Canada West Foundation Blog

By: Casey Vander Ploeg, Senior Policy Analyst

After burning up 3,000 kilometers on western Canada’s highways, it feels good to be back in the saddle at Canada West Foundation’s offices in Calgary. In Saskatoon, I took part in a special Municipal Infrastructure Forumhosted by the Federation of Canadian Municipalities (FCM) following their 75^th annual conference. In Edmonton, I made two presentations on infrastructure innovation and LetsTOC. The first was at the 125^th annual conference of the Canadian Society of Civil Engineers (CSCE). The second was to members of the Economics Society of Northern Alberta (ESNA).

Infrastructure Dominates the Conversation

The degree to which infrastructure dominates the conversation across the municipal policy community—and those that plug into it—is amazing. Everyone is abuzz about infrastructure. Much of the collective hum is being fuelled by developments in Ottawa around the Building Canada Fund, which is set to expire in 2014.

This program—worth almost $10 billion—was established in 2007 to help build critical infrastructure across the country. The 2009 federal “stimulus” program—Canada’s Economic Action Plan—topped up the original funding to deal with the recession, stimulate aggregate demand, and protect and create jobs.

The Honourable Denis Lebel, federal Minister of Transport, Infrastructure, and Communities, has been tasked with crafting a new national long-term infrastructure plan to succeed the Building Canada Fund. Those “in the know” affectionately dub the effort as the new “LTIP” (Long Term Infrastructure Plan).  It makes sense, then, that the municipal and infrastructure policy community is busying itself with how that plan should look, what it should involve, and what it should do.

I confess that I haven’t given a lot of thought to all the various components that might go into this “LTIP”.  But, there are at least two broad directions that I think ought to be seriously considered.

Facilitate Local Control

First, any new federal funding program should allow for a good measure of local control over which projects are funded and how they proceed. When it comes to provincial and federal support for municipal capital, most of it has traditionally been “conditional”.  Whether or not the money is available depends on whether a municipality meets the “conditions” of the grant program. Usually, this means that the municipality has to build the “right” project.

Bob Linner, a member of the CWF Board of Directors and former city manager of Regina, told me once about a funding program made available for local ice arenas. While other infrastructure was a much higher priority and desperately needed support, Regina went ahead and made the arena investments. Why?  The money was available. In this case, funding skewed local infrastructure investment away from priority areas.

Canada’s cities, towns, and villages know what they need and know what their citizens want, certainly more so than public servants holed up in Ottawa. Municipalities across Canada invest thousands upon thousands of hours assessing needs and developing capital plans and budgets. It makes little sense to simply ignore all of this.

Michael Atkinson is president of the Canadian Construction Association (CCA). At the infrastructure forum in Saskatoon, he argued that the owners and operators of the infrastructure—the “creators and caretakers” of it—should make the essential decisions on where investments are needed. Michael’s right.

Reward Innovation

I’m not entirely opposed to the concept of conditionality. Federal and provincial governments, too, have a stake in municipal infrastructure investments. But, I think we could use conditionality in different and much more creative ways. Rather than trying to incent particular projects or target certain types of infrastructure, why not make some funding conditional on innovation?  Why not use some of the funding to facilitate, stimulate, incent, reward, apply, and test out new infrastructure solutions?

Found a new way to finance or fund a project?  Here’s some money to help. Uncovered a better and more cost-effective design for a bridge or overpass?  Here’s a few dollars to move the thing ahead. Got some new technology for water treatment that lowers operating costs?  Well, here’s a grant.

Carving off a special pool of funding that will go only to projects that are creative, fresh, new, and innovative will help stimulate creative problem-solving, incent critical thinking, and get our collective infrastructure imaginations and juices flowing. I don’t know if Michael would agree with me on this point, but I do think there’s a lot of merit in the idea. (All of this is explored in more detail in a Canada West Foundation research study called New Tools for New Times, pages 109-111.)

A lot of government policies and programs are promoted and publicized with a “hook” or “angle.”  For the Building Canada Fund, one hook was “green” infrastructure and the “Green Municipal Fund” managed by FCM. Another hook was public transit. When it comes to conditionality, the choices are endless. Why not a focus on innovation?

The Answer

Four reasons. First, the infrastructure challenge is immense. Billions upon billions of dollars are required to upgrade and renew the nation’s core economic assets—from water mains to wastewater treatment plants, from roads and sidewalks to bridges and overpasses. Then, there are the nation’s social assets as well—hospitals, schools, recreation centres, libraries, museums, and sports facilities. I believe that the sheer size of the challenge is outside the scope of “business-as-usual”.

Second, as Communities of Tomorrow president John Lee is quick to point out, a big part of the solution has to be found in making infrastructure renewal, rehabilitation, and replacement more cost-effective, longer-lasting, and more efficient. Embracing innovation in financing, funding, and delivery of infrastructure, and finding and applying new technologies and approaches will allow the nation to lay down more infrastructure with the same dollars.

Third, innovation will open up opportunities to export our knowledge to countries around the world that are also facing the complex and costly task of overhauling and replacing their public infrastructure. At the Economic Development Association’s recent gathering in Kananaskis, Alberta, John was clear about the opportunities. “If something can be made to work in Saskatchewan, given our cold weather and harsh climate, well, it can work anywhere in the world.”  Bang on, John.

Finally, rewarding innovation builds on innovative technologies and successes that are already gathering steam. The list on our website is evidence enough of that.

An Important Federal Role

In April, I trekked out to Ottawa to meet with the Steering Committee at Infrastructure Canada that is guiding the development of the new “LTIP”. They were interested in my thoughts on alternative financing for infrastructure, particularly user pay approaches, but also things like infrastructure banks and tax incremental financing. At the end of my talk, I encouraged the committee to consider three things in any new LTIP:

1. Establish a set of special grants and capital transfers that will incent innovative approaches to financing, funding, and delivery of infrastructure.
2. Make available financial support for research and development of new approaches and technologies for infrastructure, such as Saskatoon’s “Green Streets” initiative or Regina’s “End-to-End” water service connection replacement.
3. Make sure the support is practical, and not theoretical. Help support pilot projects and demonstrations that will prove-out new technologies, using our municipalities as “living labs”.

While there’s a lot more involved in crafting a broad national infrastructure strategy, I do think local control and a focus on innovation should be two guiding principles. What do you think? Am I on-base or completely off-base?

*This article was also featured in the July 4, 2012 Edition of the CCA Weekly

One Response to “Wanted: An Innovative LTIP”

1. 1
   Amarjeet Sohi Says: 
   July 7th, 2012 at 12:11 am

   I agree with you that innovation and creativity should be encouraged and rewarded but the problem with conditional funding is the red tape and bureaucratic process that makes it more cumbersome and inefficient. I think the process that is used in delivering the gas tax funds to municipalities in the better process. It is relatively hurdle free and municipalities have greater flexibility in using the funds based on local priorities. You are absolutely correct that life-cycle costs should be considered when building new infrastructure.

By: Kevin Lynch and Kathy Sendall

If Wayne Gretzky were asked how to position Canada’s energy trade relations for the future, he would likely say, “Skate to where the puck is going to be, not where it’s been.” Following that advice leads us to Asia, which will account for the vast majority of growth in energy demand over the next quarter century, and the diversification of Canadian energy exports away from exclusive reliance on the U.S. market.

The United States is rightly concerned with having a reliable supplier of energy at the lowest cost possible. Canada, a large net energy exporter, wants a stable export market for our growing reserves, but also one that will pay as much as we can charge. Our complete dependence on U.S. markets won’t be enough, given projected declines in U.S. import demand for oil and gas, U.S. public resistance to importing Canadian oil and large price discounts for Canadian oil in the United States. Meanwhile, countries outside those in the Organization of Economic Co-operation and Development – generally considered our economic peers – are expected to generate 90% of global energy growth over the next 25 years, with China alone expected to consume 70% more energy than the United States by 2035. These countries will pay far more for Canadian oil than our American neighbours.

Through diversification, Canada can align its abundant energy resources with rapidly growing demand in Asia, provided we have the energy transport infrastructure to reach these markets and we recognize that other countries are anxious to supply Asian demands. There is a national interest in pursuing a broadbased Canada-Asia energy strategy. The full potential of the Canada-Asia energy relationship is unlikely to be realized on an ad hoc, project-byproject, basis.

In fall 2011, the Asia Pacific Foundation and the Canada West Foundation established a task force to explore how to build the Canada-Asia energy relationship. The task force members, with expertise in the energy industry, business, government policy, environmental protection and aboriginal affairs, identified four major elements to anchor such a Canada-Asia energy framework:

• Think big on diversification: Canada should diversify its energy relationship toward Asia, using energy trade as a beachhead to a broader economic relationship. Energy trade should include the full range of our resources and expertise, including renewable and clean technologies. We also need to diversify through innovation, helping Canadian producers to move up the value-added chain to build Canada’s status as an energy powerhouse. A network of world-class innovation institutes would further this goal.
• Strong leadership: Canada’s biggest risk may be complacency. An expanded Canada-Asia energy relationship can benefit Canadians broadly, but involves many jurisdictions, private-sector interests, civil society groups and First Nations communities whose interests and perspectives may differ. Leadership by federal and provincial governments, the private sector, First Nations governments and environmental groups must embody the inherent national interest and encompass a spirit of consultation, inclusion and co-operation.
• Advisory council: To fast track the deepening of our relationship with key Asian countries, a Canada Council on Asia, comprised of senior leaders in the public and private sectors from Canada and Asia, should be established. Reflecting the national interest in the expanding this relationship, Canada’s prime minister would be the ideal chair.
• Develop the necessary energy export infrastructure: Governments and industry need to canvas all infrastructure options, and commit to developing energy transport infrastructure in a way that balances the interests and concerns of affected stakeholders, and in a time frame that reflects the urgency of the competitive opportunity. This could include a public energy transportation corridor constituted by government, regulated as a kind of public utility, and operated by the private sector.

The alignment of energy trade interests between Canada and Asian countries is compelling. However, the opportunity is not open-ended; the competition to meet Asia’s energy demands is fierce and there are first-mover advantages. Canada’s starting point should be establishing an over-arching energy framework that assembles the diverse interests and perspectives across the country around a common purpose.

Published in the National Post on June 6, 2012

Kevin G. Lynch

The Honourable Kevin G. Lynch, P.C., O.C., PH.D, LL.D was appointed Vice Chair of BMO Financial Group in early 2010.

Dr. Lynch began his career in 1976 as an economist with the Bank of Canada. Throughout a storied career, Dr. Lynch served as Deputy Minister of Industry and Deputy Minister of Finance. He then served as Executive Director, the International Monetary Fund until early 2006, when he was appointed the 20^thClerk of the Privy Council, Secretary to the Cabinet and Head of the Public Service of Canada. In July 2009, after a long and distinguished career, Dr. Lynch retired from the Government of Canada.

Dr. Lynch earned his BA from Mount Allison University, his Masters in Economics from the University of Manchester and a doctorate in Economics from McMaster University. Dr. Lynch also holds honourary degrees from seven Canadian universities.

He is also Chair of the Board of Governors of the University of Waterloo, and serves on several other boards, including those of the Gairdner Foundation, the Perimeter Institute, U.K. Ditchley, the Learning Partnership, the Samara Foundation, the Shannon School of Business and the Accounting Standards Oversight Council.

The Honourable Kevin G. Lynch was made a Member of the Queen’s Privy Council for Canada in 2009, and an Officer of the Order of Canada in 2011. He has been awarded the Distinguished Alumni Award from McMaster University and the Queen’s Golden Jubilee Medal.

Kathleen Sendall

Kathleen Sendall is Executive in Residence and co-chair for the Asia Pacific Foundation-Canada West Foundation task force on the Asia-Canada energy relationship.

Ms. Sendall is a Director of CGG Veritas, a Paris-based international geophysical company that serves customers in the oil and gas industry. She chairs the Health Safety and Environment, Sustainability and Corporate Social Responsibility Committee and is a member of the Technology Committee. In addition, Ms. Sendall is Director and Vice Chair of Alberta Innovates – Energy and Environment Solutions, a provincial corporation that supports provincial research and innovation activities. She also chairs the Advisory Council to the Alberta Minister of Energy, and has served in various other advisory capacities to both federal and provincial governments in the areas of climate change, carbon capture and storage, environmental legislation and Arctic foreign policy.

Ms. Sendall was previously the Senior Vice-President of Petro-Canada’s North American Natural Gas Business Unit and was responsible for the company’s conventional oil and gas production and exploration in North America.

The following column is written by Gord Hume, President of Hume Communications Inc., former Councillor of the City of London, ON, and author of “Cultural Planning for Creative Communities” and “Taking Back Our Cities” for LetsTOC.

While driving along the Trans-Canada in eastern Manitoba and northern Ontario recently, I was struck by the metaphor that the highway offers to Canadians today. It was a great national infrastructure project that linked our country and brought pride to our citizens when it was officially opened by Prime Minister John Diefenbaker in 1962. It’s the world’s longest national highway—nearly 8,000 km long—and stretches from Victoria, BC to St John’s, NL.

Completing the Trans-Canada was a feat that demanded considerable skill and innovation. Engineers, designers, road builders, and the labourers were justifiably proud of this momentous national investment. It was an important boost to our national economy as well as our spirit. And, it was a vital part of our expanding infrastructure as a nation.

Today, much of the Trans-Canada is an asphalt ribbon of crumble, crack, and patch. It has deteriorated significantly. In many parts of the country it is two lanes instead of a modern four lane divided highway. My friends in Newfoundland and Labrador consider the ferry system to be part of their transportation network, and told me recently that this service too is deteriorating and unreliable.

As I drove on the Trans-Canada from Winnipeg to Kenora to give a key-note address to 200 mayors and municipal councillors and administrators, I thought a lot about Canadian infrastructure as I bounced over the cracks, patches, and potholes.

We are a nation that to a considerable extent has been built on infrastructure. From the thin grey railroad line that extended across the west and for the first time linked our nation from coast to coast, to the most modern of technology today, you can make a reasonable argument that Canada would never have been formed or survived without the successful commitment to and completion of major national infrastructure projects.

The driving of the Last Spike in 1885 opened a new era of national transportation, and led to the opening and development of the both the west and the north. Later, telegraph and telephone wires were strung to connect lonely out-ports and prairie towns, bringing rapid communication for business and families.

Nearly a hundred years ago, a forward thinking federal government established the first national parks service at Banff. Today, Canadians are proud of our extensive national parks and rivers, many of which are now designated as World Heritage sites.

The electrification projects of rural Canada took generations, but it had to be done to provide a modern lifestyle and generate economic benefits to farmers and the agricultural industry.

The St. Lawrence Seaway that opened in 1959 brought shipping into Central Canada, and opened new trade and supply routes for Canadian ore, wheat, and many other products.

The Trans-Canada highway that followed in 1962 opened new vistas for shipping, trucking, vacationing Canadians, and provided a new transportation corridor for municipalities.

What since? Good question.

The private sector has led the digital revolution and the satellite technology and telecommunications links that comprise vital national infrastructure for business—and for a generation of teens that have a smart phone embedded into their palms. We may not be creating the most physically fit generation, but certainly they will have the strongest thumbs in history.

I digress.

My point is, and the metaphor that struck me as I sped along the highway in eastern Manitoba with the sun setting behind me and the vast prairie sky above me, is that we have lost our way for great national projects.

The last major national infrastructure project that I recall was the 1967 Centennial projects that brought libraries, performing art centres, and other important civic amenities to communities across the country.

Recent and occasional—and sometimes panicky—federal, provincial, and municipal infrastructure campaigns today tend to be municipalities fighting desperately to get a share of whatever pot of money has suddenly sprung up, sometimes with a quaint phrase such as “shovel-ready” attached to it. No one is entirely certain what that means. While these programs are welcome, they are not nation-building in scope.

Federal governments in the last half century or so have steadily diminished their national view. They certainly don’t “get” municipalities. With the exception of Paul Martin introducing the Federal Gas Tax program that today brings Canadian towns and cities $2 billion a year of badly needed infrastructure money, federal governments in recent decades have not had an urban agenda.

Our cities are underfunded, the property tax system is broken, and it can’t be fixed. Mayor Nenshi of Calgary described it to me as “regressive, feudal and medieval.” Our municipal infrastructure deficit grows every day. All the while there is growing competition for attracting and retaining bright young minds and entrepreneurs in the global economy.

The promise and the premise of these major national projects involved cooperation from various orders of government, shared funding, a big vision and lots of political courage. There were substantial economic and social benefits. They helped to link our nation and our people. They were both politically and practically important.

The cracks and bumps on the highway today, the seemingly relentless drive to push passengers away from national rail travel, the deteriorating ferry service on our coasts, recent announcements in budgets of cuts to travel information services, the people who look after the locks on our rivers, and so many other little cuts and slices have further reduced our national vision.

How do we reclaim this pride as a nation? How do we convince politicians that as a nation we can’t keep doing more with less? At some point, we will end up doing less with less. Is this the best way we can do to build and rebuild our nation?

We need to fix the cracks in the highway.

Gord Hume

Gord Hume is President of Hume Communications Inc., a professional independent advisor to municipalities. He is also a national columnist for two important Canadian web sites on municipal affairs—the Let’sTOC initiative of the Canada West Foundation and Communities of Tomorrow, and the Municipal Information Network from Montreal.  Gord is also a regular contributor to Municipal World magazine.

Gord was also elected four times to the City Council of London, ON, and has had a distinguished career in Canadian business, broadcasting, and journalism. During his career, Gord has managed radio stations and also served as the publisher of a newspaper, during which time he also received two “Broadcaster of the Year” awards.

Gord Hume is recognized as one of Canada’s leading voices on municipal government, and is an articulate and thoughtful commentator on civic government and community issues. He is a popular public speaker, an advisor to municipal governments, and a respected and provocative author.

Gord’s first book, “Cultural Planning for Creative Communities,” was published in 2009 and can be found in more than 15 countries around the world. His second book, “The Local Food Revolution,” was published in 2010 and breaks important new ground by exploring how food has shaped municipalities and the health crisis now confronting our society.

Gord’s third book is his most controversial. “Taking Back Our Cities” is an unblinking look at the relationships between Canada’s various orders of government, why municipal government has become the most important, and how we must change the system to build prosperous Canadian cities that can compete in the global economy.

Gord is a popular and sought-after public speaker who is known for his passionate and inspiring presentations. He has addressed major audiences and local governments across Canada, as well as in Asia, Europe, and the United States. Gord was the keynote speaker at the UNESCO Congress on Creative Cities in South Korea in 2010.

Email Gord at gord@gordhume.com, or visit www.gordhume.ca.

One Response to “Let’s Fix the Cracks in Canada’s Highway”

By: Michael Holden

Over the past several weeks, Michael Holden has been highlighting some of the information and key findings of the Canada West Foundation’s recently-released publication, State of the West: Energy – 2012 Western Canadian Energy Trends. This week he rounds out the series with a discussion on the environmental impact associated with energy production and consumption in western Canada.

The production and consumption of energy of any type has an impact on the environment. Public attention at present is focused heavily on the greenhouse gas (GHG) emissions associated with fossil fuel combustion, as well as on the large-scale use of water and land in energy production.

However, the environmental impacts of energy use are not limited to these types of disturbances; some are more indirect. Wide-scale land use in oil sands production is a form of environmental impact, as is concerns about the “visual pollution” of wind turbines and their impact on local bird and bat populations. For its part, hydroelectricity may be emissions-free, but the creation of new dams can flood entire valleys and have a profound effect on local ecosystems. Nuclear power is also emissions-free but carries with it a waste disposal issue as well as concerns about potential nuclear accidents. Moreover, all forms of energy production require the construction of facilities and the manufacture and transportation of equipment and materials, none of which can happen without affecting the environment.

While detailed statistics are published on GHG emissions across Canada, many other direct and indirect environmental impacts are not well-understood. In some cases, environmental impacts are difficult to quantify while in others, the impacts are highly variable and good-quality data are not available. As a result, there is no reliable way to measure or analyze such environmental considerations as the impact of nuclear waste disposal; ecosystem damage; habitat loss; and a host of others. In State of the West: Energy, we look at greenhouse gas emissions associated with energy use, as well as the impact of energy production on water and land.

Greenhouse Gas Emissions

Previous blogs have established that Alberta and Saskatchewan are Canada’s largest producers of oil and gas; and are the largest users of coal and natural gas as an input into electricity generation. With that in mind, it should hardly come as a surprise that those provinces are the source of a significant share of Canada’s total GHG emissions. Alberta alone accounted for more than one third of Canada’s total emissions in 2009 while an additional 11% came from Saskatchewan. However, these high emissions levels are not just because of fossil fuel extraction; even when it comes to activities unrelated to energy production, Albertans and Saskatchewanians generate more GHGs than their counterparts in other provinces.

On a per capita basis, the gap between Alberta and Saskatchewan on the one hand, and the rest of Canada on the other, is especially pronounced. Saskatchewan is Canada’s largest per-capita emitter of GHGs, at 71.0 tonnes of CO2 equivalent per person in 2009. After Alberta (63.7 tonnes), the next largest per capita emitter was New Brunswick, which produced about one third the per capita emissions of Saskatchewan. For their part, BC and Manitoba are relatively small emitters of GHGs on a per capita basis, in part because both provinces are important producers of emissions-free hydroelectricity.

As energy and mining activity expands in the West, greenhouse gas emissions from the region are following suit. While total GHG emissions have been declining in most provinces since 1999, the decrease has been offset by growth in emissions from the three westernmost provinces.

In terms of energy intensity, however, Alberta has seen the second largest decrease in per capita emissions of any province since 1999. BC and Manitoba have also seen lower emissions intensity over that time. By contrast, Saskatchewan is one of the few parts of the country where per capita GHG emissions were higher in 2009 compared to a decade earlier.

One of the reasons behind Alberta’s falling emissions intensity is that there have been considerable improvements in lowering the carbon footprint of oil sands extraction over the years. The oil sands produced 38.9% fewer GHG emissions per unit of energy in 2008 compared to 1990. Emissions intensity is likely to continue to fall in the years ahead as well; a growing share of oil sands production is expected to come via in situ bitumen extraction, which is less emissions-intensive than oil sands mining.

Water Use

Water is a critical input into nearly every form of energy production. It is used in the production of the raw materials from which energy is derived—oil, gas, coal, uranium and other goods—as well as in the transformation of raw materials into a form useable by consumers. This transformation includes the use of water as a source of steam and a coolant in thermal and nuclear power plants; the process of refining fossil fuels; as well as the direct production of electricity through hydroelectric dams.

The oil and gas sector in particular is a major user of water. Although water consumption varies considerably from site to site, it is estimated that production of one cubic metre of synthetic crude oil (upgraded bitumen) by surface mining requires, on average, 2.5 cubic metres of water. Water demands for in situ production are lower—an estimated 0.5 cubic metres per cubic metre of synthetic crude oil.[1]

However, other forms of energy production can be even more water-intensive. Research suggests that although they may operate on a much smaller scale, biofuels and hydroelectricity (through evaporation from reservoirs) consume more water per unit of energy produced. [2]

Land Use

All forms of energy production are associated with some disturbance of land, whether in the construction of the required machinery and equipment or in the direct production of energy itself. Historically, large-scale hydro projects have had perhaps the greatest, and most irreversible, impact on land through the disturbance of waterways and forest/habitat loss associated with flooding ravines to create reservoirs.

However, oil sands production, especially open-pit mining, is easily the most significant and growing source of energy-related land disturbance in the present day. Approximately 662 km² of land in northeastern Alberta have been disturbed by oil sands mining operations, equivalent to about 97% of the size of the city of Edmonton.[3] An estimated 4800 km² of land in the area could be surface mined.[4]

This land disturbance also includes the creation and maintenance of tailings ponds—man-made containers where waste water from oil sands operations is stored to allow particulate (“tailings”) to settle and clean water to be recycled.  At present, tailings ponds cover an estimated 170 km² of land in Alberta and hold 5.5 billion m³ of tailings.

Conclusion

As global awareness of the environmental impacts of energy production grows, international attention has increasingly focused on ways to mitigate those effects, with particular emphasis on reducing both the intensity and the volume of GHG emissions. While there has been progress on this front in many parts of the world, that focus has cast a somewhat harsh spotlight on major global energy producers, including Canada and Alberta’s oil sands in particular.

Minimizing the environmental impacts of energy production and use needs to be a policy priority in western Canada. Not only do these impacts affect our quality of life, but the negative attention that oil sands production and other extraction activities attract could affect companies’ social license to operate in the region and their ability to sell their products in international markets. Resistance to pipeline construction is just the most recent example of the growing obstacles energy producers and distributors could face if their efforts fail to garner widespread public acceptance. Given that all Canadians are energy consumers and that energy production is an important driver of national economic activity, these issues need to be part of both a regional and a broader national discussion.

By: Casey Vander Ploeg, Senior Policy Analyst

Communities of Tomorrow President John Lee and myself have spoken across western Canada about the need for innovative infrastructure solutions and LetsTOC. Recent events include the annual general meeting of the Saskatchewan Urban Municipalities Association (SUMA) and Economic Development Alberta (EDA).

In our “tag-team” presentation, John has a fabulous set of power point slides entitled “What If?”. The slides present some pretty mind-blowing ideas. The one that always grabs the audience is the solar road. You can almost hear the collective “What the heck is that all about?”

Well, it’s the idea of building roads not with asphalt or concrete, but with high density and high impact glass that also houses solar cells. The intent is not just to build a better or longer-lasting road, but to synergize two infrastructure needs—transportation and electrical generation—in one piece of infrastructure. The concept is all about doing something more than laying down a ribbon of pavement to be tromped and trampled upon.

The embedded solar cells would perform four specific tasks—powering roadway lighting and signs, heating the surface to melt snow and ice, generating power for electric cars, and transmitting surplus juice to the electrical grid for consumption elsewhere.

Proponents say the potential environmental, financial, and economic benefits are staggering.

Environmental benefits come in the form of renewable energy, lower emissions, and elimination of road salts and other chemicals. Financially, the sale of electricity creates a revenue stream to help fund construction, and on the other side of the ledger are savings that accrue from eliminating snow plows and better safety—fewer weather-related accidents. Economically, the idea offers increased efficiency and productivity.

Scott Brusaw, an engineer from Idaho, received $100,000 in funding from the US federal government to research and develop the idea. He argues that this type of road could “pay for itself.” According to Brusaw, the US has some 25,000 square miles of roadways. Solar panels embedded in that surface area operating at only 15% efficiency would produce up to three times as much electricity that the US now generates on an annual basis.

“We can’t keep building asphalt roads, doing the same thing. It’s an antiquated system we’ve been doing too long,” says Brusaw (Solar Roadways, the Prototype).

Okay.  But it sounds so crazy. Sounds expensive. Sounds impossible.  And, in some ways, it’s all of that.

First, there are the technical challenges.  Can glass bear the intense pounding of day-to-day traffic? Brusaw answers in the affirmative, noting that glass can have much the same strength as steel, and says that researchers at the University of Dayton and Penn State are working hard in that very area.  He points to other issues that need to be grappled with.  Top on the list are the questions of traction and glare produced by glass.

Second, the costs are phenomenal. Laying down one mile of solar-powered road is currently estimated at $4.4 million (US). With a standard road-lane width of 12 feet, the cost of “solarizing” the 25,000 square miles of roadway in the US would come to $50 trillion.  Hardly economical or affordable by any measure.  Total US GDP is $15 trillion annually.  Even thinking about such a venture is, well, a little silly to say the least.

But, are these sufficient reasons to dismiss the idea?

No.

The reason is that productive and useful innovations don’t come out of the gate in one complete and massive application. Innovations emerge incrementally.  They roll out in “steps and stages” and “starts and stops.”

Yeah, rebuilding the Trans-Canada with solar panels is way out there. Too far out there. But, solarizing a small parking lot is not so way out there.  It’s here where the idea and the technology is tried, tested, and proved out.  It’s here where the idea is developed, manipulated, and improved.  From that humble beginning follows all the future steps.  Sure, it might take 100 years for the solar road to come into its own.  But, it has to start somewhere.

Brusaw agrees. “We’ll need to start off small—driveways, bike paths, patios, sidewalks, parking lots, playgrounds.  This is where we’ll learn our lessons and perfect our system. Once the lessons have been learned and the bugs have all been resolved, we’ll plan to move out onto public roads.”

Brusaw says he hopes to have a working prototype installed in some parking lots of a national chain very soon—something like the local McDonald’s.

Hmmm.  There’s 1,500 McDonald’s outlets in Canada.

2 Responses to “What If?”

1. 2
   Casey G. Vander Ploeg Says: 
   June 16th, 2012 at 2:50 am

   HI SUSAN:

   Well, the idea is most certainly outside the box. Can’t argue with that! The thing that I find so intriguing about the idea is not just the renewable energy component—as important as that is—but how it can lever so many other benefits. Sale of surplus power creates a revenue stream for financing and funding. The idea has clear environmental impacts. The idea makes more practical the use of electric cars. The idea results in better safety. With less weather-related mishaps, the concept could boost productivity of ground transportation networks. All of that is to the good. Assuming that technical issues can be resolved, it would appear that the inordinate cost remains the primary barrier for a wide application. The good news about these sorts of things is that what may be uneconomical today is not always uneconomical tomorrow. Thanks for reading! I think Sylvan Lake gets a pretty fair share of snow and ice in the winter, right?

   CASEY VDP.

2. 1
   Susan Samson Says: 
   June 14th, 2012 at 2:27 pm

   This is the kind of thinking we need, outside the box, to get us sustainable and solve the world’s problems of a population of 9 billion. The delivery of energy in an affordable, environmental manner is a big peice of the puzzle

By: Michael Holden

Last time, Michael Holden highlighted some of the information and key findings of the Canada West Foundation’s recently-released publication, State of the West: Energy – 2012 Western Canadian Energy Trends, focusing on the types and quantities of energy consumed in the region. This week, he examines energy use by sector.

There are five broad sectors across which energy consumption (also known as “final demand”) takes place: residential, industrial, transportation, agriculture and commercial/public administration. For most provinces, the transportation sector, which includes motor vehicles, aircraft, trains, ships and pipelines, is the largest energy user of the five, but in Alberta the industrial sector dominates—the direct result of energy-intensive oil sands production and other activities related to natural resources extraction.

As noted in last week’s blog, there is a significant difference in the intensity of energy consumption across western Canada. While final demand for energy in Manitoba and BC is comparable to levels seen elsewhere in the country, Alberta and Saskatchewan are by far the most energy-intensive provinces in Canada. Per capita energy use in those provinces is almost twice the national average.

It is tempting to assume that the energy demands of mining and oil and gas extraction are responsible for this difference. Indeed, industrial activity does explain much of the gap, but not all. On a per-capita basis, Alberta and Saskatchewan consume more energy than any other province in each of the five sectors identified above. The only exception is agriculture, where per-capita consumption in Manitoba is somewhat higher than in Alberta.

Transportation

The western provinces are relatively large users of energy in transportation. The region as a whole accounts for 31% of Canada’s total population but 39% of transportation energy use. No province in the region consumed more energy in transportation than Alberta, although on a per-capita basis, Saskatchewan was the largest consumer in the country.

There are important differences in transportation energy consumption patterns across the West. Driving is popular across the three prairie provinces; Saskatchewan, Alberta and Manitoba are the largest per capita users of energy in personal vehicles across Canada. BC and Alberta are relatively large energy users in air transportation, while BC is a relatively large consumer of energy in marine activities. For its part, Saskatchewan dwarfs all other provinces in energy consumption in pipeline transportation.

The intensity of energy consumption in transportation has fallen in most provinces over the past ten years, although Saskatchewan stands out as a significant exception to this general trend. Rising energy use in pipeline transportation has caused overall consumption levels to soar in that province.

Industrial

Industrial energy usage varies dramatically across Canada. Because of the energy-intensive nature of natural resources extraction, Alberta is by far the largest overall industrial energy consumer of any province, including Ontario and Quebec. With 11% of Canada’s total population, Alberta accounts for 34% of industrial energy use across the country. On a per-capita basis, industrial energy consumption in Alberta is more than three times the national average. Because of a similar reliance on resource extraction, Saskatchewan is also, proportionately speaking, a major industrial energy consumer. In BC and Manitoba, however, industrial energy consumption intensity is slightly below the national average.

In most provinces, per capita industrial energy use has been flat or has declined over the past 20 years, reflecting a combination of factors including increased energy efficiency and a relative decline in national manufacturing output over that period. In Alberta and Saskatchewan, however, per capita industrial energy use is soaring because of the continued expansion and development of the oil and gas industries in those provinces.

Residential

Led by Alberta, the three prairie provinces have the highest levels of per capita residential energy consumption in the country. By contrast, BC stands as one of Canada’s least intensive residential energy users. However, the intensity of energy use has been falling across the region. In all four provinces, residents used less energy in their homes in 2009 than they did 20 years earlier, echoing a similar trend at the national level.

A number of factors contribute to the higher-than-average levels of residential energy consumption on the prairies. For one, the five major cities in Alberta, Saskatchewan and Manitoba have the highest heating requirements (as measured by average heating degree days) of any large urban centre in Canada. At the same time, a higher proportion of residents in all three provinces live in single detached homes, which require more energy to heat. On top of that, Alberta and Saskatchewan also boast the lowest residential natural gas prices in Canada, reducing the incentive to conserve energy. Finally, building codes in Alberta have a lower energy efficiency standard than in many other provinces, meaning that Albertans on average consume more energy to achieve the same heating/lighting results compared to other Canadians.

Commercial/Public Administration

There is a considerable range in energy consumption in commercial and public administration activity across western Canada. As with all other energy end-use categories, residents of Alberta and Saskatchewan consume significantly more energy compared to residents of other provinces. Per capita consumption in Manitoba is in line with the national average and consumption in BC is the lowest of any province.

It is unclear what accounts for the significant differences in energy consumption; detailed information is not available on the type of commercial activity that takes place in each province. However, two possible contributing factors are climate (as noted above, the number of heating degree-days is higher on the prairies than elsewhere in Canada) and energy efficiency standards in building construction.

Unlike most other sectors, per capita energy use in commercial/public administration applications is rising across Canada, including in all four western provinces.

Agriculture

On the whole, agriculture is not a major driver of energy consumption in Canada, accounting for about 3% of final energy demand across the country in 2009. Not surprisingly, however, agricultural energy use is concentrated in the West—in particular, Saskatchewan and Alberta. The two provinces account for just under half of Canada’s total agricultural energy consumption, with Saskatchewan consuming slightly more than Alberta. On a per capita basis, Saskatchewan is by far the largest agricultural energy consumer in the country, with Manitoba a distant second.

Energy use in agriculture is declining across Canada. On a per capita basis, consumption has fallen by more than 25% across Canada over the past decade. BC and Alberta have seen some of the largest decreases in the country.

By: Casey Vander Ploeg, Senior Policy Analyst

In late February/early March, Casey Vander Ploeg introduced the idea of a Penny Tax in the “1¢ Solution to a Billion Dollar Problem” series on LetsTOC, igniting much interest around the community. Continuing the conversation, this blog is an expansion of that idea, delving to the heart of the rationale behind the Penny Tax.      

A huge and growing infrastructure funding gap does not answer the question of why the penny tax should emerge as a policy option.  Neither is that question answered by the fact that local governments in many countries around the world have access to similar types of taxes.  The answer comes in the form of an argument that weaves together a number of considerations or perspectives that, when combined, show the penny tax as a fresh, creative, and innovative response that can neatly align local preferences with a locally-determined tax source.  The penny tax would provide cities—but only if voters desire—with a supplement to the property tax.

Fiscal Perspective

The property tax attaches to only one aspect of the economy—real estate.  As such, the tax base is relatively narrow and tax revenues do not always keep pace with population and economic growth.  In contrast, a small local sales tax casts its net across the full range of activity in the economy, and unlike the property tax, growth in sales tax revenue does not have to be achieved by intentionally increasing the rate of tax.  Sales tax revenues always track alongside the economy.  A penny tax will allow cities to retain a small but important portion of the economic growth occurring within the local region, and then direct that to the infrastructure needed to accommodate the growth.  Because federal and provincial governments have also reduced their sales tax rates, there is room to dedicate a small local penny tax to infrastructure.

Demographic Perspective

Today’s cities—particularly the large metros—provide services and infrastructure not only for the local citizenry but also for a broader regional population and a host of visitors, all of whom pay their residential property taxes elsewhere.  This produces a “fiscal disequivalence” where the costs land disproportionately on local taxpayers.  Not only does a small local penny tax helps ensure that all those who benefit from a city—commuters, truckers, tourists, shoppers, business travelers—also help pay for the infrastructure and services they use.  A penny tax will also help remediate current patterns of urban growth, much of which occurs in “metro-adjacent” municipalities just outside the large “anchor” cities themselves.   For some cities, this “donut growth” or “urban fragmentation” is meeting up with a lack of diversity in municipal tax tools to severely press their finances. For proof of this, just talk to officials at the City of Edmonton—a city-region comprised of some two dozen distinct municipalities.

Governance Perspective

Just as cities have grown in size, importance, and complexity, so have the issues with which they must contend.  Many of these new responsibilities are directed toward “people” services and infrastructure as opposed to “property” services and infrastructure.  The property tax is ill-suited to address services and infrastructure to people because the tax base is narrow. A small local penny tax would help increase tax diversity at the local level and provide an opportunity to better match revenue-raising capacity with current municipal expenditure responsibilities.  In short, a penny tax would alleviate infrastructure’s need to better compete for scarce property tax dollars.

Economic Perspective

In many ways, the property tax makes less sense in the new economy.  Property is no longer a key to creating wealth or income in an information economy.  What is more, the property tax can also produce perverse subsidization effects that cause distortions and artificially increases the demand for infrastructure.  For example, properties “close-in” tend to carry higher assessed values and thus pay more tax.  Properties in the “far-flung” suburbs carry lower assessed values and pay less tax.  But, the cost of servicing “far-flung” properties is higher.  This amounts to a subsidy that breaks the link between those who pay and those who benefit.  Since the suburbs contain the great majority of voters, it also leads to artificially increased demands for services and infrastructure because they are not the ones who are paying.   In addition, many municipalities over-tax business properties relative to residential properties, which produce similar subsidization effects.  These realities and perversions of the property tax—which are very difficult to reform—mean that the tax often looks and behaves like a capital tax, which is one of the worst taxes possible.  Sales taxes, particularly value-added (VAT) sales taxes, are perhaps the most benign tax possible with the lowest marginal efficiency cost (MEC) to the economy.  In other words, they do the least economic damage.

Political Perspective

Only locally-raised taxes and locally-decided expenditures ensure the highest level of political accountability.  To fund infrastructure, cities currently rely on the property tax.  But because the tax is insufficient to meet all of their needs, federal and provincial governments have always come along with capital grants.  In the revenue exchange, political accountability and transparency takes a huge hit.  While the municipalities point their finger at the province, the province blames and shames the federal government.   To the greatest extent possible, locally-decided expenditures should be recovered through locally-generated tax revenues.  The penny tax can be part of this “re-jigging” of the municipal tax system.

Taxpayer Perspective

A properly designed and implemented local penny tax stacks up very well against the various principles that should guide tax policy and tax reform.  For taxpayers, a penny tax can be quite fair and equitable, particularly if the rate is kept low, if basic goods like groceries and pharmaceuticals are exempted, and various low income offsets are available like the current GST rebate.  A 1% tax on every $1 spent is simple and straightforward, and because the tax rate is capped and the revenues are earmarked for infrastructure, accountability and transparency is strengthened.  The accountability ante is also upped as the penny tax would be voter-approved and locally-levied.  Administratively, sales taxes already exist federally and in most provinces.  Because the tax machinery is already in place, the tax should be relatively easy and cost effective to extend.

The Heart of the Matter

At the heart of the rationale for a penny tax is the realization that Canada’s large urban centres are heavily and singularly dependent on the property tax.  In many ways, this lack of diversity in tax tools constitutes a disadvantage when it comes to infrastructure investment.  It is important to recognize the benefits that accrue from a diversity of tax tools and revenue levers.

No single tax is entirely fair or neutral with regards to investment patterns, economic distortions, or decisions about location and business inputs.  Nor is every tax equally suited to generating predictable, stable and growing streams of revenue.  No single tax source is equally suited to compensating for inflation, capturing growth in the local economy, or controlling for the problems with free-riding and fiscal disequivalence that inevitably result from more and more people filling the beltways around our cities.  Tax diversity allows the unique disadvantages of one tax to be offset by the advantages of other taxes.  The question certainly is all about a balanced tax regime for local governments.

A small local penny tax that combines the unique features we have identified is an excellent candidate to begin building better diversity in local taxation and meeting the infrastructure challenge in a way that is effective, efficient and equitable, as well as visible, accountable and transparent.  Given the historically high degree of voter apathy in local elections, the penny tax will also stimulate voter engagement by asking them to participate in the process in a meaningful way.

You may also be interested in parts I, II, III, and IV of the “1¢ Solution to a Billion Dollar Problem” series.

By: Michael Holden

Last time, Michael Holden highlighted some of the information and key findings of the Canada West Foundation’s recently-released publication, State of the West: Energy – 2012 Western Canadian Energy Trends, focusing on the intermediate use of raw energy as an input prior to consumption by final end-users. This week and next, he turns his attention to energy consumption in western Canada, looking first at the types and quantities of energy used in the region. Next week he will examine energy consumption by sector. 

As in the rest of the country, nearly all the energy consumed in western Canada is in one of three forms: electricity, natural gas and refined petroleum products (gasoline, diesel, etc.). These three account for 97% of all energy consumption in the region and a similar share nation-wide. As discussed last week, other major forms of energy like coal and natural gas liquids are used primarily as inputs (the vast majority of coal is used to produce electricity) or to make non-energy products.

Western Canadians are not only major producers of energy, they are also some of the largest consumers in the country.  In 2009, the four western provinces, which were home to some 30.8% of the Canadian population, accounted for 42.7% of all primary and secondary energy consumption in the country.

However, these figures mask significant differences in consumption intensity within the region. Western Canada’s high overall consumption levels are entirely the result of disproportionately heavy energy use in Alberta and Saskatchewan. On a per-capita basis, those two are by far the largest energy-consuming provinces in Canada, using almost twice as much energy per person as residents of other provinces. Meanwhile, energy consumption levels in BC and Manitoba are comparable to those outside the West.

High consumption levels in Alberta and Saskatchewan extends across energy types. Alberta is the single largest natural gas consumer in the country, accounting for 35.8% of Canadian final demand in 2009. Per capita consumption in the province is more than three times the national average and is growing rapidly. Saskatchewan is the next largest user on a per-capita basis and is the only province other than Alberta where natural gas is a significant and growing source of energy. Similarly, Saskatchewan is by far the largest per-capita consumer of refined petroleum products in Canada, while Alberta is ranked third (behind Newfoundland and Labrador). The two provinces also consume higher-than-average amounts of electricity per person, although in that category at least, they are closer to the national average.

Not only do Albertans and Saskatchewanians consume more energy than do residents of other provinces, but they are also bucking the national trend in terms of overall demand growth. Per capita energy consumption has fallen in most provinces since the late 1990s, but it has soared in the West’s two middle provinces. Newfoundland and Labrador—Canada’s third largest oil-producing province—is the only other province where per capita energy use has risen since 1999.

At the other end of the spectrum, BC has seen one of the largest decreases in consumption intensity since 1999. Per capita energy use in that province was 8.5% lower in 2009 than it was a decade earlier. The only province in which energy consumption has fallen more is Ontario, where a decline in industrial production in the late 2000s contributed to a large decrease in energy use in that sector.

In addition to the fact that energy consumption levels vary across the region, there are also considerable differences across Canada in the relative importance of each type of energy—differences which largely reflect regional resource endowments and transportation linkages. The four western provinces, along with Ontario are relatively large consumers of natural gas. Quebec is by far the largest consumer of electricity and the Atlantic Provinces are large users of refined petroleum products.

Within western Canada, energy consumption in BC and Manitoba is relatively evenly divided across the three main energy types. Refined petroleum products—used heavily in the transportation sector—made up about 43% of total energy consumption in BC in 2009 and 40% in Manitoba. Natural gas accounted for a little less than 30% of total consumption in both provinces, with electricity making up the remainder.

By contrast, energy consumption in Alberta and Saskatchewan is more heavily skewed towards natural gas, which made up 54% and 44% of final demand in 2009 in the two provinces, respectively. Electricity accounted for about 14% of energy use in each, and petroleum products, the remainder (30% of total energy use in Alberta and 40% in Saskatchewan).

It is tempting to attribute the high level of consumption in Alberta and Saskatchewan to the energy-intensive nature of fossil fuel extraction, which is heavily concentrated in those provinces; indeed, oil and gas extraction (as well as mining) does account for about one quarter of overall energy consumption in Alberta and Saskatchewan. However, this is only a partial explanation. When industrial energy use is removed from the equation, Albertans and Saskatchewanians still consume far more energy on a per capita basis than other Canadians. Each Albertan uses 50% more energy for non-industrial purposes compared to the national average and each resident of Saskatchewan consumes almost twice the national average. How western Canadians consume energy in their day-to-day lives and how transportation, home heating and other activities affect energy demand across western Canada will be discussed next week.

By: Michael Decker

I take 15 minute showers. I run the tap when I brush my teeth. I find a sink full of dirty dish water unsettling so I wash each individual dish and pot under the tap with the water running. I prefer a clean shiny car so I wash it at least once a week. To keep my lawn lush and green during the summer, I water it regularly. Sound excessive? It should. But like plenty of Canadians, I haven’t spent a great deal of time considering water conservation. When I turn on the tap I expect clean fresh water to come out of it. This was the way I approached water consumption until my home town in British Columbia decided to adopt water meters.

When I heard the news that my town was going to implement water meters I, like many others within the community, was baffled. Our town is located near a stable source of fresh water. Our drinking water is world-renowned (ranked third in the world one year). So why was our town council implementing water meters?

After researching Canada’s water supply, and issues surrounding water conservation, it became clearer that Canada’s water supply wasn’t as stable as I once thought. However, a problem arises for municipalities when they try to implement water conservation measures when they currently have a stable abundant supply. To address these concerns, municipalities should highlight the significant cost of treating water and the benefits of leaving water in the environment. This belief that Canada has an abundant supply of water has led to many Canadians becoming unwitting water gluttons.

Could it be true? Was I consuming water like a glutton? In addition, I was shocked to discover that my home town consumed on average 1,100 litres of water per capita per day compared to the national average of 426 litres.

The concept of water meters is very simple. Meters measure how much water you consume and then you are charged a fee based on your consumption. Once I found out that I would be charged for the amount of water that I consumed, I immediately found ways to conserve water. This was, of course, the objective of my local town council in implementing water meters. I give credit to my town council, and to cities and towns across Canada who have implemented water metering as a way of conserving water.

As a result of this initiative, I’ve reconsidered my personal water usage. I no longer take long showers, brush my teeth with the water running, wash my car every week, or water my lawn every day. I have gotten over my fear of dish water and I only run the dishwasher when it is completely full.

I am proud to say that I am no longer a water glutton. If I can be reformed, there’s a good chance that others might rethink their habits, too.

For more information on water conserving measures and for additional urban environmental policy tools, check out Canada West Foundation’s new report Tools of the Trade: Urban Environmental Improvement Options.

By: Michael Holden

Over the past few weeks, countless articles have been written about the question of whether or not Canada is suffering from Dutch Disease—an economic affliction by which large-scale development and export of natural resources drives up the value of the domestic currency and thus erodes the international competitiveness of the country’s manufacturing sector.

The issue first captured public attention during a brief but public spat between Alberta Premier Alison Redford and Ontario Premier Dalton McGuinty, but began to dominate headlines when NDP leader Thomas Mulcair took up the cause. The ensuing debate has been regionally divisive and largely unproductive. To the extent that it implies that growth in one part of Canada is coming at the expense of prosperity elsewhere, it is a recipe for disaster from a nation-building standpoint.

Is Canada a victim of Dutch Disease? While there is some debate on the matter, a number of recent studies suggest that there is at least some evidence to support the idea. But a review of the data shows that, even if oil sands activity is driving up the dollar and harming the export competitiveness of eastern manufacturers, it is only a small part of the problem.

To begin with, there should be no doubt that much of the Dutch Disease story rings true in Canada. Thanks to booming oil production and exports, the Canadian dollar has become, at least in part, a petro-currency. As Figure 1 shows, the Canada-US exchange rate began in the early 2000s to mirror movements in international oil prices. This is not to suggest that the price of oil is the only factor that influences the dollar, or that the same effect can be seen versus other currencies. Nevertheless, a clear relationship now exists between oil prices and the Canada-US exchange rate.

Similarly, there is also a clear relationship between the Canadian dollar and the relative health of the manufacturing sector in Ontario (Figure 2). Since the late 1970s, employment in manufacturing has tended to move in the opposite direction of the loonie. This trend is a natural result of Ontario’s heavy dependence on the US market. When the dollar goes up, manufactured goods from Ontario (and elsewhere in Canada) become more expensive in the US, so demand for those products falls and manufacturing activity north of the border slows as a result. When the dollar weakens, Canadian goods become relatively cheap, US demand for them increases and production activity increases. It is no coincidence that Ontario’s peak levels of employment in manufacturing were in the early 2000s, when the dollar was at historic lows.

But is that all there is to it? Are Ontario’s manufacturing woes the result of oil sands activity and is a lower dollar the solution to the problem?

To answer these questions, it is instructive to compare the performance of manufacturing in Canada with that of the US. Using 1990 as a starting point, Figure 3 shows that, at least from an employment perspective, Canada has outperformed the US over the past 20-plus years. Of course, the term “outperformed” is essentially damning with faint praise. In April 2012, Canadian employment in manufacturing was about 13% below 1990 levels while in the US it was nearly 33% lower.

Looking at such a long time horizon captures long-term trends, but it also glosses over the run-up in the Canadian dollar in recent years. From 2002 to 2011, the dollar rose from an average of 63.7 cents US to US$1.01. How did manufacturing employment in Canada and the US compare over that period? As it turns out, they were almost identical; employment levels in both countries dropped by 23%.

In other words, even though the Canadian dollar rose by 59% in nine years, the US manufacturing sector performed just as badly (in terms of employment levels) as the Canadian sector over that period.

Why? The reasons are complex and varied, but the two most obvious contributors are low-cost competition from China, Vietnam, Indonesia and other Asian markets; and the impact of the global financial and economic crisis. The former has been eroding the manufacturing base in North America, while the latter has undercut domestic demand for the goods produced here. The solutions to these challenges are not easy, but most agree that they are found in innovation, productivity gains and a rebound in consumer confidence.

Oil sands activity and high oil prices have undoubtedly contributed to a higher Canadian dollar. And this hasn’t made life any easier for Ontario manufacturers. But the dollar is clearly not the main problem and treating national economic activity as a zero-sum game, where growth in one region must come at the expense of growth in another, is not the solution.