The world is moving on from oil. Alberta should as well.
Out of all of Canada’s provinces, the economic effects of the COVID-19 pandemic are hitting Alberta the hardest. The Western province is experiencing the fastest short-term drop in its economic activity and highest unemployment in the country, at 15.5% in June. Its debt to GDP ratio will increase to 20%, highest since The Great Depression. The blow, in fact, has been so hard that for the first time in 55 years, Alberta is receiving more funding from the Federal government than it provides.
Many factors have led Alberta to this point. Most prominently is its relationship to the volatile oil and gas sector. As the entire world locked down in the spring, the demand for oil plummeted, along with oil prices. Most of the oil and gas jobs in Canada are in Alberta and according to the Petroleum Labour Market Information, in June employment in the sector dropped by 4% from May. Compared to June 2019, employment in the oil and gas sector fell by 17%.
Over reliance on the industry has been a controversial subject in Alberta and Canada because by its nature, oil is a finite resource and has harmful impacts on the environment. But it’s also a contentious topic for Albertans because of how much the industry has contributed to the province’s prosperity, wealth, and to people’s incomes and Alberta’s identity.
At the same time, however, Canadian oil is one of the most expensive to produce in the world, the fourth dirtiest in the world, and largely depends on America as its export market. Due to the volatile nature of oil and to avoid a financial crisis like the one Alberta is facing today, the province has long faced calls to diversify its economy and help workers transition to the renewable energy sector. Premier Jason Kenney, though, is bent on taking Alberta backwards.
His Covid-19 economic recovery plan cuts corporate taxes, which he claims will create 55,000 more jobs and attract new investments, even though it didn’t work the last time he tried. Another $1.5 billion dollars are being invested in the Keystone XL pipeline, even though Joe Biden has promised to cancel the pipeline’s approval if elected as President, and big investors – such as Sweden’s central bank – are actually withdrawing investment from Alberta’s oil sands due to its high carbon emissions. In 2017, Royal Dutch Shell, one of the world’s largest oil companies left the province to instead invest $1 billion per year in renewable energy till 2020. Other major companies that have divested billions away from Alberta’s oil economy include Kinder Morgan Inc, ConocoPhillips, and Marathon Oil Corp.
So for all the economic havoc Covid-19 has wreaked on Alberta’s economy, Kenney is still using discredited economics and a failed agenda instead of leaning into this moment to revamp the economy through more public investments in clean energy.
So far in 2020 Kenney has introduced 33 bills which target healthcare workers, labour unions, and scrap several environmental protection policies introduced by the NDP such as the carbon tax, cap on oil sands emissions, subsidies for home insulation, and investments in solar and other renewables.
The most recent bill – the Health Statutes Amendment Act – will make it easier for private players to enter the healthcare sector. According to Kenney’s government this will reduce wait times, but critics argue this will actually take money and resources away from the publicly funded healthcare system.
Under a new plan for municipalities, Kenney is planning on providing oil and gas companies on rural land with tax breaks, which would reduce revenue for local governments in Alberta. This is compounded by the fact that the oil and gas sector already owes $173 million in property taxes to rural municipalities, according to a survey released by the Rural Municipalities of Alberta.
All this underscores the importance of Alberta moving away from the oil industry by focusing on newer, more stable industries which can benefit from a skilled workforce currently employed in the oil industry. A Green New Deal, with its focus on transitioning workers from one industry to another, could be one such plan. Polling shows the Green New Deal is popular, with the support of 61% of Canadians.
A new Oxford study found that a green stimulus will do more for economic recovery both in the short and long term. For example, investing in clean energy production can create twice as many jobs per dollar than the fossil fuel industry. Other investments include spending on research and development and creating more energy efficient homes and buildings.
With the province’s deficit set to reach $20 billion by the end of the year, Alberta needs is a leader who is willing to move away from tried, tested and failed economic ideas that depend on volatile oil prices, and towards bold new thinking to create sustainable jobs and stimulate the economy.