Alberta Doubling Down on Failing Industry with Petrochemical Handout
While COVID-19 has largely pushed Canada’s environmental agenda to the sidelines, it has also exposed the oil sector as a fragile and unstable foundation for the economy.
After years of fighting for approval, Teck Resources Ltd withdrew its application to build a $20 billion dollar tar sands mining project – one of the largest – thanks to a combination of resistance by environmental activists and falling oil prices. Coronavirus also caused an historic plummet in oil prices, with futures dropping below $0 in April.
Yet despite the boom-bust nature of the oil and gas industry, and with mounting pressure to address the climate crisis, Alberta just introduced a grant for the petrochemical industry to be rolled out over the next decade, as part of its Covid-19 economic recovery plan. Currently there isn’t a hard cap on investment costs, but they could reach $30 billion, according to Alberta’s Industrial Heartland Association.
The petrochemical industry is more or less regarded as oil’s little sibling. Some of the largest oil companies such as ExxonMobil and Saudi Aramco have huge stakes in chemical industries. Since petrochemicals are essentially components drawn from oil, they are going to account for more than a third of growth in demand of oil till 2030.
Over the past few years, with environmentalists calling for a ban on plastics, the industry saw a downturn in profits. Earlier this year, the government even committed to phasing out single-use plastics by 2021.
But while Covid-19 decimated oil prices, the plastics industry boomed. According to the CEO of the Chemical Industry Association of Canada (CIAC) (with a new plastics division created as recently as of July 1), the “demand for plastic packaging has never been stronger”.
At the height of the pandemic, the government saw the need to manufacture Protective Personal Equipment (PPE) domestically rather than depending on imports, and as the pandemic continues we’re using plastic for protection more than before.
So even though the oil and gas industry may have seen better days, its close kin – the petrochemical industry – is using the health crisis as a smokescreen to amp up production of ethylene that ultimately ends up in tangible plastic form that we use as consumers.
In Alberta’s economic recovery plan, Premier Jason Kenney calls the province’s energy sector, “the bedrock sector of our economy”, while “[accelerating] the future of the natural gas industry” along with a “retooled program to incentivize potentially billions of dollars of investment in the petrochemical sector”.
Hand picking to support the petrochemical industry in the name of diversification is not diversification at all since the same oil players have a stake in petrochemicals. Instead, funds could have been diverted to support renewable energy companies and making Alberta a leader in clean energy production.
In comparison, there is no concrete plan mentioned in the economic recovery document on how much money the government is earmarking to support the renewable energy sector, and create jobs in that industry – a sector that was flourishing and attracting investments before the pandemic.
Provincial support for the sector has actually lagged behind the private sector: In October 2019, a Danish investment group gave $500 million in funding to Greengate with plans to build Canada’s largest solar energy project.
Pre-Covid-19, according to Clean Energy Canada, jobs in the clean energy sector are going to grow at 3.4% every year till 2030, employing 559,400 Canadians, versus job losses in the oil and gas industry at 0.5% every year. In 2018, it accounted for 3% of Canada’s GDP. But now, as a result of the government selecting who to back, the clean energy sector is potentially experiencing an extinction level of revenue and job losses.
According to a recent report on energy investments by G20 countries during Covid-19, Canada has spent $300 million to support the clean energy sector, compared to $16 billion for the oil and gas sector, and this includes Alberta’s $1.5 billion equity investment and $6 billion loan guarantee for the Keystone XL pipeline.
By putting money towards fossil fuel and the petrochemical industry, Alberta is signalling that they will protect oil corporations in lieu of protecting the environment and Albertans. Plastic has been a kind of visible enemy for the environment and animal rights movement, and governments have almost used the policy of banning as a tactic to pacify environmentalists while soaring ahead with subsidies for the fossil fuel industry. But now, through billion dollar grants for the petrochemical industry, the Albertan government is not even trying to put its money where its mouth is, and going ahead to “ensure a future” for harmful industries, during a climate crisis, and even in the face of an established fact that Canada is the second-fastest warming country on the planet.