Canada's national wealth grew by just 0.19 percent annually between 1980 and 2013, and continues to strongly depend on oil and gas extraction, the International Institute for Sustainable Development (IISD) said in a report on Thursday, highlighting concerns that the Canadian economy is still overly reliant on an area known for volatility.
The report measured a 'comprehensive wealth' indicator as a combination of produced capital, market natural capital, non-market natural capital, human capital, and social capital. Produced capital grew by an annualized rate of 1.68 percent between 1980 and 2013, but as much as 70 percent of this growth was concentrated in just two industries: oil and gas extraction, and housing.
Statistics Canada has estimated that the total nominal value of mineral, fossil fuel and timber assets slumped by 75 percent between the first quarter of 2014 and the fourth quarter of 2015, the report said.
"If oil prices do not recover, this value could drop even further in the future and the losses could be permanent," the IISD noted.
Looking ahead, the institute suggests that underpinning Canada's growth on fossil fuels is risky, given the short-term commodity prices volatility and the longer-term global shift towards a cleaner economy.
"The current debate about fossil fuel projects and pipelines needs, therefore, to include a vision of transformation toward a low-carbon economy," according to the report.
Related: U.S. Crude Oil Output Drops In September
Canada needs to diversify so that oil and gas extraction and housing become less dominant in its overall growth mix. The drop of the value of fossil fuel assets and the obstacles they are expected to face in the long run call for diversification to hedge against these risks, the institute said.
Last month, Canada said it was phasing out coal by 2030.
Earlier this week, Canada's Prime Minister Justine Trudeau approved, conditionally, two new pipeline projects: Kinder Morgan's Trans Mountain and Enbridge's Line 3, despite environmentalist opposition to these and all other pipeline construction proposals.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More