By Gary G. Mar and Colleen Collins
Published in the Calgary Herald
November 16, 2022
Support in Canada for climate action initiatives depends on two factors.
First, the impact of the policy on individuals. Canadians are less likely to support a policy when it comes directly out of pocket, like a carbon tax on gas, versus a policy subsidized by the anonymous taxpayer such as energy efficiency or electric vehicle subsidies.
Second, the impact of policy depends on where people live in Canada. It’s not surprising that residents of oil and gas producing provinces who will disproportionately bear the costs of transition are much less supportive of rapid energy transition than their neighbours who are blessed with hydroelectric power.
The challenge, both for the public and for provincial governments, is determining how much various policies will actually cost Canadians where they live and not some non-existent “average” Canadian.
It’s a good question and one where the federal government gets a failing grade on transparency. A case in point is the 2021 federal appendix to the Healthy Environment and Healthy Economy plan, the follow on to the Pan-Canadian Framework. The Modelling and Analysis of a Healthy Environment and Healthy Economy provides historical and future emissions projections to 2030 at the sector and provincial level, but only one national GDP growth reduction number and no provincial economic impacts. So much for analysis of the healthy economy. National outcomes mask the potentially massive redistribution of jobs, investment and GDP from resource-exporting regions to the core central Canadian economy. Analysis of the federal government’s estimation of the impact of climate policies finds that their estimates essentially assume away the problems created for resource export-dependent provinces like Saskatchewan and Alberta. Estimates using more realistic assumptions for Saskatchewan find major impacts.
The Parliamentary Budget Office’s 2021 report Beyond Paris included forecasts of sectoral emissions and GDP impacts but did not provide province-level GDP estimates. However, its estimates of large negative GDP impacts in the oil and gas sector (-10.8 per cent), compared to a national impact of -0.8 per cent, make it plain that the biggest negative economic impacts would fall on Alberta and Saskatchewan. While it may be true that jobs and income will be created by alternative opportunities, the evidence is not provided.
A Canada West Foundation report, Transparency and the Pan-Canadian Climate Framework in action in the West, assessed the Environment and Climate Change Canada’s model’s effectiveness at the provincial level. The report found that the federal models were not showing economic impacts at the provincial level, even when the models assumed an 85 per cent decline in oil production. The models did not accurately account for how provincial economies would adjust to shocks. In effect, they assumed away the problem that federal climate policies create for resource export-dependent provinces like Saskatchewan.
When a different model using realistic assumptions was applied to Saskatchewan, it showed very large impacts on the Saskatchewan economy. For instance, increasing oil exports by 25 per cent increases GDP by five per cent, while decreasing oil production by 85 per cent would reduce provincial GDP by 12 per cent — a decline similar to that experienced in the Great Depression in the 1930s. That loss of GDP would drive Saskatchewan’s population back to one million instead of reaching its goal of 1,250,000 people.All models are simplifications of reality but clearly, model assumptions matter. Without doubt, these policies will create winners and losers. The discussion about these policies should include an informed debate about what to do about that.
Gary G. Mar is president and CEO of the Canada West Foundation. Colleen Collins is vice-president at the Canada West Foundation.