A just transition for Alberta is possible
The Parkland Institute and Alberta Federation of Labour have some ideas about how to get there.
Alberta Premier Danielle Smith has spent the first month of 2023 railing against the federal government over its impending “Just Transition” legislation, arguing a transition off fossil fuels will by necessity leave thousands unemployed, and Leader of Opposition Rachel Notley is following her lead, albeit with less enthusiasm.
Meanwhile, an Alberta-based think tank has released a report arguing that the move to a clean economy could create thousands of new jobs. We just need to seize the opportunity.
“No Worker Left Behind: A Job Creation Strategy for Energy Transition in Alberta,” released on Feb. 1 from the Parkland Institute, argues the transition to a green economy is happening internationally, regardless of whether Albertans want it or not. We can either use it to our advantage, placing the needs of those who are most impacted by the transition at the forefront, or be left behind.
“Workers on the front lines of the energy transition need to lead the discussion about how best to transform Canada’s energy economy. The Canadian union movement has been instrumental in developing the concept of Just Transition and has considerable experience in its implementation in different sectors of the economy,” the report reads.
The report is based in part on the Alberta Federation of Labour’s (AFL) industrial blueprint for creating more than 200,000 jobs while reaching a sustainable economy by 2050, dubbed “Skate to Where the Puck is Going.”
The AFL strategy consists of preserving as many oil and gas jobs as possible into a net zero future while transitioning the bulk of oil and gas production into feedstock for materials manufacturing, and vastly expanding the province’s clean energy sector.
This, the AFL says, will create about 100,000 oil and gas jobs, 85,000 of which would be in CO2 and hydrocarbon-based manufacturing, 70,000 jobs in hydrogen and biofuel production, 20,000 in clean electricity generation, 8,000 in electric transportation, batteries, critical minerals and metals, and 14,000 in retrofitting buildings.
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The Parkland report sets the stage for its recommendations with some dire statistics from the oil patch. From December 2014 to December 2022, oil companies cut their workforce by 19%, or 43,548 jobs, with 81% of those jobs in Alberta.
While the UCP’s so-called “Job Creation Tax Cut,” which cut the corporate tax rate from 12% to 8% between 2019 and 2021, earned the Big 5 oil companies $4.277 billion, these funds went largely towards increasing executive compensation and, more importantly for our purposes, automation, allowing these companies to produce more oil than ever with a smaller workforce.
“We're already seeing workers in energy in Alberta losing their jobs and there's no government plan for how to support those workers,” Ian Hussey, who wrote the Parkland report, told The Orchard.
This is particularly urgent in Alberta, where oil and gas is so deeply embedded in our social fabric that the loss of one oil and gas job leads to multiple job losses elsewhere, “because of indirect employment and induced employment based on those workers spending money in those local economies,” Hussey explained.
The transition in Alberta is ultimately about more than just cleaning up our energy supply, but the need to transition Alberta’s economy towards more diverse revenue sources that are less subject to the volatile fluctuations of international markets than oil.
“If we don't do this in a concerted way, in a planned way, then we're going to see higher numbers of job losses, we're going to see deeper community decline, than if we just plan for the inevitable transition away from oil and gas over the long term,” Hussey said.
The price tag for this massive transition is hefty — an estimated $300 billion for Alberta — so the inevitable question arises: how are we going to pay for it?
Firstly, it’s worth noting that the cost of inaction would be much steeper. Business as usual will cost the government at least $40 billion a year in perpetuity “to cover the costs of future disasters made worse by climate change,” according to the Royal Bank of Canada — not exactly a bunch of eco-radicals.
“And that’s before accounting for the uncertainty over how climate patterns will evolve. Melting permafrost, collapsing rainforests and other catastrophes could make the bill that much steeper.”
To fund an orderly transition to a clean economy, the Parkland report suggests returning the province’s corporate tax rate to 12%, which would have earned the province $6.3 billion in additional revenue if it had remained in place from 2019 to 2021, and increasing its income tax rate on the top 7% of earners, which would net the province $1.255 billion.
Another revenue source would be to increase oil and gas royalty rates for when oil prices are high to 50% from 40%, and lower the threshold for high prices to $80 or $90 a barrel from $120.
On the federal side, the government could expand its modest 15% windfall surtax on the profits of banks and life insurers who make over $1 billion to the oil and gas sector and big box stores, which the Parliamentary Budget Officer estimates would net $4.4 billion.
Finally, the feds could offer a Just Transition Payment to provinces, First Nations, Inuit communities, and Métis settlements, which would be based on emission levels. Alberta, which emits a wildly disproportionate 38% of Canada’s CO2 emissions, would thus receive 38% of the transfers.
The World Bank advises governments spend somewhere between 1% and 2% of GDP on the energy transition, which in the Canadian context would mean $10 billion to $20 billion a year for Alberta. Over thirty years, this would at least amount to the $300-billion transition cost.
This would be supplemented by private sector investment spurred by the business opportunity of clean energy, so some of the federal funds could go towards costs not captured in the $300-billion figure, such as training programs for workers or post-secondary education.
“There are all kinds of things that provincial governments and Indigenous governments should be doing around the energy transition that they may not have the resources to do right now,” Hussey said.
“If the federal government is going to pass a sustainable jobs act, well, it's really got to put its money where its mouth is and support other levels of government in pushing the transition forward.”
Read the full report here.