Canada would be poised to become a new agricultural, resource-rich superpower if it weren’t for the rocks—and all that water.
In northeast Alberta, at the furthest edge of Canada’s great plains, lie the tar sands. Oil-rich, controversial and now hemorrhaging money, the region may come to represent Canada’s plight as climate change advances: resources abound, but they are increasingly hard to access—and increasingly less valuable.
Beyond the sands lies the Taiga, a huge boreal forest that spans the north of the globe, and beyond that, hundreds and hundreds of miles of Arctic and Subarctic tundra, frigid swampy grasslands that extend north to the point that the land joins the Arctic Ocean. More optimistic Canadians have longed hoped that America’s breadbasket was on the verge of edging northward into Canada’s prairies while resources in the high Arctic were just a few short years away from easy extraction, but crashing prices for some staple industries, political opposition to water export and—ironically—thawing permafrost have come back to haunt Mountie country.
It’s the thaw that might be the biggest part of the story. Water is Canada’s lifeblood: it controls a fifth of the global supply, it builds its roads on frozen lakes, it irrigates its fields with glacial runoff. But what if things aren’t that sanguine after all?
Canada’s economic and environmental futures are inextricably linked. The country—larger than the United States and with over 125,000 miles of coastline—is likely to be hit hard by climate change, from shifting patterns of precipitation and drought in the western prairies to a quickly melting Arctic, but those harsh realities may not be all bad for the Canadian economy.
Canada’s climate is warming in some regions by as much as twice the worldwide average and as much as four times in the parts of the high north, and “in general, for much of Canada, that’s a good thing in terms of agricultural production because we’re quite limited by the short frost-free season and in many years very cool temperatures in the growing season that limit types of crops,” Brian McConkey, a research scientist at Agriculture and Agri-Food Canada (the country’s agriculture department), said.
The new Canuck breadbasket
On the surface, things do look good. A warming climate and a map that stretches quite literally to the ends of the Earth—plenty of land for planting, development and the like—make Canada’s agriculture future look bright, but the truth of the matter is far more complicated, Debra Davidson, a resource economist at the University of Alberta, told the Observer.
Climate projections that only include averages often show boosts to agricultural production, particularly in the Canadian prairies, but those same models often don’t account for dramatic variability, soil quality or extreme weather events, she said.
“They tend to exclude climate variability and extreme events, and there’s a good reason for that, and that’s just that climate models do a bad job projecting that sort of thing with any accuracy,” Dr. Davidson said. “We might experience some really nice bumper crops on odd years, but those bumper crops are likely to be bookended by rather poor returns.”
Then there’s the problem of the Canadian Shield. Three million square miles of essentially unfarmable exposed igneous rock, the shield extends from Labrador and Quebec in the east all the way to the edge of the prairies—prime agricultural land—in Manitoba and Saskatchewan.
“You’re in a position where the agricultural regions cannot migrate north,” Adam Scott, the climate and program manager for the environmental watchdog group Environmental Defence (EDF), said.
“The biggest limiting factor in the northern expansion of the agricultural zone is the lack of soil,” said Dr. Davidson. “We have great soil in the southern half of the prairies, and you don’t have to go too far north before you start hitting Canadian Shield, which basically has no soil at all.”
And there’s the Taiga. Also known as the boreal forest—a fitting name; boreal comes from the Latin borealis, literally meaning “of the god of the north wind”—the biome stretches around the northern edge of the globe.
Dr. McConkey says the Canadian agriculture department is “optimistic in a national sense,” but even he doesn’t see the boreal forests as a major new resource for farming.
“A lot of that boreal forest is probably kind of on the edge anyway, it’s really on the periphery, so certainly with warmer temperatures… the forest would disappear, so that could, depending the soil underneath, could either become cropland or certainly potentially pasture,” he told the Observer.
Mr. Scott said that EDF projects some northward movement of the forest, but not so much that it could expose major agricultural resources to the south or greatly expand Canadian food production northward.
Natural Resources Canada—the government department responsible for resource management, minerals and metals—noted in its 2014 update to a massive 2008 report on climate change, “From Impacts to Adaptation: Canada in a Changing Climate,” that, in the near future, Canadian agriculture could experience a boost from the warming temperature. Predicting longer growing seasons and “higher-value warmer-weather crops” taking over existing agricultural regions, the report envisaged a positive result for Canadian agricultural production, but also highlighted the challenges numerous potential challenges.
Water access somewhat ironically poses a cardinal threat to Canada. The country is perhaps the most water-rich in the world on a per capita basis, but it just isn’t in the right places.
Many parts of western Canada’s prairies rely on glacial runoff for irrigation, and those same glaciers are now threatened by the warming climate. Even a position thousands of feet above sea level in the Rocky Mountains will not wholly protect Canada’s most abundant—and most fragile—freshwater supply. Once the glaciers have melted away—likely to occur by mid-century—there won’t be much water left to irrigate the vast prairies.
“The glaciers act like sort of a storage battery for water, distributing it all year round,” Mr. Scott said. “Those glaciers are in rapid retreat, and they’re expected to completely disappear by mid-century.”
A limit on water would also effectively limit Canada’s ability to produce foodstuffs to the extent theoretically possible.
Dr. McConkey said that a 50 percent increase in Canadian agriculture production “wouldn’t be impossible” in the next half century, although extreme weather events could notably curtail that potential.
And then there’s the question of what sort of crops Canada can grow. “In a general sense, if you looked at most of Canada projections, it would be more of a positive story. A little bit warmer temperatures gives us a greater choice of crops,” Dr. McConkey said.
While Canada’s canola production could become heavily threatened—the plant struggles to grow in high temperatures—it hopes to see increased yields for corn and soybeans, traditionally more southerly crops that had limited viability above Canada-U.S. border. Currently, wheat and canola are Canada’s largest crops, but that is likely to change—Canada may not become a new breadbasket, but it may be a corn- and soy-basket.
Thus far, the frost-free season has increased by as much as two weeks, a huge margin for farmers in the prairies and country-wide.
“Much of Canada was constrained by cold temperatures,” Dr. McConkey said. “I think the thing that they’re concerned about more than temperature is what will happen with precipitation.”
While the prairies have been experiencing very wet years of late, drought in future is hardly impossible, and with the threatened glaciers in fast retreat, runoff will no longer be a dependable source of irrigation water.
“I’m not very optimistic that climate change will result in an agricultural windfall for Canada,” Dr. Davidson said, although she added that Canada is far less vulnerable to shifts in climate as the U.S. and Mexico, both of which boast many highly temperature-sensitive crops—some of which are grown in areas that are dangerously vulnerable to extreme weather events, such as Florida and the drought-prone U.S. great plains.
Another potential victim of climate change is a minor—but notable—staple of Canada’s agricultural economy: ice wine. Made from grapes that froze while still on the vine, ice wine is challenging to produce, and today most of the global supply comes from Ontario and Germany. If the grapes don’t freeze as necessary, production of the novel dessert wine in Canada could be seriously threatened, Dr. McConkey said.
“You can’t really rely on production,” he said.
Once again, the thawing of water could pose a threat to Canadian agriculture.
Crumbling roads on ice
The common thread for Canada in climate change—profit, loss, market shifts, exports—is water. Whether frozen or free-flowing, Canada’s water resources will dictate the country’s path going forward, and not just in terms of irrigation.
In northern Canada, there are few conventional roads as we know them. There is little in the way of dirt roads and even less in the way of pavement, because most long distance highways are built over ice, the frozen backbone of the transportation sector in the far north. The communities in northern Canada are small: between them, Canada’s three territories—the Yukon, Nunavut and the Northwest Territories—have a population of barely 100,000 spread out over 1.5 million square miles.
“It’s kind of a cheap road network, when you think about it, that they have been able to count on, but that road network is becoming less and less viable,” Dr. Davidson said. “That whole transportation network is really beginning to crumble” as the ground literally melts underneath it.
Nick Xenos of Natural Resources Canada said thawing bodies of water in the far north represent one of the greatest challenges to resource extraction and economic development in the resource-rich areas above the boreal forests.
“Winter roads have been a key supply route in our north,” he told the Observer. “In the winter, they put roads onto the permafrost and on frozen lakes and rivers, but of course if things are thawing or melting, you get shorter seasons for those supply lines.”
Even when transportation is not situated on lakes or rivers, it is still under threat from climate change as permafrost—the permanently frozen ground on which everything in Canada’s north is built—begins to thaw. One report—compiled in part by Natural Resources Canada’s Fiona Warren—the situation bluntly: “winter roads in Manitoba turn into quagmires,” one section header read.
Winter roads, or ice roads, are the most obvious source of concern. They are “seasonable transportation networks located primarily on the surfaces of lakes, rivers and bays.” In addition to providing relatively easy access to communities, they are a vital resource for mining operations, which essentially cannot transport their products out of their mines when the roads are not open.
Every Canadian province and territory—with the exception, of course, of Prince Edward Island—has significant mining operations within its boundaries. All three northern territories have numerous mines, extracting everything from gold to tungsten from the earth. And even now those resources are not subject to major stress, as most mining is still confined to more southerly—and therefore, more easily accessible—regions.
“In the past, engineering design did not consider a changing claim and most mine infrastructure was built to withstand the climate norms and conditions at the time of construction,” meaning that increased thaw depth and permafrost degradation could compromise not just the transport networks leading to mines, but, in some cases, the mines themselves, according to the “Canada in a Changing Climate: Sector Perspectives on Impacts and Adaptation” 2014 update.
‘Anyone who is active in the Arctic doing any kind of logistics is struggling to move equipment and use personnel’
A warming climate might provide some boost for Canada’s farmers, but to the north, the mining industry and communities in the far north are likely to be hit hard by permafrost thawing, undermining infrastructure upon which they have traditionally relied, Mr. Xenos said.
Ms. Warren told the Observer that new mining ventures would require essentially all new infrastructure, perhaps more than would be financially viable. Either way, all that new construction would cut into mines’ revenue. The only transport route likely to become more viable is shipping, and as many mines are far inland that would still involve overland — and therefore, over (melted) permafrost—transportation to ports. At this point, most of those ports do not even exist or are incredibly small.
Arctic resource access has never been the main obstacle for miners, Mr. Scott said. “There have been Arctic mining projects across Canada in recent years in very remote places,” he said.
The bigger obstacle to Arctic exploration, instead, is the comparative lack of need for resources available in the Arctic. Now, Arctic entrepreneurs also have to contend with their traditional infrastructure quite literally melting away.
“Anyone who is active in the Arctic doing any kind of logistics is struggling to move equipment and use personnel,” Mr. Scott said.
Individual northern communities are also desperately at risk, Mr. Xenos said. Inuit and indigenous—First Nations, in Canadian government parlance—peoples have long relied on the frozen nature of their environment for a variety of traditional industries, including fishing and craft production. And their transportation networks are crumbling. It could be the most remote communities that are hardest hit by Canada’s changing climate.
Inuit lifestyles have focused on ice for millennia, but without sea ice to support them, the people of Nunavut may be as lost as the polar bears with whom they share their bays, islands and tundra.
The $100 per gallon gamble
The more optimistic in Canada have long believed that climate change could expose vast quantities of oil in the Beaufort Sea, beneath the Arctic Ocean and across the northern parts of the country. Thawing ice would allow access to millions of gallons of crude oil beneath the Arctic surface, it was thought. But would extraction of that oil ever be worth the cost?
The tar sands in Alberta are currently a leading global producer of oil, but all is not well for them. Oil prices in the U.S. are currently hovering below $40 per barrel. Extracting oil from tar sands bitumen is expensive at the best of times, but when oil prices are as low as they are now it fails to even cross the threshold of profitability. And that’s even after the lower cost — as low as $8 in January—for oil extracted from bitumen. The break-even price for tar sands oil? About $100 per barrel, where the market hovered for about five years before crashing in late 2014.
And there are political hurdles. Canada’s new prime minister, the dashing Liberal Party leader and scion of Canadian political royalty Justin Trudeau, did support the proposed Keystone XL pipeline from Alberta to Nebraska and was “disappointed” when President Barack Obama nixed the plan, but he has set his sights on greener pastures and clean energy, not Alberta’s oil. It doesn’t hurt Mr. Trudeau politically to shift his sights away from the tar sands, either; his Liberal Party won only 25 percent of the vote in Alberta in last fall’s general election, far under the 40 percent it took nationwide.
Mr. Scott dismissed tar sands oil extraction as a nonsensical, increasingly economically unviable energy source for Canada. As for drilling in the oil-rich far north? It’s not even worth thinking about, he said. “We’re going to have to stop new extraction of oil and keep this stuff in the ground long before we have to worry about these extreme oil projects,” he said.
Exploration in the Arctic Ocean’s Beaufort Sea for oil has begun under the anticipation that an ice-free Arctic would make transport of oil easier, but “the safety issues are just off the chart,” Mr. Scott said. And even the exploration that has gone on has largely resulted in nothing more than cancelled projects so far as oil companies retreat from their costlier ventures in the face of falling oil prices.
“We’re already operating at a loss here in the oil sands at the current oil prices, and we already have our infrastructure in place, so when you consider the possibility of exploring and establishing and putting in the capital investments that would be required to access previously unaccessed oil deposits in the far north and bringing them to market, it seems like it would be some pretty substantial losses from the get-go,” Dr. Davidson, who teaches not far from the Athabaska sands, told the Observer.
Gordon Clark, the director of Oxford University’s Smith School of Enterprise and the Environment and a fellow at the university’s St. Edmund Hall, told the Observer that extracting oil from shale—the process known as hydraulic fracturing or, to its critics, as fracking—is not promising in Canada either.
“With increasing pressures on countries to limit their CO2 emissions, what’s the future of the oil industry and Alberta and the like? I think it’s a very unlikely that that type of resource will be extracted at anything like the rate that have been pursued in the last 10 or 15 years,” he said.
And that potential reduction in oil use also complicates things for governments who have come to rely on revenues from oil taxes, said Jonas Meckling, an expert climate and energy policy at the University of California Berkeley. He asked, “how can you secure new revenue streams tie that into more comprehensive carbon regulations framework?”
Either way, the ability of oil producers to adapt to new conditions in climate policy, the economy and the climate itself is likely highly limited, Dr. Davidson said. “They can’t respond as quickly as they would like to price shift. It takes a couple of years to set up new infrastructure and so forth, so what would potentially change is the willingness of oil majors to basically purchase leases,” she said.
The country’s strict environmental protections (when compared to other oil-producing nations) coupled with the relative inaccessibility of its oil—most of which is either bitumen-based tar sands oil or deep northern reserves trapped under ice and the ocean—will likely spell doom for its oil industry, and plastics—which utilize under two percent of all petroleum produced—will be unable to save the industry.
So what is on the horizon for Canadian oil? “Permanent flattening and eventual decline of oil demand globally,” according to Mr. Scott.
Water: not for sale
Oil isn’t Canada’s only precious liquid. Water, in addition to its role in the country’s fragile northern transportation infrastructure, could become increasingly valuable as precipitation patterns shift worldwide, leading to increasing drought in some regions.
Eleven of the 30 largest lakes in the world are at least partly in Canada. Of the five longest rivers in North America, four are at least partly in Canada, including the massive Mackenzie-Slave-Peace-Finlay and Yukon basins. In total, the country has one fifth of the world’s freshwater, according to the World Wildlife Fund. Less than 0.5 percent of the world’s people call Canada home.
While oil is shipped across boundaries constantly, tracing the world in a network of planes, trains, automobiles and ships, water mainly stays within river basins, if not national boundaries. But in Canada, some want to ship water overseas instead of oil.
In its 2008 report on Arctic marine policy, the Global Business Network hypothesized that Canadian Arctic water resources could be shipped worldwide as a warming climate led to severe droughts in many areas, particularly in the third world. That prediction is wide of the mark, however, as export of water resources is incredibly unpopular—and essentially illegal—in Canada.
“There’s a very strong sentiment here that we would never allow bulk-water exports, period,” said Mr. Scott.
Mr. Trudeau has come down hard against bulk water exports, even attacking one of his political rivals, the New Democratic Party’s leader Tom Mulcair, for allegedly supporting exports to the U.S. when he served as Quebec’s environment minister over ten years previously.
‘I think water in many jurisdictions will be at an increasing premium, that’s either because water will be more variable. There will be competition for water’
In 2011, Canada’s Parliament unanimously passed the Transboundary Waters Protection Act, a proposal put forward by the Ontario Conservative politician Larry Miller. The law essentially bans bulk removal of water to the U.S., a measure designed to prevent further attempts to export water, particularly to California.
“Canada has vast quantities of clean fresh water, but it’s absolutely not going to be exported in bulk,” Mr Scott told the Observer, citing “huge public opposition and legal barriers to that option.”
Still, Canada’s water is likely to be increasingly valuable, and even if drought does strike its agricultural production in the western prairies—as Dr. McConkey believes could be likely—the country is likely to remain highly water-secure when compared to other regions.
“I think water in many jurisdictions will be at an increasing premium, that’s either because water will be more variable,” Dr. Clark said. “There will be competition for water. Major companies that rely on water will be competing with communities that rely on water.”
Even if it were politically viable to export Canadian water resources, Dr. Davidson said a market might not exist for it. “On paper while it looks like while we are quite water-rich, a lot of that water is located away from our population centers and our economic centers, so it would take a lot to move that,” she said. “The water would be so costly that I can’t imagine who would pay for it.”
And there’s no guarantee that water resources will stay the same. Canada’s major freshwater lakes are not in danger of abruptly drying up like the Aral Sea on Kazakhstan and Uzbekistan’s border, but that doesn’t mean that the fates of the Great Bear Lake or Great Slave Lake are wholly known.
“Changing water and precipitation means you’re going to have to adjust for that and plan for that,” Mr. Xenos said. “Some parts of the prairies are water-stressed, so the changing precipitation pattern needs to be taken into the account.”
Invest in renewables and plants—and hope
So where does the smart investor go in the shifting environment—both economically and, of course, environmentally — of a country like Canada?
Renewable energy is still a high growth sector, according to Dr. Meckling. Putting money into alternative energy sources, new technology and socially conscious resources could be a major boon for investors and governments alike.
Returns in renewable resources in recent years have already outpaced fields like oil and coal, Mr. Scott said. “The future is almost entirely to be made in these technologies that will help us take carbon out of our economies,” he said.
“Demand for coal will completely bottom out and not recover, and that risk exists for oil, it exists for gas, and it’s a massive financial—we call it a carbon bubble. The valuation of these industries is based on the proven reserves they have in the grounds, and we know that it’s impossible for those proven reserves to be exploited,” Mr. Scott added.
Still, northern resource exploration isn’t unviable. “Really, the game hasn’t even started there,” Dr. Clark said.
But it’s that focus on resource extraction—rather than renewable tech and innovation—that could cost Canada in the long run, Mr. Scott said. While the U.S. has been investing heavily in renewable technology, energy storage technology and the alternative transportation sector, “Canada has really missed the boat on this, and we’re in a much more vulnerable position,” he said. “We’ve had tar sands fever here for a really long time, and that has ended over the last year and a half. This industry never had the potential to continue to drive our economy, and it had a lot of risk.”
Now that new coal plants and oil extraction projects are being cancelled, the economic costs of a focus on fossil fuels are becoming clearer and clearer, Mr. Scott said. Since Canada put its resources into the tar sands and deep northern extraction, the country has failed to target its resources into the now economically viable fields of solar and wind production, where U.S. development has been stronger.
Even if Canada can’t open up massive swaths of land for agriculture, the smart bet is that places already doing well could do a bit better, and mild expansion isn’t beyond the pale..
Still, food is a good place to put your money, Dr. Clark said. “I think food will be more valuable, not less valuable, and sites for producing food more valuable and not less valuable,” he said. Global vulnerability in the food supply could allow food-rich nations to build up an economically dominant position—and it wouldn’t be a bad idea to start putting money into seed banks, either.
A report on sustainable food sources prepared for the Morgan Stanley Institute for Sustainable Investing by Dr. Clark’s Smith School of Enterprise and the Environment said that the long term trend in both the U.S. and Canada toward agriculture representing an ever-shrinking proportion of the nations’ economies could begin to reverse as food becomes a more valuable, highly sought resource due to a rising global population and increasing climate insecurity of traditional food-producing regions.
“Where are the strongest effects? How well can a country adapt to those? And the net of that, I think, is best for more northern countries, especially benefit on the agricultural side,” Dr. Meckling said.
Buying a new vacation home on the Great Bear Lake or investing in offshore mining in the high Arctic may not be safe investments, but it isn’t all doom and gloom for Canada, either. According to Mr. Xenos, Canada is warming at about twice the global average—and in the Canadian Arctic, about four times the global average. Those figures present both opportunities and challenges, so while Canada likely won’t hit the optimistic targets set by its more optimistic cheerleaders, a future of prosperity isn’t out of the picture.
So if you want to know how Canada’s economy will be doing in 10 years, in 50, in a century, just follow the water.