Keystone XL and Canada’s Resource Trap

Canada’s brand of the resource curse is called the “staples trap”. The pattern was articulated by celebrated Canadian economic historian Harold Innis in his studies of Canadian staple resource economies.

Photo by Nick Fewings on Unsplash.

Harper has just made a trip down the US, after the Canadian government has launched a “please buy our oil” publicity campaign promoting the Keystone XL pipeline on the American airwaves. The federal Conservatives have been tirelessly lobbying American officials. Thus far, this campaign has been quite bizarre, resulting in the Natural Resources Minister hurling threats at governments and insults at climate scientists.  

Whether Obama will approve or reject Keystone is anyone’s guess. Reports hint that Vice President Joe Biden might be against Keystone. A lot of attention has been placed on what the Americans will do. But we should also take a look at possible Canadian reactions to the American decision, and what impact they could have on the environmental and economic pathways Canada will follow. We know that if Keystone is rejected, it will likely trigger an over-the-top reaction from the Conservative government that will try to blame the opposition and anyone else, rather than re-evaluating their own actions. 

On the Canadian side, a group of climate experts has recently highlighted the “risk of locking ourselves in to a high carbon pathway”. When Al Gore was up here, he commented on Canada’s bitumen-based “resource curse”, recognizing that the Canadian version of resource lock-in was more complex and multi-dimensional than other nations. Of chief concern to Gore was how the Canadian government’s industrial strategy has become dependent on the spewing of C02 pollution into the earth’s atmosphere.

Canada’s brand of the resource curse is called the “staples trap”. The pattern was articulated by celebrated Canadian economic historian Harold Innis in his studies of Canadian staple resource economies based on cod, fur, wheat, timber etc. 

This pattern stems from the particular situation where a regional economy exports raw materials to major industrial powers. Accessing and then exporting these commodities typically requires high fixed-cost transportation infrastructure (i.e. pipelines) as well as a series of organizational and political evolutions that further solidify the region’s resource dependency.

The problems with the structural rigidities that tie in with resource development come when things change. The expectation of a continued resource boom is disrupted by factors such as economic recessions, political changes in the resource purchasing areas (i.e. concerns about environment and climate change), or technological changes (i.e. shale oil and gas, renewable energy, energy efficiency).

A key action that can dig us further into the staples trap instead of out of it occurs when Canadian political and economic leaders react to periods of disruption and uncertainty by doubling-down on resource dependence.

This reaction contrasts to more innovative and adaptive economies that respond to periods of economic change by renewing and diversifying their economies through strategies focused on new sectors and technologies. For example, South Korea responded to the recession by spending about 80% of its economic stimulus funds on green initiatives. The US is launching a Clean Energy Manufacturing Initiative seeking to build upon regional advantages.

A prelude, which indicates that the Conservative government seems set to follow the staples trap pattern, is witnessed in the Conservative government’s reaction to Obama’s delay of the Keystone decision before the last US election. The government did not react to this unexpected event by launching a strategy of economic diversification. Rather, it sought to build more pipelines west, east, and north; it desperately sought to export bitumen to China and welcomed a Chinese buy-up of the resource; it cleared the way for these pipelines by eliminating environmental oversight; and it ramped up its campaign to silence scientists, and vilify environmental activists critical of its position.

Building Keystone XL will only exacerbate global carbon lock-in and Canada’s bitumen-driven staples trap. On these grounds it should be rejected, on both sides of the border. However, the multiple dimensions of Canada’s staples trap also mean that the political reaction that we might see in the event of a rejection will likely be calls for even more carbon-resource dependency. Such a reaction will unveil the Conservative’s lack of a coherent economic strategy and their continual denial of climate change as the fundamental problem of our time. 

In the staples trap, the Conservatives solution if Keystone is approved will be “more oil”. Their solution if it is rejected will also be more oil. Even their answer to climate change is more oil and pipelines!

So whether the US approves or rejects Keystone, Canadian social democrats should be prepared to explain to Canadians that an advanced economy prepares for periods of economic change by promoting industrial diversity. A 21st Century economic strategy aimed at promoting resilience and new avenues of prosperity will develop expertise in the green technologies that can help the world take action against climate change, rather than aggravating Canada’s economic and ecological vulnerability within the bitumen-based resource trap.

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