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Doubling down on Alberta’s oil and gas sector is a risk Canadians can’t afford to take

The province’s economic crisis started before the coronavirus pandemic — and bailout proposals on the table now would do little to protect Albertans from future shocks

By Vanessa Corkal, policy analyst, and Aaron Cosbey, senior associate, at the International Institute for Sustainable Development.

In times of unprecedented crisis, government leadership means being bold. But as Canada and its provinces prepare to roll out record-breaking emergency responses to help the newly jobless and throw lifelines to drowning sectors, it’s becoming clear that not all support is created equal.

Alberta Premier Jason Kenney has said unemployment could rise to at least 25 per cent, or upwards of 500,000 workers. To bolster Alberta’s economy, he called for the federal government to commit at least $20 to $30 billion in liquidity for oil and gas producers. This came on the heels of the province’s announcement of almost $8 billion in equity infusion and loan guarantees for the Keystone XL oil pipeline. There have also been calls for the federal government to purchase oil and gas sector accounts receivable at a discount.

There’s no question that people across Alberta need urgent help. In the accommodation and food service sector alone, nearly 100,000 workers have already lost their jobs, and similar numbers seem likely in retail trade. The oil and gas sectors have seen thousands of layoffs and postponed labour as the province’s companies limit production and shelve all plans for expansion, upgrades and maintenance.

But is injecting tens of billions into oil and gas corporations the right kind of help? As well as addressing immediate needs, strategic emergency response should have two critical features:

  1. It should address the root causes of the crisis and reduce vulnerability to future crises;
  2. It should take advantage of the dynamism that crisis creates to build back better and achieve important public policy goals that may have been harder to reach in more settled times.

Would the proposed assistance address the root causes of the crisis? Alberta’s economic hardship started before COVID-19 and is grounded in over-dependence on those inherently cyclical commodities. But rather than pursue diversification that could shelter Albertans from the pain of future shocks, these sorts of investments double down on the status quo, hitching the wagon firmly to volatility and uncertainty.

There will be future shocks, whether it’s another 2008-style financial crisis, a climate-induced crisis such as the 2016 Fort Mac fires, or — dare we say it — another COVID-19-style pandemic. Placing heavy bets on the oil and gas sector nearly guarantees we will be here again, with similar social and economic pain for people across the province.

Bets like these assume the oil and gas sectors will return to business as usual after COVID-19, that demand will be strong for decades in spite of increasing climate change mitigation efforts, that pipelines will be built despite sustained opposition or political delays, and that Saudi Arabia and Russia will back down and reverse measures designed to do exactly what they are doing — squeeze out high-cost producers like the U.S. and  Canada.

Even if all those assumptions prove right, and the bet pays off, that success doesn’t address the underlying problem of over-dependence — it aggravates it.

Would the proposed assistance take advantage of the opportunity to build Alberta back better? We know that, whether through market forces or government policies, Canada’s oil and gas sector will eventually decline, hopefully to be replaced by more diversified and sustainable economic drivers. As the head of the International Energy Agency, the United Nations Secretary-General and others have recently argued, our response to the current crisis must accelerate this urgently needed transition. If Alberta is to rebuild its damaged house after this unprecedented crisis, why not build a stronger house?

For Alberta and the federal government, this should mean investing tens of billions of dollars in sectors that can bring long-term prosperity for Alberta’s workers and families, such as hydrogen, health sciences, renewable energy, clean transport, sustainable agriculture, innovation in oil and gas well reclamation, and prevention of fugitive methane emissions, building on the province’s world-class institutions and infrastructure, and the strengths of its people.

The coming economic downturn will swallow up the unprecedented torrents of fiscal support we’re assembling, and still call for more. But let’s remember that this spending can be a historic force for positive change to ensure that when we come out the other end, our society is more equitable, sustainable and resilient — ready for whatever the future might throw at us.

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