This premise derives from the idea that if governments and oil companies were serious about climate change then energy companies would be valued accordingly by not including reserves which would not be burned.
I'd like to weigh in on this debate as it's both important unto itself and also provides plenty of places of entry into other incredibly important and undeniably linked issues.
First of all I'll state my position, the entire argument is flawed and perhaps more importantly exists within a bubble inflated with ideology about the free market which doesn't exist, and the supposed 'duty' people feel oil companies will service regardless of cost. I've explained once before why even if we did have a "free market" that it is impossible that the free market could facilitate some sort of voluntary energy transition.
I would assert that both claims are true, it is not an either/or situation, but rather both are true at the same time. Even stranger though, I would also assert that both claims are false - also at the same time. We'll address these points directly before tying it all in to the bigger picture.
Governments are not serious about climate change
Governments are serious about climate change
How can this both be true and false at the same time? I guess it depends on your definition of "serious". For instance, from the 2012 budget I noted:
A few other paragraphs confirm for me that the government believes fully in climate change and that it is occurring now and is inevitable as earlier signs have indicated.The government is very "serious" about climate change, they also are very "serious" about economic development and growth. Being serious doesn't mean there are plans to address it (as in a solution), it can just as easily mean their plans are to address it are to adapt to it.
Canada’s Economic Action Plan laid the groundwork to establish a world-class research station in the North. As announced by the Prime Minister in August 2010, the station will be located in Cambridge Bay. Once established, the station will provide a year-round presence in the region and anchor the network of research infrastructure across Canada’s North, making a significant contribution towards the Government’s Northern Strategy. The Government will be announcing next steps in the establishment of the Canadian High Arctic Research Station in the coming months.Combine the link, the "research station", and the explicit mission we have for research directly from section 3.1:
The Government’s science and technology strategy, Mobilizing Science and Technology to Canada’s Advantage, emphasizes the importance of ensuring that federally supported research contributes to the commercialization of new products, processes and services that create high-value jobs and economic growth. Guided by this strategy, the Government provides significant resources to support research, development and technology.It's not unreasonable to assume the research station will be heavily involved in arctic mining research as that's one of few products, services, or processes that can be commercialized. This compliments another paragraph in regards to climate change (from the section on GMO research):
•Increasing the competitiveness of the forest industry. Spruce trees are the most widely used species in Canada’s forest plantations. Researchers at Université Laval are working to develop tools and protocols that make it possible to select high-performance spruce trees with better quality wood and high potential to adapt to climate change. Government and industry have partnered to transfer molecular breeding technology to commercial application across a broader range of tree species, to increase the competitiveness of the Canadian forest industry.I'm more convinced than ever now that the government's climate change strategy is adaptation and not prevention (indeed I believe they believe it is now impossible to prevent). Take note of the wording "better quality wood with high potential to adapt to climate change". It's current tense and matter-of-fact. I anticipate most policy will be geared towards adaptation with climate change simply becoming a reality.
Energy companies are over-valued
Energy companies are under-valued
The fundamental flaw here is that we are "valuing" energy based on supply and demand, which when it comes to energy over-simplifies a very complex resource.
In example: Let's say that you lived 500 years ago and you had a cart that weighed roughly the same as a car. You need to push that cart 10km to get your water, or food, or something from town. Now let's say you're a person living today, who has to drive a car 10km to get the modern equivalent of those items. Has the value of your trip changed?
You can accomplish things today it would take Kings to accomplish in the past. 500 years ago you'd need slaves, horses, etc, to accomplish 1/100th of what we've accomplished today and yet our value of energy is only of the day. So how can energy companies both be undervalued and overvalued at the same time?
For the "overvalued" we will look at Alberta's oilsands and the so-called "bitumen bubble". Up until the "bitumen bubble" the value of Albertan bitumen (which is very expensive to produce) was very high. This was caused by energy demand in the U.S. but ever since their so-called fracking revolution the value in our bitumen has dropped significantly because it is perhaps the most expensive energy to produce and has little added return. However with tight energy supplies that small return is incredibly invaluable. The moment however that a (what is claimed to be) cheaper supply comes online, the value evaporated. Was the value even there to begin with?
For the under-valued argument we will actually look at the so-called fracking revolution.
Crude Falls as U.S. Supplies Climb to 82-Year High
The price of crude is (for the moment) collapsing due to the sudden rush for fracking profit. However, do you believe this price represents the value of crude? Keep in mind that they are fracking a finite resource. What do you think that barrel of crude will be worth 50 years from now? What is the value of the current temporary over-supply to the generations of the future? We are using the rules of the past to buoy the present at the cost of the future. The 82year energy surplus record exists only because we've taken this energy from the future generations. This should be invaluable, priceless, but because of the way our modern economics works with growth as the be-all, end-all" of prosperity this over-supply has resulted in the depressed price of a resource generations in the future may well be rioting over.
The fracking boom's "monkey-see, monkey-do, follow the leader" gold rush is really to our own detriment, taking from the future at the costs of the present is absolute insanity.
Coming back to climate change, the insanity of our need for growth and reflex-action markets extends also to our "seriousness" about climate change. We are very serious about adapting because we will not be changing. We won't be changing for the same reason we won't leave the resources in the ground for future generations.
EVERYTHING we are doing to "sustain growth" right now is at the expense of the future and when you see your energy and poverty stricken children in the future just remember all the good times that consumer debt bought.
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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for eQube gaming systems.
Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.