Let’s talk, very quickly, about Pierre Elliott Trudeau, Justin Trudeau, and the resurrection the Liberal Party in Canada underwent during the country’s most recent election, 20 months ago.
Before Justin Trudeau became Prime Minister at the end of 2015, the Liberals controlled only 34 of the 308 seats in Parliament. They had become the third party for the first time in their history. They had not won a majority of seats in Quebec for nine consecutive elections–not since Pierre Elliott Trudeau won big in Quebec in 1980.
Today, on the other hand, the Liberals have the largest majority in parliament that any party has won since the election of 1984 (the same year that Pierre left office), and they control a majority of Quebec’s seats to boot.
If you look at the electoral map from Justin Trudeau’s first victory in 2015, and the map of Pierre Elliott Trudeau’s final victory in 1980, you will see that the similarities between the two elections may or may not stand out more than their differences.
In both elections there was a clear East-West divide. The Liberals fared far better to the east of the Ontario-Manitoba border than they did to its west, regardless of which Trudeau was on the ticket. Both won flat-out majorities in Ontario, Quebec, New Brunswick, and Newfoundland, and both won a significant majority of seats throughout the country as a whole.
Justin Trudeau, however, fared far better than his father in the Maritime provinces (he swept all 32 ridings, whereas his father lost in Nova Scotia), worse in Quebec (he won 51 percent of Quebec’s seats; Pierre won 99 percent), and better in Ontario (66% vs 55%), Manitoba (50% vs 14%), Saskatchewan (8% vs 0), Alberta (12% vs 0), and British Columbia (40% vs 0). Further north, Justin swept the Territories’ three ridings; his father lost all three.
Two other important differences between 2015 and 1980 were the price of fossil fuels and the strength of the North American economy. In 1980 the price of oil was over 100$ per barrel when adjusted for inflation; during Justin Trudeau’s victory in 2015 oil was only at 40$ a barrel, having dropped by 60$ in the fifteen months leading up to election day. And while the economy of the United States was in relatively decent health in 2015, in 1980 it was still in the midst of “stagflation“, with negative GDP growth and an unemployment rate around 6-7%.
I’ll close here by showing a graph I made which I think is interesting, but which probably (definitely) should be taken with a very large grain of salt. The graph shows a relationship between four variables: the price of crude oil (in West Texas Intermediate prices, adjusted for inflation); the employment rate in the United States (which we are using as a proxy for American economic health in general); the success of Conservative parties* and the NDP in Canadian federal elections; and the success of the Liberals and Bloc Quebecois in elections. The basic idea is that because western Canada benefits from expensive oil whereas eastern Canada depends more on a strong American economy, and because Conservatives and the NDP are generally more associated with western Canada whereas the Liberals and Bloc are associated with the eastern half of Canada, there should, maybe, be some links between these variables:
This graph covers the same time period, from Pierre Trudeau’s final election in 1980 to Justin Trudeau’s first election in 2015. It shows that in the elections immediately following Pierre’s departure and immediately preceding Justin’s arrival – namely, in the elections of 1984 and 2011 – the Conservatives and/or NDP did extremely well relative to the Liberals and/or Bloc Quebecois. In 2011 Harper won his only majority government and the NDP become the official opposition for the first time ever, while in 1984 Pierre Trudeau resigned prior to the election and Mulroney’s Progressive Conservatives won by the largest margin in Canadian history.
Every year shown on the graph above corresponds with a Canadian federal election, with the exception of 1998. 1998, however, was the year in which oil prices fell to their lowest point in nearly a century, even as the American economy was not in a recession, as it usually is when oil prices fall. With US employment high and oil prices low, the blue line on the graph above is far higher than in any other year. In the subsequent election, in 2000, Jean Chretien would go on to win a large majority for the Liberals, and the BQ a majority of ridings in Quebec. 2000 was the last time that any party won a majority government until 2011, and the last time the Liberals won a majority until 2015.
If extremely high taxes on greenhouse gas emissions were to be enacted worldwide, which part of Ontario would be poised to lead in terms of population growth and economic development as a result?
My guess would be St Catharines-Niagara, which at the moment is Canada’s 12th most populous census metropolitan area (just ahead of Halifax-Dartmouth), home to approximately 400,000 people.
A low-emissions city should at least a few of the following five characteristics, all of which define Niagara. One, it should be easily accessible by barge, as water remains far and away the most fuel-efficient mode of transportation. Two, it should not have much suburban sprawl. Three, it should be located close to other major cities in order to create urban economies of scale. Four, it should have a mild climate: not too cold or snowy in the winter, not too hot in the summer. And five, it should have an abundant source of clean power — and ideally also the ability to store up its energy in order to assist clean but intermittent power sources like solar, wind, and run-of-river hydro.
1. Water Transport
St Catharines-Niagara is one of only two urban areas in Canada or the US to be situated on more than one Great Lake. (The other is Sault St Marie). It links Lake Ontario to Lake Erie via the Welland Canal, a canal 43 km long and, in most places, 100-150 metres wide. The canal has seven locks on its northern end and one lock on its southern end; it takes ships around 10 hours to cross in full. However it has a lock-free middle stretch that is close to 25 km long, next to the city of Welland (pop. 50,000). It runs perpendicular to the Erie Canal, the longest shipping canal in the United States, which links Niagara Falls and Buffalo to New York City and Lake Champlain via the navigable Hudson River, passing by Rochester, Syracuse, and Albany along the way.
Canals, when they are not frozen in the winter, are in many ways the ideal form of water transportation. They lack the difficulties of rivers (bends, rapids, shallows, etc.) and seas (storms, tides, waves, etc.), and are not too wide to make building bridges or tunnels across them too expensive. According to the New York Times, “one gallon of diesel pulls one ton of cargo 59 miles by truck, 202 miles by train and 514 miles by [Erie] canal barge… A single barge can carry 3,000 tons, enough to replace 100 trucks”.
As recently as the 1890s, prior to the modern age of highways, cars, and trucks, the Erie Canal allowed Buffalo to become the eighth most populous in the US and fourth most populous inland city in the US. And while Niagara never shared in Buffalo’s prominence (in part as it was too close to the US border for comfort; it was captured in the War of 1812, and became the refuge for William Lyon Mackenzie and his supporters during the Upper Canada Rebellion in 1837-38), the adjacent city of Hamilton did. Hamilton was Canada’s fourth most populous city during the 1890s, and was about half as populous as Toronto in 1870. Today, in comparison, Hamilton is only around 13 percent as populous as Toronto.
As land transport became dominant, however, Hamilton found itself blocked in by the Hamilton Harbour (which until then had been the main source of its success) as well as by the Niagara Escarpment. Toronto, in contrast, has been able to expand barrier-free, now reaching to Lake Simcoe in the north, Oshawa and Clarington in the east, and Hamilton’s suburbs in the west.
Admittedly, it is still quite expensive to build bridges across harbours or wide canals; they must be either high enough to let large ships pass below, or else be lift-bridges. The Welland Canal overall has two tunnels and ten bridges, all but one of which are lift-bridges. Given that the population of the region is split by the canal (St Catharines and Hamilton are to its west, Niagara Falls and Buffalo are to its east), these lift-bridges and tunnel crossings could lead to traffic bottlenecks if its population or economic activity were to experience growth.
This canal-crossing problem can be managed, however, by switching over from cars to public transit. Luckily for St Catharines-Niagara, such a switch which would be necessary anyway if greenhouse gas emissions were to be highly taxed.
Public transit, including new transit services like Car2Go, Uber, and UberPool, can allow canals to be crossed more easily via bridge or tunnel, by reducing traffic bottlenecks and by letting its passengers relax rather than drive when there are traffic bottlenecks. In addition, public transit can allow for easier canal crossings via boat, pedestrian bridge, cable car, or even ice-sled, by making transit available upon crossing. For the same reason, crossing canals will also become easier as parking apps like Rover and PocketParker become common (and if cars that come equipped with parallel parking sensors or can parallel park themselves become common), as people will be able to park a car easily on one side of the canal and then take public transit after crossing.
In the St Catharines-Niagara area, public transit will be similarly useful in helping to cross the Niagara River (which is one of the widest and, in places, the most treacherous rivers in southern Ontario), Hamilton Harbour (which has two bridges crossing it at present, and no tunnels), and perhaps even the 45 km Lake Ontario shortcut that separates St Catharines (and Buffalo) from Toronto.
2. Suburban Sprawl
St Catharines-Niagara, as well as the nearby urban areas of Hamilton and Kitchener-Waterloo, are among the cities with a relatively high population density in Canada. Kitchener-Waterloo and Hamilton have the highest population densities among urban areas in Canada apart from Toronto, Montreal, and Vancouver, according to the 2011 census, while St Catharines-Niagara has the seventh highest population density (though this does not take into account the 50,000 people living in Niagara Falls, NY).
Niagara may be particularly well-placed to benefit if suburban sprawl in general is reversed as a result of eco-taxes. This is because many of the big cities around Niagara have had their suburbs sprawl away from Niagara during their recent generations of suburbanization. As a result, a reversal of this sprawl would bring people back closer to Niagara.
Toronto has sprawled north and to a lesser extent east, away from Lake Ontario and Niagara. Northern Toronto suburbs like King city, Caledon, and Whitchurch-Stoufville tend have population densities that are far lower than in suburbs closer to the lake, like Mississauga, Oakville, and Oshawa — nearly 30 times lower in the case of Caledon compared to Mississauga. Indeed some of Toronto’s lakeside suburbs, particularly to its west (towards Hamilton and Niagara), are themselves among the cities with the highest population densities in the country. Toronto’s easternmost suburbs, on the other hand, like Clarington and Scugog, have relatively low densities too.
Buffalo’s suburbs sprawl away from the border with Niagara, meanwhile, and Detroit’s sprawl away from Windsor (which is 315 km from St Catharines). Cleveland’s suburbs away from Lake Erie, mainly to the south and west. If, then, suburban sprawl gives way to urban re-densification, it could lead to population growth along the coasts of both Lake Ontario and Lake Erie, which Niagara shares, as well as along the Buffalo and Detroit borders with Canada, which Niagara either shares or is at least not too far away from.
Another energy advantage of de-suburbanization is that it frees up land to be re-converted into farmland. This is important, as importing food is highly energy-intensive; food is much more bulky than most other goods, and also often requires refrigeration or freezing while it is being transported. This means that areas that are not suitable to agriculture — areas that include most of Ontario, as the Canadian Shield generally is not farmable in the economic sense — will not benefit as much from de-surbanization in an eco-tax world as areas that are best suited to be used for agriculture. For Ontario, these areas are Southwestern Ontario and adjacent lands of the United States.
3. Proximity to Major Cities
St Catharines is around 50km from Toronto by way of Lake Ontario and about 100 km from Toronto via land. To put that into perspective, Oshawa, Burlington, and Newmarket, all three of which are in the Greater Toronto Area, are around 45 km from downtown Toronto, and Barrie is around 85 km from downtown Toronto. St Catharines is also around 40 km from downtown Buffalo (and Niagara Falls is less than 30 km from downtown Buffalo), 65 km from downtown Hamilton, 120 km from Kitchener-Waterloo and from Rochester, 270 km from Cleveland, 300 km from Pittsburgh, and 320 km from Detroit, and 500 km from New York City and Washington, D.C.
St Catharine’s proximity to the New York City-to-Washington “Megalopolis” is unique and, in an eco-tax world, could be economically significant. If you extend the Megalopolis all the way north to Boston, however, then St Catharines’ proximity is less unique, as Ottawa and Kingston are both closer to Boston than St Catharines is. That said, the population density of the area between New York and Boston is quite a bit less than between New York City and Washington, so it is not clear Boston really should be counted as part of the Megalopolis core. St Catharines is also around 40 km closer to New York City and 250 km closer to Washington than Ottawa is, whereas Ottawa is only around 160 km closer to Boston than St Catharines is. Only Kingston then, among notable Ontario cities, can be said to be closer in proximity to the Megalopolis than St Catharines is.
Niagara, because of its relatively southern location and the temperate effect of the Great Lakes that surround it, has a mild climate compared to most other cities in Ontario. It tends to be around a degree warmer than Toronto in the winter and a degree cooler than Toronto in the summer, and it is much milder than the weather in more northern cities like Ottawa or Thunder Bay. It is also located outside any of the Great Lakes Snowbelts, unlike, for example, Sudbury or Barrie.
Niagara’s position next to the US border may also be significant, as eco-taxes could lead Americans to come north to where the climate is more mild, at least during the summer. The average annual daily temperature highs in Buffalo is 14 degrees celsius, compared, for example, to 29 degrees for Miami or 31 degrees for Phoenix. Cool climate zones may also end up using more eco-friendly energy for heating than hot climates do for cooling, because the weather gets coldest at night when there are typically surpluses of electricity available (including low-carbon sources, like wind, base-load nuclear, and run-of-river hydro), whereas it is hottest during the day when no such energy surpluses typically exist. Admittedly only seven percent or so of American households use electric heaters, but a high eco-tax could cause them to be adopted more widely. Plus, it is possible to stay warm using clothing and blankets rather cranking the heat.
The arid climate and diffuse population settlement in the US Southwest in particular leads to a high energy footprint. Any extended drought in the Southwest, for example, would necessitate water desalination, water treatment, or increased food imports, all three of which are extremely energy-intensive. The most extreme of these, Las Vegas, which is a gambling and tourism competitor of Niagara to a certain extent, relies on long-distance air travel, long-distance food imports, air conditioning during the day, and heating at night (the desert can get cold at night, after all).
Owning, renting, or Airbnb-ing a home or cottage in upstate New York or upstate Pennsylvania, in contrast, will help keep air conditioning costs down in summer. Moreover, because both are located in the Great Lake Snowbelts and Appalachia, these also be used recreationally during the winter. This may be an advantage too, given that eco-taxes will make it far more expensive to fly to the Rockies to ski, and given that aging Baby Boomers are going to be switching from downhill skiing to cross-country skiing. Similarly, eco-taxes could make Canadian vacationers who head south to escape the winter forgo flying to places like Arizona, California, and Mexico, and instead travel by train or bus to the US Southeast (and perhaps from there on by cruise or plane to islands in Cuba or the Bahamas). Such train and bus journeys will usually pass through Niagara.
5. Energy Production
In a world in which greenhouse gas emissions are highly taxed, it would no longer be viable for Ontario to import so many manufactured goods from Asia, since Asia is so far away and relies on burning coal to power its industrial activity. Ontario would instead have to manufacture more products locally, making up for its lack of low-wage labour by using machines, having foreign engineers and other skilled labour e-commute from afar, etc. Such industrialization, particularly as it will depend on machines to assist or replace human workers, will need a lot of low-carbon energy. Niagara Falls hydro (not counting the American side of the border) accounts for around 5-6 percent of Ontario’s power generation capacity, but more than 7 percent of non-fossil fuel generation capacity and more than 20 percent if you also ignore nuclear power. Niagara accounts for about a quarter of all Ontario hydropower, and its dams also happen to be located far further south than the majority of other dams in the province or country, meaning that the energy and capital used to maintain Niagara’s dams (and to maintain the electricity grid infrastructure that is connected to them) tends to be less than it is for other hydroelectric facilities. Most of Ontario’s other dams are either located near to or north of Ottawa – far north, in many cases – while most of the hydropower in the country comes from central or northern Quebec.
In addition, the hydropower facility on the US side of Niagara Falls produces 25 percent more power than those on the Canadian side of the Falls; it produces more power than all but three other dams in the United States and accounts for nearly 60 percent of New York state’s hydropower (and New York ranks third in hydropower among US states). It also has a pumped storage capability that by itself is larger than the hydropower storage available in all of Ontario outside of Niagara, which is significant since hydro-storage remains the leading method of assisting intermittent energy sources like wind and solar. (Batteries are still not generally up to the job of storing energy in a cost-effective or eco-friendly manner, in spite of all the hoopla surrounding Tesla).
Niagara is, similarly, home to nearly all of Ontario’s pumped storage hydro capacity. Moreover, it is located relatively close to the pumped storage facilities across the United States (apart from the pumped storage in California, but those have been under-utilized in recent years as a result of drought), not just those on the US side of Niagara Falls.
Niagara is also, along with the rest of Southwestern Ontario and the adjacent Bruce Peninsula, home to most of the province’s wind power production and solar power potential.
While 60 percent or so of Ontario’s electricity comes from nuclear, people do not want to live in urban areas that contain nuclear facilities. In addition, more than half of Ontario’s nuclear power capacity is located directly on the coast of Lake Ontario, 30-60 km east of downtown Toronto, which means that, when you combine their output with that of Niagara’s dams (not even counting the US Niagara dams), the coastlands of western Lake Ontario account for more than 40 percent of Ontario’s non-fossil fuel power capacity and nearly 40 percent of Ontario’s overall power capacity.
If, finally, you look at natural gas storage – both underground storage and LNG storage – Niagara is also well-placed. Natural gas could be useful in assisting intermittent sources like solar and wind, because like hydro, but unlike coal or nuclear, a gas-fired power plant can ramp up and down energy rapidly in response to the wind suddenly slowing or the sun suddenly being blocked by clouds. Most US underground storage is surrounding Niagara, in a broad sense.
In Ontario, which in contrast to the US has very little gas storage capability, much of the gas storage is around Sarnia, with potential further development in Goderich, both of which are not too far away from Niagara. Most LNG storage and peakshaving capacity, meanwhile — which, while smaller in scale than underground storage, is better for delivering gas quickly in order to assist wind or solar intermittency — is located mostly on the Northeast coast, much of it within New York state.
The gas pipelines that bring US gas to Ontario also mainly run through or near to Niagara. Ontario used to get its gas from Western Canada, but with the shale boom in nearby US states, particularly in Pennsylvania which has led the shale gas boom, the province has begun to use US gas instead. The shale boom has revolutionized the gas industry, and should it continue it may be likely to put the border areas of Ontario in a strong position relative to non-border areas, in terms of their energy economics.
The Ontario government recently announced a plan to subsidize electric cars by up to $14,000 per vehicle and pay for them to be charged at night, among other things. Night-time charging is a key factor in electric vehicle ownership, as in most cases it takes several hours to charge an electric car.
This begs the question: what will the price of overnight electricity in Ontario be in the years ahead?
Today overnight electricity is cheap because most nuclear power plants in Ontario and coal plants in nearby states like Michigan cannot easily be turned off at night, in contrast to gas plants or hydropower facilities which can more easily ramp up and down their output to match real-time electricity demand. An estimated 60 percent of Ontario’s power is generated from nuclear, compared to around 15 percent in Canada as a whole and 20 percent in the US. Around 50 percent of the power in Michigan, Pennsylvania, Ohio, Indiana, and Illinois (states that are close to Ontario) comes from coal, compared to 33 percent in the US as a whole and 10-15 percent in Canada. Ontario and the Midwest are also among the leaders in wind turbines, which do not turn off at night either, and Ontario, Illinois, and Pennsylvania are by far the top three North American producers of nuclear power.
Going forward, however, there are compelling reasons to think that this overnight surplus of electricity will no longer exist.
The second reason overnight electricity prices are likely to rise is robots. Machines that combine mobility with computation are highly energy-intensive, but, unlike humans, they do not need to sleep at night or relax in the evening. Take, for example, Amazon’s robotic warehouses: they have caused the company’s night-time electricity use to rise substantially since they were introduced, given that before they came along Amazon’s warehouses were either inactive overnight or else employed human workers who ran on food (and overtime pay) instead of electricity. If and when this robotic economy finally goes mainstream, then, such demand for overnight power could be replicated at large. We should expect late-night electricity use to skyrocket: robots are no longer science-fiction.
The final reason is environmentalism. In order to keep greenhouse gas emissions down (which is, after all, the main point of subsidizing EVs), many voters are pushing for more solar panels and wind turbines to be built. Solar and wind are complementary to one another, not only because the sun often shines brightly at different times as the wind blows strongly, but also because wind farms and solar farms usually inspire non-overlapping types of NIMBY-driven political backlash. Ontario already gets 5-6 percent of its electricity from wind compared to less than one percent from solar, so it might be that going forward its solar power growth will outstrip its wind power growth. Of course, solar power will not help to bring down overnight electricity prices. Even the wind, however, tends to blow less strongly overnight than during the day – a fact that runs contrary to conventional wisdom, since the wind can usually be heard more clearly at night.
As solar, wind, and gas replace dirtier coal in the regional electricity network, there will also be environmentalist-led pressure to stop heating homes with fossil fuels and instead adopt electric-powered heaters like those used in Quebec and the Pacific Northwest. This too would be likely to cause overnight electricity prices to rise. Quebec, for example, uses electric-powered heating and so has its electricity demand peak during frigid winter nights, whereas Ontario primarily uses gas-powered heating and therefore has its electricity demand peak during hot summer days. Should Ontario or nearby US states switch over to electric heating in order to reduce carbon and methane emissions from natural gas, the region’s overnight electricity usage will rise.
The need to help support solar and wind power could lead as well to the building of more pumped-hydro facilities, which pump water uphill so that it can flow back downstream through a turbine when other power sources are in low supply, such as when solar panels are blocked by clouds or the wind is not blowing. There has been talk lately of building more pumped hydro in Ontario, in places like Niagara and Marmora, as pumped hydro is the most efficient form of electricity storage. Given that Ontario’s daytime power is not cheap (at least, not by Canadian or American standards), this water would be pumped at night. It is an energy-intensive process, however, requiring 20 percent or so more energy to pump uphill than is generated from releasing it back downhill. Thus it would lead overnight prices to rise.
In closing, any electric-vehicle policy approach that assumes that Ontario’s overnight electricity costs will remain cheap is probably a shortsighted one. Ontario’s overnight electricity costs are likely to rise substantially as a result of natural gas replacing coal, robots working slavishly every night, and the move towards cleaner sources of energy like wind power and, especially, solar power.
Without being certain of future electricity prices, the EV subsidy plan is like a leap, or Leaf, in the dark.
With the economy of Western Canada hit hard by the fall in oil and other commodity prices that began last year, Canada’s most populous province, Ontario, has begun to account for quite a large share of the country’s economic growth. Many Canadian economists – most of whom live in Ontario, as I do – assume this economic resilience is the result of Ontario’s economic diversity and size. Ontario’s population is much larger than that of any other Canadian province (see graph below), and its economy is mixed between services (in Toronto), government (Ottawa), industry (southwestern Ontario), and commodities (northern Ontario). Ontario’s economy is also more oriented toward the auto sector than other provinces are, and so may be benefiting more than others from the fall in oil prices.
Still, this may be missing the point to a certain extent. What really sets Ontario aside from other Canadian provinces is the proximity of large population centres in Ontario to large population centres in the United States. This is unique among Canadian provinces (see graph below), particularly if you ignore Quebec (which is separated from US populations by a language barrier as well as a political one) and British Columbia (which, perhaps not incidentally, is the other major province that has decent economic growth right now, in spite of the fact that it is a significant commodity exporter and has close ties to oil-rich Alberta). Ontario is the only province to have a handful of cities which straddle the US-Canada border. These include Detroit-Windsor, Buffalo-Fort Erie, Niagara Falls, Sault St Marie, and Sarnia-Fort Huron.
Since the US economy has remained relatively strong in recent years, unlike those of Europe, East Asia, or much of the developing world, Ontario’s ties to the US may be what is driving Ontario’s economic growth. This should make Ontario concerned; the US economy has not had a recession for almost eight years now, so, in a certain sense at least, it is due for one soon.
Below, I have tried to show some of the ways in which Ontario’s proximity to the US is unique. I’ve gathered all the data myself using Google Earth and recent Canadian and American censuses, so if you think you’ve found any errors in the following graphs please let me know.
Ontario’s ties to the US have also meant that it is less dependent on inter-provincial trade of goods than other parts of Canada are: in recent years Ontario has conducted 2.5 times more trade with other countries (led by the United States, of course) than it has with other provinces. This is compared to just 1-1.5 times more for Quebec, Alberta, and British Colombia.
Economists and financial journalists in Ontario need to be more careful than they have been in the recent past. During the 2007-2009 economic crises they ascribed the relative success of Canada’s financial system (which is centred in Toronto, Ontario) to the fact that Canadian bankers and regulators were more prudent and conscientious than their peers in other countries, rather than to the fact that Canada was flush with capital at the time as a result of the sky-high commodity prices that existed just before and just after the financial crisis, and as a result of the fact that Canadian Baby Boomers were then in the prime of their financial lives (as Canada, unlike the younger US or older Japan, is dominated by the Baby Boomer generation).
But instead of acknowledge these facts, much of the Canadian media decided instead to help create a cult of personality around Canadian bankers and Bank of Canada leader Mark Carney — a cult of personality they have since exported to Britain, where Carney has become a figure of great importance (especially since Brexit and the resignation of Prime Minister David Cameron) and the first non-Briton to ever become the central banker over the British financial system, a system that is far larger, far more worldly, and far less dependent on commodity sectors than the Canadian financial system is. Similarly, Ontario’s economic resilience is now being described (by some people) as if it was basically an inherent condition of the Ontario economy, rather than a result, at least in part, of Ontario’s unique ties to the growing US economy.
Don’t get me wrong: I am not saying that Ontario is not a resilient place or that bankers and regulators in Toronto and Ottawa are not prudent and wise. And certainly I would like Ontario’s economy to continue growing, since it is my home. However, believing either one of these stereotypes about Ontario too much could be a dangerous mistake for investors or governments to continue to make.
Outside of the Rocky Mountains, most of the snowfall in the United State falls within the Great Lakes “Snowbelts”. So too does a significant portion of the snow that falls within Canadian cities. These Snowbelts are located, almost entirely, in Michigan, upstate New York, or Ontario:
In the map above, which shows average yearly snowfall in the more than 3000 counties of the United States, there are just 29 counties (according to my count) that receive 120+ inches of snow, 30 counties that receive 100-120 inches of snow, 50 counties that receive 80-100 inches of snow, and around 100 counties that receive 60-80 inches of snow.
13 of the 29 with 120+ inches of snow are in the Great Lakes Snowbelts (8 of the remaining 16 counties with 120+ inches of snow are in Colorado). 15 of the 30 counties with 100-120 inches of snow are in the Great Lakes Snowbelts (compared to 5 in Colorado and 5 in Vermont or Maine). 24 of the 50 counties with 80-100 inches are in the Great Lakes Snowbelts (compared to 7 in Colorado, 4 in Alaska, and 9 in Vermont, New Hampshire, or Maine). And about half of the 100 or so counties with 60-80 inches are in states which border the Great Lakes.
As you can see in the maps below, this has had a big impact on urban development within the Great Lakes basin. The largest cities, namely Chicago, Toronto, Detroit, and most of Cleveland-Akron, are located outside of the region’s snowbelts. Chicago, for example, gets only a third of the snow on average that Rochester, NY gets in any given year, and a sixth of what cities like Oswego, NY get.
There are, of course, some notable cities within the Great Lake Snowbelts. Buffalo, for example, which serves as New York state’s outlet on Lake Erie, was the 8th most populous city in the United States in 1900, and the 4th most populous city in the US that did not have an ocean port. (A year later, in 1901, President Mckinley was assassinated in Buffalo at the Pan-American Exposition). This was before the construction of the US’s road and rail networks stripped the Erie Canal, and thus Buffalo, of most of its economic significance. Today Buffalo is estimated to be just the 76th most populous city and the 46th most populous “urban area” in the country. It has recently had one of America’s fastest shrinking populations.
Rochester and Syracuse were the 22nd and 40th most populous cities in the US in 1930, respectively, but are now just the 103rd and 182nd most populous cities and the 60th and 90th most populous “urban areas”. Rochester and Syracuse serve as New York state’s outlets on Lake Ontario, just as Buffalo does on Lake Erie. Rochester is located 11 km inland from Lake Ontario and Syracuse 53 km inland, however, unlike some of the non-snowbelt cities on Lake Ontario like Toronto, Hamilton, and Kingston, which are situated directly on the lake.
Grand Rapids is listed as the 123rd most populous city in the US and the 70th most populous “urban area”. It is Michigan’s second largest city and serves as the state’s chief outlet on Lake Michigan. Like Syracuse, it too is located inland: it is 50 km upriver from the Lake. As you can see in the map below, Grand Rapids is the only place along Lake Michigan’s coast where the lake’s coastal lowland (the green areas on the map) extends relatively far inland.
Cleveland’s numbers on the graph above are somewhat misleading. They are skewed upward because some of Cleveland’s suburbs, like Broadview Heights, usually get much more snow than Cleveland proper does. Akron, meanwhile, gets even less than Cleveland: just 47.4 inches of snow a year. Akron gets less than half of what nearby Erie in Pennsylvania gets. Pittsburgh, by the way, gets 41.9 inches of snow a year, on average.
Outside of the big and medium-sized Great Lakes cities, there are places in the Snowbelts that get even more snow. Lake Ontario coastal towns in the area from Oswego (population: 18, 142) to Watertown (population 27,823), get well over 100 inches of snow a year. Marquette in Michigan and Owen Sound in Ontario do too. And even smaller places like Boonville, New York (population 2056), in the foothills of the Adirondacks, and Hancock in Michigan’s Upper Peninsula (population 4596) get more than 200 inches on average. According to this source, Hancock is the snowiest city in the United States among cities or towns with at least 1000 residents, with the exception of Valdez, Alaska or Crested Butte, Colorado.
Why does any of this matter?
The Great Lake Snowbelts have posed challenges for urban development thus far. Buffalo is by far the most populous snowbelt urban area, and even Buffalo is not a big city. And apart from Erie, Rochester, and Syracuse in the US or London, Barrie, and Sudbury in Ontario, there are no other Great Lake cities that get more than 70 inches of snow a year on average and have populations of at least 100,000. It simply has not made sense to grow a city in a place with so much snow.
Technology, however, could be a game-changer when it comes to dealing with snow and with snowstorms, which could in turn could give a boost to the economies – or real estate values – of this region. This is particularly relevant given that this is a region that otherwise has great assets, such as the Great Lakes and physical proximity to Manhattan, Toronto, Chicago, and other major North American cities. Indeed, even the snow itself can be an asset once its limitations can be overcome. Snowfall is not only beautiful, but also provides recreation (skiing, cross-country skiing, taboganning, etc.) and can help to prevent forest fires.
One technology that could help the Snowbelt is self-driving snowplows. It makes sense that self-driving snowplows should come into operation even before self-driving cars or trucks do, as snowplows are often in demand overnight, when few other drivers are on the road and labour costs are high. Snowplows drive and work slowly, meaning that plowing roads normally tends to be labour-intensive and that self-driving plows working overnight would probably not be as much as a safety hazard as faster self-driving cars might initially be.
Similarly, snow-clearing robots can help clear parking lots, sidewalks, and, most helpfully, rooftops. Rooftop snow can be especially damaging to buildings, and is often difficult, expensive, and time-consuming to clear.
Another technological change is e-commuting and e-commerce. If you do not want to commute to work following a heavy snowfall, you may now work from home instead, or from an office or co-working space near your house. And you may order your groceries directly to your house.
If you do not want to drive while it is snowing or has recently snowed, you may also soon be able to use an app like Uber or Uberpool to get around in a vehicle that can better handle harsh conditions.
And if you are driving, you can use tools like GPS and smarter cars to better handle snow. Today, driving in a road that does not have street lighting while it is snowing can be hugely irritating and dangerous; when you turn your headlights on the light ends up scattering off the snowflakes, making it nearly impossible to see. There is also often snow covering the surface of the road, making it difficult to see the barrier between your lane and the lane for oncoming traffic. You often have to drive extremely slowly, and even then can easily get your car stuck in a snowbank or suffer a car accident.
Nearly all the Snowbelt are in Ontario, Michigan, or upstate New York. The snowbelts in upstate New York and Eerie, Pennsylvania are strategically located at the “backdoor” to the Boston-to-Washington megacity (which you can see in the map below), and are similarly adjacent to the Toronto-to-Detroit (or, more broadly, the Montreal-to-Chicago) region.
According to Accuweather, of the 10 snowiest “major” cities in the world, three are in New York state (Buffalo, Rochester, and Syracuse), three are in Canada (Saguenay in Quebec, St John’s in Newfoundland, and Quebec City), and four are in northern Japan (Sapporo, Aomori, Toyama, and Akita). Aomori gets the most by far: 312 inches, compared to second-placed Sapporo which gets “just” 191 inches.
In Canada, unlike the United States, the Great Lakes Snowbelts don’t dominate in the snowfall category, since places further north where the weather is colder often get more. French-speaking cities like Quebec City, Saguenay, and Sherbrooke, for example, get more snow than places throughout much of the Great Lake Snowbelts, mainly because they have very cold climates.
St John’s, Moncton, and Cape Breton, on the other hand, which are in Canada’s Atlantic Maritime provinces, are actually relatively warm, yet still receive enormous amounts of snow. St. John’s, which is the largest and snowiest of these three, is actually one of the warmest cities in Canada outside of British Columbia during the winter; its coldest month is February, when it averages highs of -1 degrees Celsius and lows of -9 degrees Celsius. But in return for this “balmy” winter weather St John’s also gets cooler summers than other Canadian cities: its average high in August is just 20 degrees Celsius (68 degrees Fahrenheit).
Finally, one last thing on Snowbelt snow patterns, from theweatherprediction.com. They can be highly erratic and different to forecast in advance:
“Lake-effect snow has been a forecaster’s nightmare from when maps were drawn by hand to the current days of computer predicted models. But no one computer can accurately predict the magnitude or severity of a lake- effect event with the same success as a synoptic event. To describe lake effect snow as temperamental would be a gross understatement. Often arranging itself in rogue bands of heavy snow, lake- effect can stop and start on a dime, and it can dump a foot of snow on one neighborhood and leave the residents of another wondering why the idiot meteorologist keeps breaking into Oprah about some kind of Lake Effect Snow Warning.
And in its unpredictable nature comes its beauty. One of natures precious wintertime treats, just the prospect of lake- effect snow strikes both fear and awe in the hearts of a forecaster. There are, however, trends. Subtle nuances that fade in the background to the untrained eye, but trends nonetheless. If nothing else, these trends offer a faint possibility that maybe, just maybe, Mother Nature may be following a game plan all along.
…Conditions [for lake-effect snow to form] are so difficult to achieve in one given place that lake effect only occurs in four locations on the entire planet: the southeast shoreline of the Hudson Bay, areas just east of the Great Salt Lake in Utah, the northernmost Japanese island of Hokkaido, and of course, the Great Lakes.
Lake snows generate downwind of the Lakes. Sure, lots of people live near a Great Lake, but only a few lucky ones live downwind. Downwind though, is very much a relative term. One day, it takes a west wind. Another, a north wind. But that’s just one piece of the puzzle. Pace yourself. Meteorology follows from this point on.” Read more here.
[Update– My predictions in this article were incorrect: the Liberals, led by Justin Trudeau, ended up winning a majority government in parliament. I didn’t see that coming!]
In most countries, investors usually have a clear idea of what they want to see from an election. They want the victory of a competent, “market-friendly” candidate, with a majority government and no significant regional divisions displayed in the country’s voting patterns. This is, in fact, what they got out of the most recent Canadian federal election, in 2011: the right-of-centre Conservative Party won a decent-sized majority government (which was Canada’s first majority government since prior to 2004), winning in Ontario, British Columbia, and the Prairies, while at the same time Quebec abandoned its independence-minded Bloc Quebecois en masse in favour of the NDP, which also became the largest opposition party by a large margin in Ontario, British Columbia, and the country as a whole.
From the perspective of investors, it is unlikely that the 2015 election will be much more favourable than the current situation that exists in Canada. Even if the Conservatives were to win an even larger majority than they have now, which seems unlikely, this would still only be a continuation of the status quo, and would therefore be unlikely to generate any excitement among Canadians or foreign investors. Plus, given that the Conservative leader Stephen Harper has been Prime Minister for just short of ten years now, this status quo may start to become tiring even for investors and Conservatives. It would certainly not induce any sort of “hope and change” optimism that could potentially help stimulate markets in the short-term. To the contrary, the election campaign will probably make Canadians less confident in the health of their economy, as both the Liberals and the NDP may spend it trying to convince Canadians that Harper has brought the country to the brink of a recession.
In contrast, it is not very difficult to imagine that the elections could make Canada less appealing to investors. Here’s one scenario that would be much worse from an investor’s view: the Liberal Party, led by 43-year old Justin Trudeau (the son of a former Canadian Prime Minister) wins a minority government in parliament, while, on a provincial level, the country is regionally divided in its voting patterns, with Ontario going primarily for the Liberals, Quebec voting primarily for the NDP, the Prairie provinces voting primarily for the Conservatives, and British Columbia splitting its vote between two or three of the parties.
In such a scenario, Canada would have changed from having a “market-friendly” majority government led by an experienced Prime Minister and having no regionalist tendencies reflected in its voting patterns, to having a left-wing minority coalition government led by a young inexperienced Prime Minister (who would have been chosen purely because of his family name) and having significant regionalist divisions between eastern Canada and western Canada and between Quebec and the rest of the country reflected in its voting patterns.
If the NDP defeat the Conservatives instead of the Liberals, meanwhile, which is also possible (the NDP are currently the second largest Canadian party in parliament by far), it would bring to power a party that has never been in power before in its history, which until relatively recently was viewed by many conservatives as being “far left”, and which has a leader who is only in charge because of the tragic death of the former leader of the NDP following the party’s unprecedented success in the Canadian election of 2011.
Even worse, a staunchly provincialist party like the Bloc Quebecois, which is currently polling at around 10-20 percent in Quebec, could theoretically end up becoming the kingmaker in a split between the Conservatives and a Liberal-NDP coalition. Investors could turn on Canada to a certain degree if they begin to think that an increasingly fragmented result such as this is likely to occur. Thus, while the defeat of Stephen Harper’s Conservative Party or the loss of its majority position in parliament would not necessarily be bad for Canada over the longer term, it arguably represents a short-term challenge for the Canadian economy – and in particular, for Canadian financial markets – during the election year ahead.