs of a recovery under way, at least outside Alberta.

In other words, there can be life after oil. It does not have to be what defines Canada’s economy; in fact, oil and gas represent only about 10 per cent of it (but 25 per cent of our exports). Given the attention climate change is receiving these days, and given oil’s ambiguous future, it’s time Canada’s political leadership began to focus on transitioning from an economic model that increasingly looks fraught to one that reflects new global realities and priorities.

Follow  on Twitter: @garymasonglobe

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