Canada West Foundation Blog

By: Robert Roach

The federal government recently announced a “Plan for Responsible Resource Development” that will streamline the federal regulatory review process. While this is a step in the right direction, a report from the Canada West Foundation being published on May 3 argues that the task at hand is much larger. Keeping Pace: Improving Environmental Decision-Making in Canada reveals an environmental decision-making process that, while one of the best in the world, is dogged by a number of significant shortcomings. These weaknesses include insufficient integration of scientific research; a lack of clarity regarding exactly what trade-offs between environmental protection and economic development are acceptable to the government of the day; and the ongoing need to ensure that the various government departments and agencies at the federal and provincial levels are cooperating as much as possible.

You can download this timely new report for free from the Canada West Foundation website on Thursday.

As reflected by the results of the 2011 census, the creation of new House of Commons Seats and the ongoing news about the westward titling of the economy, it is clear that the nature of the Federation is shifting. The latest research from the Canada West Foundation looks at the consequences for the region and the country, now that the West is truly “in”.

Taking Stock of the Federation by Dr. Roger Gibbins, President & CEO and Robert Roach, VP, Research, is the synthesis report from a roundtable held on February 9, 2012 in Calgary. This roundtable gathered sixteen participants who provided their insights on the contemporary political landscape, the likely direction of future change, and the potential for strains within the federation across the four western provinces.

“Each region in Canada is vitally important,” notes Dr. Gibbins. “While differences between the regions have evolved, they are still key variables in both Canada’s political environment and the economy. For the federation to work well, we must ensure that all regions— including the West—are heard, understood, and integrated into the whole.”

While participants expressed a general sense of optimism about the region’s future, they also highlighted some significant challenges western Canadians will face in securing a new position within Canada and the global economy. By addressing issues like market access, sustainable environmental management, labour shortages and a fiscally unbalanced federal state, we can ensure that the future remains bright.

Taking Stock of the Federation is part of Foundation’s The West in Canada initiative, which examines public policy innovation in the West, discusses and recommends ways to improve the Canadian federation, and analyzes regional economic, demographic and public opinion trends. Click here for your copy of the report.

Western Canada profits from its abundance of natural resources, however, in the changing global landscape, we need to take action to ensure our future prosperity. The latest research from the Canada West Foundation outlines the main contours of the contemporary energy world and takes stock of the trends shaping energy in western Canada.

State of the West: Energy – 2012 Western Canadian Energy Trends, by Senior Economist Michael Holden and Policy Analyst Robbie Rolfe, provides an overview of the provincial energy systems in western Canada, including the current state of energy production, consumption, and other associated activities and impacts. That information is framed in the context of the energy-related policy issues and challenges facing the four western provinces.

“Western Canada is characterized by a profound diversity of resources, consumption patterns, and economic and environmental impacts” said Michael Holden. “The energy picture in each province is unique, but their strengths are complementary. Through a more coordinated approach to energy policy, the western provinces can become more than the sum of their parts.”

Given the extent to which it permeates our daily lives, energy has come to dominate the economic, social, and political agenda in the region. State of the West: Energy provides a one-stop information resource on energy in western Canada, informing the debate surrounding energy policy in the West, and providing context to both where we are today and where we may go in the future.

State of the West: Energy – 2012 Western Canadian Energy Trends is part of the Foundation’s Powering Up for the Future initiative, which facilitates constructive debate on sustainable energy policy solutions for Canada and promotes the vital importance of western Canadian energy systems in the national, continental, and global economy. Click here to download a copy of the report.

By: Larissa Sommerfeld 

Alberta is now in the throes of the third week of the provincial election campaign. Given the critical importance of the province’s water resources to its economy and environment, it is worthwhile checking in to see how water policy is being addressed by the contending parties.

I’ve reviewed the platforms of the main parties and have highlighted their water policies below:

Alberta Party
The Alberta Party’s platform focuses on the five core ideas of healthcare, students, democracy, the economy and communities. It doesn’t specifically place environmental concerns front and centre. However, under the “economy” section, the Party commits to promoting a “positive brand image for our resource industries by insisting on best practices and a strong commitment to environmental stewardship.”

Evergreen Party
The Evergreens—a newer addition to Alberta’s political scene who have replaced the Alberta Greens—simply state in their party platform that “we will encourage conservation and reduction of water usage, and prevent the sale or export of water.”

Liberal Party
The Liberals do not mention water in their party platform at all. Rather, their key environmental policies focus on emissions and the monitoring of the oil and gas industry.

New Democratic Party
The NDP has some very specific water policy goals outlined in their platform including stopping the expansion of water markets and putting human and ecosystem needs first when it comes to water allocation. Regarding industry activity, the NDs support:

• Cleaning up tailings ponds, but at a cost to companies rather than taxpayers;
• Doubling the monitoring and enforcement activities of the Ministry of Environment and Water to “make sure the industry lives up to its environmental obligations under the law”; and
• Appointing an independent scientific panel to examine hydraulic fracturing.

Progressive Conservative Party
The PC Party does not have a comprehensive policy platform available on their website. In this case, we have to look at past policy to see where they might stand on water:

• Premier Redford renamed the Ministry of the Environment as the Ministry of Environment and Water last fall. According to Diana McQueen, the current Minister for Environment and Water, this was a “deliberate move to emphasize the priority that our government places on this resource.”
• The government has committed to increase funding to about $11 million for environmental monitoring; and
• An annual amount of $150 million has been committed to fund the Alberta Oil Sands Technology and Research Authority (AOSTRA) to support research that will help Alberta work toward meeting the Water for Life goals.

Wildrose Party
The Wildrose Party has a fairly robust environmental platform. Some of their commitments include creating a position for an Albertan environmental ombudsman and addressing water quantity issues in the south and water quality issues in the north. The Party is committed to finding ways to improve water storage by building more dams and/or reservoirs and states it will review and reform Alberta’s licensing system to “ensure that existing licenses are fully utilized while respecting the principle of first in time, first in right.” It also is supportive of new conservation technology that allows for the use of things such as grey water recycling and supportive of the movement toward a federal ban on bulk water exports to the US. Regarding industry, the Wildrose has stated it in its platform that it will:

• Work toward eliminating tailings ponds;
• Support water technology so that industrial use of water decreases; and
• Strictly enforce existing regulations on effluent-producing industries.

By: Robert Roach, VP, Research

In an article in today’s Globe and Mail, John Ibbitson argues that "One question will define national politics in our time: Are Western Canadians prepared to sacrifice for the sake of the nation, now that Ontario is less able to help?"

In addition to incorrectly implying that western Canadians chipping in to help the rest of the country is a new phenomenon, the question is the wrong one to ask.

The question Canadians should be focused on is how to ensure that the nation successfully adjusts to the evolving global economy. It is a mistake to start with a negative question that assumes the need for "sacrifice"—whatever that means—or puts pressure on the nation’s fault lines by immediately assuming that regional wealth redistribution is the solution to central Canada’s problems. This is the old way of thinking and this is not the time to bring it back.

The West knows what it is like to have its interests and economic prospects ignored and how damaging this is to the country and its potential. It will not, therefore, make the same mistake that central Canada has made in the past and be blithe to the blight of the other regions.

The West gets it—all regions benefit when all regions are heard and respected. The West will do its part, as it always has.

Ensuring Canada’s prosperity will happen naturally as the western economy continues to provide jobs and returns on investment. It will also happen at the political level through the equalization program, a strong tax base in the West that helps fill the national treasury, and by ongoing efforts by Canadians to ensure strong regional representation within the national government.

Ultimately, however, the economic recovery of Canada's industrial heartland will depend on the efforts of individual Canadians and their ability to harness the changes happening at a global level.

By: Shawna Stirrett

In November 2011 the Canada West Foundation in partnership with the National Round Table on the Environment and the Economy (NRT) conducted a series of roundtables about developing a low-carbon growth strategy for Canada with particular emphasis on the opportunities and risks facing the West.

You can read all about the main themes, policy recommendations, and overview issues in the report (click here to view) but, just for fun, here is a visual overview of the roundtables:

These word clouds were created from my notes, which were typed up during each of the sessions. Words that appeared more often in the conversation appear larger in the clouds and words that were less common are smaller. In a sense, these clouds give a visual overview of what ideas were most prevalent during the roundtables and which topic generated the most interest.

What is really fun is to see how the conversations—which were all structured around the same questions—varied from province to province.

For example, in Saskatoon, one of the main themes was on how to deal with carbon constraints in an environment of economic growth.

Those in Vancouver were most concerned about how carbon should be constrained, should it be a tax or cap and trade?

Calgary roundtable participants were pretty set on the need for a national framework around energy and emissions.

While in Winnipeg the discussion centered on how challenging it can be to put in place carbon policies when power is so cheap and emissions rates are so low in the province.

Of course these word clouds do not tell the whole story, but they do provide an interesting visual overview of what issues were important to roundtable participants and how the conversation varied across the region.

Click here to download a copy of Cautious Optimism: Western Perspectives on a Low-Carbon Economy.

By: Robbie Rolfe

I sometimes find myself getting weary of ideologues on environmental issues. One argument I find particularly tiresome is the insistence that there are significant tradeoffs when it comes to the economy and the environment. The conclusion of these extreme viewpoints is that we can be prosperous polluters or penniless hippies. Apparently, there is no middle ground.

These zero-sum views neglect market-based instruments (MBIs for short) that can make us both prosperous and green. The careful deployment of MBIs can address a major difficulty facing governments trying to encourage good environmental practices: people and businesses will not provide enough ecological goods and services because the costs of providing them accrue to individual persons or businesses while the benefits are enjoyed by the wider community. An MBI is a mechanism that shares the costs of environmental protection among its many beneficiaries.

Take a farmer who is nearing retirement and needs cash. If he sells his farm to a developer, he gets the money he needs. If he holds onto the land to ensure that it continues to provide a nearby city’s water system with valuable natural filtration, he takes a direct financial hit. There are significant tradeoffs in that situation: the farmer gives up some of his livelihood to maintain ecological benefits or gives up ecological benefits to enhance his livelihood. An MBI could pay the farmer for the ecological goods and services his land provides. To ensure a fair price, the amount the farmer gets could be set by a market, or at least market-like mechanisms. Taxpayers living in the city who benefit from the natural filtration on the farmer’s land could fund the MBI through their taxes, thereby sharing in the costs associated with the benefits they receive.

The good news is that these kinds of policies are increasingly under consideration in western Canada. The Alberta Land Stewardship Act, for example, urges the use of market-based instruments on a regional or local level to better provide ecological goods and services, particularly when it comes to land use and land management.

Though market-based instruments show great potential, we are only beginning to explore their varied applications. If we can tap that potential, then one day we may be able to have our cake and eat it too.

MBIs are explored in detail in a new Canada West Foundation report entitled The Invisible Hand’s Green Thumb: Market-based Instruments for Environmental Protection in Alberta. To download the report, click here. 

By: Michael Holden

Just in time for Christmas, the federal government has announced a new funding plan for health care. The present funding agreement, in which federal cash transfers to the provinces and territories grow by 6% per year, is set to expire in 2013-2014. The new ten-year plan will see that 6% annual escalator maintained through to 2016-2017. Thereafter, federal cash transfers for health care will be tied to annual growth in nominal (i.e., not adjusted for inflation) economic output, with a floor provision that guarantees a minimum increase of 3% per year, regardless of how well the economy actually does.

This unilateral announcement caught many people off guard. Federal-provincial transfers have always been a sensitive and nuanced subject and new funding agreements typically come only after extensive, public, and often bitter negotiations between Ottawa and the provinces. Many people were just beginning to get geared up for the next round of talks, which now appear to have been cut off at the pass.

Reaction across the provinces to the new arrangement has been mixed. Alberta is strongly supportive, for reasons that I will discuss below, while BC and Saskatchewan are also largely in favour. In the rest of Canada, however, the backlash has been harsh. It being the Christmas season, “lump of coal” metaphors abound.

This backlash is rooted in the interpretation of a Conservative Party campaign promise during the last election; several provinces had expected the 6% escalator to be maintained over the entirety of the new funding arrangement. Tying federal transfers to economic output will almost certainly result in slower growth in health transfers beginning in 2017-2018.

How much slower is anyone’s guess at this point. However, historical data suggest that nominal economic growth in Canada has actually been quite consistent over the long term, averaging 4.2% over the past 10 years, 4.7% over the past 15 years and 4.5% over the past 20 years. Assuming growth at the low end of that range (4.2%) over the duration of the new plan, total federal health transfers to the provinces can be expected to increase from about $30 billion in 2013-2014 to about $47.7 billion in 2023-2024. Had the 6% escalator remained in place, transfers would have reached $53.7 billion.

As I hinted at above, Alberta is the clear winner under this new funding arrangement. One of the less-publicized changes it will bring is that cash transfers for health care will be distributed across the provinces on an equal-per-capita basis. At present, this is not the case. The history and complexities of federal transfers are too complicated to get into here, but the end result is that wealthy provinces (with strong tax bases) currently receive less cash per person from the federal government for health care than poorer provinces. Since Alberta is by far the wealthiest, it receives far less on a per-capita basis than the other provinces.

When the new funding arrangement comes into effect, there will be a large increase in per-capita cash transfers to Alberta in order for it to reach the same level as the other provinces. This change is bound to be controversial. Alberta is already the richest province in Canada. For it to receive a perceived “windfall” of cash may not sit well with some provinces, especially since the increase in payments to Alberta will, by definition, come at the expense of increases to other provinces (because all funds come out of a fixed pool).

One thing is for certain; after a few quiet years, fiscal federalism and issues about federal-provincial transfers suddenly are back in the public policy spotlight. We will be writing more on these subjects in the months ahead.

By: Larissa Sommerfeld, Policy Analyst

Today Alberta’s new cabinet will be sworn in.

Some regard the selection of her Cabinet to be Premier Alison Redford’s first test. How many fresh faces will have new jobs? Who will be shuffled? Will any of the old guard remain?

Those involved in water policy will watch the Environmental portfolio closely. Will veteran Minister Rob Renner stay or go?

Perhaps more importantly, what does the election of Redford mean for Alberta’s water?

On her campaign blog, Redford wrote, “while I believe that water needs to be conserved, this does not necessarily imply that it should be treated as a commodity with a market-driven price. Such a move has far-reaching and complex implications, none of which, especially in areas like licensing and export obligations, have been adequately explored.”

She went on to write that any changes to water policy would be arrived at through public consultations. However, she did refer to the fact that she would move “ahead with a new water management framework for the province.”

While her statements were ambiguous, it is clear that Redford will wade into the water debate cautiously. She is aware that the status quo cannot continue, and is committed to ensuring the stability of Alberta’s water supply. So, while we know the ends, we do not yet know the means to get there.

One fundamental question will be whether Redford will follow any of the recommendations put forth by the Premier’s Council for Economic Strategy in the 2011 report Shaping Alberta’s Future. When it comes to water policy, the report recommended that the province create an Alberta Water Authority. The Authority, an independent organization, would be tasked with gathering and maintaining a robust water database for the province, developing a long-term water infrastructure plan, and perhaps most importantly, “oversee[ing] an Alberta water allocation exchange.”

This Authority would “encourage the growth of activity that delivers the highest possible benefit to the province for the water used.” In other words, the Premier’s Council recommended that an active water market in Alberta be developed—one where those industries that could generate the highest benefit to Alberta are awarded the right to use an allocated amount of water. (What is meant by benefit is still to be determined.)

Although a pseudo water market currently exists in the southern half of the province, the idea of a market is extremely controversial. Stakeholders have expressed concern that a firmly entrenched market would favour those who can pay large sums for a license—for instance, an irrigator likely could not compete with a large oil company.

While there has been much discussion about further developing water markets in Alberta, the Stelmach government did not wade too far into the debate. Now that we have a new government, perhaps we’ll see some movement in this area.

Will Redford follow the advice of the Premier’s Council? Or will she start from scratch—engage in public consultations and carefully assess the implications of a water market before initiating new policy? Or will she wait until the next general election? Water just might be one of those issues that isn’t touched until a clear government mandate—which isn’t entirely certain right now—is given to the Redford Progressive Conservatives.

Only time will tell. But today’s pick for Environment Minister might give us a few hints.

By: Michael Holden

As the Canada West Foundation highlighted in a study released earlier this year, western Canadian exporters are gradually shifting their focus away from the United States and are increasingly selling their goods in Asian markets.

Early data for 2011 show this trend continuing. Through the first six months of the year, western Canadian exports to Asia were up 23.3% compared to the same period last year, well above the growth rate for exports to the US (11.2%) or other non-US destinations (18.3%). In total, 18.2% of western Canadian exports from January to June 2011 went to Asian markets.

Leading the charge is BC. Through the first half of 2011, BC’s total exports were 14.0% higher compared to the first half of 2010. Exports to Asia, however, have risen at more than twice that rate, owing in part to strong growth in sales to China, Taiwan and South Korea.

This increase has not only helped to cement BC’s status as Canada’s largest exporting province to Asia, but, if the pattern established through the first six months hold true for the remainder of the year, BC will be the first province to reach a significant new milestone: it will export more to Asia than to the United States. From January to June 2011, BC shipped 43.2% of its merchandise exports to Asia, compared to 42.0% of sales going to the United States.

As we’re looking at just half a year’s worth of data, this feat is mostly symbolic at this point, but if the underlying trend continues, it could represent an important structural shift in how we think about the BC economy. What happens in Asia could be more important to the province’s economic outlook than what happens in the United States.

The other three western provinces are in no danger of crossing that threshold in the foreseeable future, but Asian markets continue to grow in importance for exporters on the prairies as well. Manitoba and Saskatchewan have seen increases of 39.0% and 25.4% in exports to Asia, respectively, through the first half of 2011. Both provinces now sell more than 20% of their total exports to that part of the world.

On the surface, Alberta appears to be something of an exception to this general trend. Not only are Alberta’s exports to Asia growing more slowly than any other province (7.6% through the first half of 2011), but the share of total exports going to Asia (7.5%) remains low as well. Only New Brunswick and Ontario send a smaller share of their exports to Asia.

The weakness in growth through 2011 to date is partly due to reduced sales of primary plastics and canola – two of Alberta’s largest exports to Asia. It remains to be seen if that reduction is a temporary dip or evidence of a longer-term trend.

But in terms of overall market share, Asia is far more important to Alberta than the figures suggest. Oil and gas make up more than half of Alberta’s total exports, but based on the infrastructure in place, Alberta oil and gas companies wishing to sell their products abroad have no real choice in where they can go: all roads – or, in this case, pipes – lead to the US.

Removing oil and gas from the equation gives us a chance to see where Alberta exporters sell their products when they have a choice of customer. When you do so, Alberta’s export mix begins to look a lot more like the other Prairie Provinces. In the first half of 2011, 15.7% of Alberta’s non-oil-and-gas exports went to Asia – not as much as in Saskatchewan or Manitoba, but still much higher than in any province outside western Canada.  

On Thursday, September 8, 2011, The Canada West Foundation and the Asia-Pacific Foundation are co-hosting the Canada-Asia Cooperation Conference and Dinner, which will look at the growing web of energy-related trade, investment, strategic and environmental linkages between Canada and Asia. For more details, click here.