/Posthaste: ‘Green swan’ event — Why Canada will be hit harder than Saudi Arabia if the world switches to renewable energy sources

Posthaste: ‘Green swan’ event — Why Canada will be hit harder than Saudi Arabia if the world switches to renewable energy sources

Good Morning!

Climate change could lead to “green swan” events and trigger the next systemic financial crisis, according to a report by the Bank of International Settlements.

BIS — often called the central banks of central banks —, has borrowed the swan terminology from economist Nassim Nicholas Talib who famously coined the ‘black swan’ thesis focused on unpredictable events that are hard to measure and can have catastrophic economic consequences.

“Climate change poses unprecedented challenges to human societies, and our community of central banks and supervisors cannot consider itself immune to the risks ahead of us,” François Villeroy de Galhau, governor of the Banque de France, said in a foreword to the report. “The increase in the frequency and intensity of extreme weather events could trigger non-linear and irreversible financial losses.”

However, switching to low-carbon technologies and sources could have a major impact on most fossil fuel producers, especially Canada, warns BIS.

“A rather weakened multilateral order that is an important barrier to address the multiple trade-offs that a global low-carbon transition will generate,” BIS said in its report published this morning. “For instance, stranding fossil fuels may require the United States and Canada to immediately stop extracting unconventional oil, with potentially significant impacts on the output of their national economies.”

Quoting a 2018 report by environmental economists J.F. Mercure and others, BIS notes that Saudi Arabia could keep selling oil in a low-carbon scenario given its competitive prices, whereas Canadian and U.S. unconventional oils could be stranded much faster, with potential significant impacts on their GDPs.

“In practice, the most vulnerable countries (Canada and the United States in this case) would probably be tempted to subsidise their fossil fuel production to avoid such negative impacts,” the BIS stated.

Here’s what you need to know this morning:

  • Prime Minister Justin Trudeau to hold cabinet retreat in Winnipeg
  • The House of Commons special committee on Canada-China Relations will meet to elect a chair in Ottawa
  • International Monetary Fund press conference on World Economic Outlook at Davos, Switzerland
  • Premier Doug Ford, Deputy Premier and Minister of Health Christine Elliott, Minister of Finance Rod Phillips, Minister of Agriculture Ernie Hardeman, and Minister of Municipal Affairs Steve Clark to deliver remarks at the 2020 Rural Ontario Municipalities Association annual conference in Toronto
  • Andy Barr, head of Economics and Trade Policy, British High Commission in Ottawa will give an update on brexit and discuss the implications for Canada
  • Indigenous leaders hold a news conference in North Vancouver and deliver a letter to the office of Environment Minister Jonathan Wilkinson expressing their opposition to the Teck Frontier Mine in Alberta
  • Extradition hearing for Huawei executive Meng Wanzhou in Vancouver

With few options to rescue itself from mediocrity, Bombardier Inc. may look to sell its business and could fetch more than triple its current valuation, writes Victor Ferreira, quoting a CIBC analyst.

The plane and railmaker’s shares plunged as much as 37 per cent on a single day last week on news that it was facing trouble in both divisions and “pursuing options to strengthen its balance sheet and enhance shareholder value.”

Having already sold off a number of its assets to improve profitability, Bombardier may now look to explore its own sale, CIBC analyst Kevin Chiang said in a note published on Friday.


— Please send your news, comments and stories to [email protected]. — Yadullah Hussain @Yad_Fpenergy

With files from The Canadian Press, Thomson Reuters and Bloomberg


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