Christy Clark and the Great False Choice of 2014

Our premier capped off 2013 — the most impressive year of her political career — with a trade mission to Asia, where she hopes to sell fracked-in-B.C. natural gas. Speaking in Tokyo on December 2, Clark offered a startling glimpse into her vision for our province’s economy.

It could be that Clark was simply telling some overseas businessmen what they wanted to hear. Or perhaps her new messaging reflects her true economic beliefs. Either way, British Columbians are about to be offered a false choice.

Here’s what Clark said in a speech at a natural resources conference, according to the Globe and Mail’s Justine Hunter:

The fundamental challenge for B.C. – and in fact, all developed economies in the world – goes beyond the recent global downturn and a fragile recovery. We need the courage to take a broader and deeper look, and admit the truth about most of the developed economies around the world.”

Amen, Premier. You’re absolutely right. Please continue.

“When was the last time we had real growth? It was the 1950s and ’60s, when 6- or even 8-per-cent growth was the norm.”

Well, okay. Bear in mind, the post-war boom was a different era. The global population only cracked 3 billion in 1960. That year, Canada’s GDP was $2,295 per person. Oil cost less than three dollars a barrel. Even adjusted for inflation, that’s less than a quarter what we pay now. With all that cheap energy, it’s not surprising the economy grew.

“That wealth set a standard for government investments – for infrastructure, for health and education, for social programs.”

Canada’s corporate income tax rate was also 50%. Again, a different era.

“But over the past four decades, economic growth for most developed economies has been more like 2 or 3 per cent at best.”

That’s right. As we’ve burned all the easy, irreplaceable energy, costs have gone up. And because we’re still heavily dependent on fossil fuels, when oil prices spike — the economy slows down. You can’t build infinite economic growth on finite resources. That’s not philosophy, it’s physics.

So how can we afford to maintain the high standards that were set more than 40 years ago?”

To start with, we could focus on four things: equality, efficiency, education, and energy security.

By equality, I mean sharing wealth in ways that reduce the overall burden on social services. Efficiency means reducing the amount of energy we currently waste. Education means training and retaining more innovators and problem-solvers, so our province can stay competitive. And energy security, frankly, means leaving some of our fossil fuel wealth in the ground. What we do withdraw should primarily be used here at home — to power our transition to a sustainable, low-carbon economy.

Why, what did you have in mind?

“There are two choices. Manage decline year after year – and get by with less. Or take a bold step and grow the economy. I say let’s grow the economy.”

(Cue polite Japanese hand-clapping.)

Did you catch that? This is the great false choice of 2014. Get used to this rhetorical framework, because you’re going to hear it a lot this year: “Either we build more pipelines, or grandma languishes on the waiting list for surgery.” “Either we run more oil tankers down the coast, or close another school.” “Either we frack our own province for the foreign LNG market, or we all shiver in darkness and deprivation.”

It’s blackmail, and it’s premised on three deeply problematic assumptions.

The first assumption is that fossil fuels, including liquified natural gas, will be a fiscal bonanza for the province. The second is that energy exports lead to balanced government budgets, and funding for social services. The third is that 6-8% economic growth, year after year, would be a good thing for British Columbia.

Assumption #1: The LNG bonanza. Simply put, B.C. is late to the party. Russia holds the largest natural gas deposits in the world, with a liquefaction terminal already built and more on the way. Russian companies pay Russian wages, Russian taxes, and operate according to Russian environmental standards. They also share a land border with China, with an agreement to ship gas by pipeline — skipping the entire process of putting it on a boat. Further south, Australia is building seven LNG terminals at once. Meanwhile, Asian countries are in talks to form a buyer’s club, to bargain down the price of natural gas. All of this adds up to lower government revenues than Clark predicts. (Click here to read more from Ben Parfitt in The Tyee.)

Assumption #2: Social services. If you believe that accelerated resource development makes for well-stocked public larders, take a look next door. Alberta, the province with all the oil, has somehow drained its rainy-day fund and fallen into a $2.8 billion deficit. They have the highest wages in the country, but they also have the lowest. A steady flood of new workers is straining government programs and facilities. Strapped for cash, the environment ministry is currently outsourcing enforcement duties to industry. Dependence on commodity exports has been a blessing for producers, but a curse for government. That’s something for B.C. to think about, before we tie our fortunes to LNG or bitumen. (Click here to read more from Graham Thomson in the Edmonton Journal.)

Assumption #3: Infinite growth. This is a fantasy, one that serves politicians more than it serves ordinary people. At 8% growth, the B.C. economy would double in size every nine years. There’s no way our infrastructure could keep up. In fact, it would be a nightmare — for workers, for municipalities, and the environment. Ask planners in Kitimat, B.C.’s latest gold rush town. The fact is, Christy Clark made promises on the campaign trail that were too good to be true. Now she’s grasping for a short-term solution, which is exactly what the fossil fuel industry has to offer. Another spurt of growth, until the market crashes or the resource runs out. Then what — find another, riskier, finite source of energy? That’s no way to run a province. (Click here to read more about infinite growth in the Vancouver Sun.)

To save her own political skin, Clark appears willing to sign our whole province to a Faustian deal. What she fails to realize is that the solutions whispered by energy lobbyists are in fact the source of the problems she now faces as Premier.

“There are two choices. Manage decline year after year – and get by with less. Or take a bold step and grow the economy. I say let’s grow the economy.”

There’s another option, and that’s to focus on the four E’s: equality, efficiency, education, and energy security. What’s more courageous — to do the same thing we’ve been doing for the last fifty years, or to ready our economy for the next fifty? That’s the real choice, the one faced right now by Christy Clark. I hope her bravery is real.

  1. JanaLee said:

    Brilliant post Kai. There’s been great stuff up here recently – keep writing!!

  2. NathanLeduc said:

    Did you catch that? The admonission of our “Priemer”that we dont have a choice about resources… we “MUST” bow to the powers that are greater, lmfao
    What does she know about anything other than ‘Sandals’ ..??
    Is she in Honduras right now…holding the hands of children…..Yeah Right!Watch….

  3. Marthe Lépine said:

    I really like your common sense approach in this post, and your way of expressing some facts in striking terms that I have not seen too often, such as your statement that infinite growth with finite resources not being possible is not a matter of philosophy, but of physics. And I have a question about fracking for natural gas in BC: From the little I know about fracking, it does seem that fracking in an environment vulnerable to a future big earthquake is not really sensible – am I correct or do I miss something? If I happen to be correct, it seems that paying a little more attention to environmentalists might save lives…

  4. Michael said:

    Change is always hard. And paradigm shifts of the magnitude that the author is suggesting are beyond difficult. They lie in the category of earth shattering, cultural ripping, upheaval.

    Unless we believe that our species, nearly all 8 billion of us, is on a sustainable path, then day of reckoning is coming.

    And here lies the second truth about ‘change’. As hard as change is, it is easier when it is in your power of control. Change that is forced upon you, that is of a surprise in nature, is a sonofabitch.

    So knowing that, when should we start? When should we consciously pull back and deny ourselves the life of milk’n honey that we are presently enjoying?

    Not on my watch! And not on my kid’s watch! I have other plans and they are a little more sumptuous and decadent. I’m living the old model and loving it.

    I’m counting on the day of reckoning being delayed long enough so as it not to be my responsibility.

  5. Lou said:

    on top of all this, there are no guarantees that schools will not close, and that grandmas wont languish… ! It’s all smoke n mirrors til the budgets are fixed. Just because there’s tons of money doesn’t necessarily translate to better or even maintained services … there’s ‘potential’ for better services – but how can we trust a government that hasn’t put schools and health first ?

  6. Your central point is a fair one – this is a false choice that’s being presented to British Columbians. But your information about the nature, size and scope of global LNG markets is, well, not very accurate.

    As a potential substitute for China’s coal-fired plants (not to mention a replacement for Japan’s nuclear reactors and a feedstock for the economic growth of the rest of the region) the market for LNG is MASSIVE – and relying on Russian exports would not be in China’s best interests, nor in Russia’s. As Canada is rapidly learning, relying on one market for exports is a recipe for trouble.

    More to the point, the fact that SOEs have already poured billions into gas properties in BC before the pipeline and outtake terminals have even been built (and paid a hefty premium for them, to boot) speaks to the nature of that demand and the long-term security of that market. The idea that there won’t be a market for BC’s natural gas simply doesn’t hold up to any reasonable scrutiny.

    And as to a buyer’s club trying to create a quasi-cartel to drive down the price of natural gas? It’s no wonder, given the spread between global natural gas prices and continental ones here in North America. But even if they succeed in driving the price down to, say, $10 per MCF (the prevailing price in Europe) LNG in BC will still be wildly profitable, given that many producers can get it out of the ground and into pipe sub-$3 per MCF.

    The second point you make is a red herring, I think. Just because Alberta has managed its resource wealth incompetently doesn’t mean that BC is destined to as well. In fact, it might well serve as an example of how not to behave. Time will tell. BC has a sales tax, for starters, which is something we desperately need here. But there are other jurisdictions in the world that have used a resource boom to fund great things and save for the future – and British Columbians should demand that, within reason, when it comes to LNG exports.

    • Point taken about Alberta. Jurisdictions like Norway have managed fossil fuel wealth very differently. As to the market potential, IEA forecasts definitely suggest there will be customers for gas. But … the Panama Canal is being widened to accommodate LNG tankers from the US. China has a … quadrillion (?) cubic feet of its own. And Japan is exploring methane hydrate. Aside from what that could do to prices, just to keep BC-based producers competitive could require Christy to make some serious concessions on taxes and royalties.

      • That’s a clever answer to a tricky queositn

  7. Perhaps. But reserves in the ground are an awful lot different than cubic feet in pipe. And we’ve established (for better or worse) that we’re pretty good at getting it out of the ground. If I were an oil producer, I’d be very concerned about peak demand. But if I’m a gas producer? I can sleep at night. We’ll need gas to transition away from oil and coal-based forms of electrical generation and transportation fuel. And we’ll need lots of it.

    • Damn it, that was supposed to be nested under your comment.

    • CCTV Reporter: “Chinese companies are also looking for advanced technologies to solve the current so-called bottleneck in developing shale gas in China. What can BC offer to Chinese companies?”
      Clark: “They should come to BC, we welcome the chance to show them…So they can bring that knowledge back to China.” This is maybe one reason I have a hard time trusting her to get this right.

  8. Very odd use of the term “bottleneck” by the reporter there. Anyways…I don’t think there’s anything terribly wrong with exporting IP and expertise. And while I suppose it’s plausible that the Chinese would spend a bunch of money to develop their own expertise and technology in the energy service space, that would be a curious strategy for them to pursue, given how ruinously expensive it would be (a lesson that many of the SOEs operating in Alberta are already learning). Far better to pay the people who can already do it for them at a lower cost and with greater efficiency.

    Now, if China is secretly pursuing a policy of autarky? Then maybe. But I don’t think they are.

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