Canada’s oil industry is one of the dirtiest in the world. The oil sands in the northern nation’s Alberta province represent the fourth largest proven oil reserve in the world, but they don’t produce normal oil. Instead, they produce a naturally occurring tar-like crude bitumen which is particularly ecologically unfriendly to extract, process, and consume. Because of the particularly weighty negative externalities associated with the oil sands, investors, banks, and major oil companies have been shying away from Albertan projects for years now.
But that doesn’t mean that production has waned – far from it. The tar sands are on track to produce more oil than ever, and experts predict that they will continue producing for at least another two decades. In spite of major pushback from both private and public sectors, demand for energy is high and growing higher as Russia’s war in Ukraine drags on and China begins to reopen after easing its stringent Zero Covid Policy. Put simply, in the words of the Wall Street Journal, “so long as existing oil fields—no matter their carbon footprint—remain profitable, they are likely to remain in production long after big-name multinational companies walk away.”
Unless the government steps in, that is. And that’s exactly what left-leaning Canadian Prime Minister Justin Trudeau is trying to do. Trudeau has been battling the Alberta oil industry for years now over production and emissions cuts (notably, Canada has missed every emissions benchmark it’s ever set). He’s also been battling his fellow liberals, who argue that he’s been too lenient on the oil sands and too unwilling to strong-arm the sector into decarbonization, if not outright duplicitous. Now, Trudeau’s administration is finally working on pushing through a Just Transition bill, originally promised in 2019, which is aimed at easing the transition away from an oil-based economy by “helping workers and communities thrive in a net-zero carbon economy.”
This latest move has sparked outrage in the oil patch, as union and community leaders argue that the bill that claims to support the 185,000 workers in the Canadian oil and gas sector is not actually in their best interest at all. With a provincial election coming up in May, Albertan politicians have been swift to publicly decry the move from the federal government. "When I hear the words "Just Transition" it signals eliminating jobs and for Alberta, that is a non-starter!" Alberta's Conservative Premier Danielle Smith tweeted last week. The government of Alberta has also railed against the bill, claiming that it aims to dismantle the province’s oil and gas sector altogether, which currently provides 5% of the nation’s GDP.
Others argue that the bill, if done right, is exactly what is needed to bring the Canadian energy sector out of the oil sands and into the 21st century. The oil and gas workforce is already shrinking, 14% smaller now than its 2014 peak of 225,900 workers. The tar sands themselves are a global pariah as supermajors and investment banks seek to decarbonize their portfolios. Even if they hang onto other oil and gas holdings, the oil sands are an obvious first project to drop due to their disproportionate negative environmental externalities.
Proponents argue that clean energy investment has already taken off in Alberta, now all it needs is momentum. And that could easily come in the form of the Just Transition bill if it’s optimized. According to Gil McGowan, President of the Alberta Federation of Labour (AFL), optimization would more or less mean modeling the bill off of the United States’ Inflation Reduction Act, which boasts $430-billion green energy subsidies.
Passing a quasi-Inflation Reduction Act in Canada will probably be as difficult in Canada as it was in the United States – which is to say, very. The U.S. act is actually a slimmed-down version of the Build Back Better Act, which died on the senate floor thanks to West Virginia senator Joe Manchin, who represents an extremely petro-protectionist constituency where oil, gas, and coal are the backbone of the local economy (sound familiar, Alberta?). While politics are rarely certain on either side of the border, one thing is guaranteed: if Trudeau is unable to push through some sort of energy transition legislature, Canada will continue missing its emissions targets.
By Haley Zaremba for Oilprice.com
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