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Alberta's Coal Phase-Out

A Just Transition?

Alberta's Coal Phase-Out: A Just Transition?

This report explains that Alberta will have little coal-fired electricity left by the end of 2023, six years ahead of the federally mandated coal phase-out deadline of December 31, 2029. This relatively rapid transition away from coal power is the result of numerous decisions made since 2007 by various provincial and federal governments, a few arms-length agencies of the Alberta government, and several large publicly traded corporations that produce electricity for the Alberta market. Our report aims to evaluate Alberta’s electricity transition to date against principles and lessons gleaned from the just transition literature.

Following the introduction, the report proceeds as follows. In Section 2, we provide an overview of Alberta’s coal power industry, communities, and workforce. In Section 3, we delineate key principles and lessons from the just transition literature. In Section 4, we present case studies on the three companies affected by the Notley government’s accelerated coal phase-out (TransAlta, ATCO, and Capital Power). We examine the Notley government’s transition programs for coal workers in Section 5 and for coal communities in Section 6. Section 6 also includes a case study of Parkland County, which is the municipal district in Alberta perhaps most affected by the phase-out of coal-fired electricity. In Section 7, we provide an analytic discussion of our research results by evaluating the government’s transition programs against the key principles and lessons drawn from the just transition literature. In Section 8, we outline our conclusions based on the research results.

Overview of Alberta’s Coal Power Industry, Communities, and Workforce

Coal’s dominance in Alberta’s electricity market has steadily declined since the late 1980s, when coal plants provided over 80% of Alberta’s electricity. Coal power was over 50% of Alberta’s installed capacity in 2015 when the Alberta New Democratic Party (NDP) government was elected. In March 2019, at the end of the NDP government’s mandate, coal plants only provided 35.5% of Alberta’s electricity, while gas plants supplied 47.2%, wind facilities provided 9%, hydroelectric added 5.6%, and 2.7% came from other sources.

Alberta has had a deregulated electricity market since 2000, and most power generating facilities in the province are privately owned. In 2017, the entire electricity industry employed 2% of Alberta’s workforce and produced 1% of the province’s gross domestic product, yet, because of the heavy reliance on coal power, the industry was responsible for 17% of Alberta’s annual greenhouse gas (GHG) emissions. The prevalence of coal power in the province has resulted in Alberta cities having among the worst air quality in Canada.

There are 20 municipalities and First Nations impacted by the coal phase-out in Alberta. Most are rural communities, and a few are larger towns that are bedroom communities of Edmonton.

Key Principles and Lessons from the Just Transition Literature

Without deliberate and coordinated action, the workers and communities most dependent on fossil fuel extraction shoulder a disproportionate share of the challenges of the energy transition. Calls for a just transition are thus rooted in the understanding that an equitable climate policy agenda must dismantle existing social inequalities and prioritize the well-being of both workers and their communities. At a bare minimum, just transition is about ensuring that the costs of climate change are distributed more equally.

While there is no single approach to just transition, there are some common values and approaches expressed in the just transition literature.

The transition strategies employed will be different for each workforce, but many are found consistently throughout the just transition literature, including support for re-employment or alternative employment, income and benefit support, pension bridging and early retirement assistance, and retraining and educational programs.

What a just transition looks like will vary from community to community, which is why local leadership is critical in the process. Just transition policies must anticipate the consequences of the energy transition on fossil fuel-dependent communities. Key to local community adaptation is the ability to count on the provincial and federal governments to produce clear timelines and plans for the wind-down of facilities, so workers and communities can prepare for the changes.

Public investments in support of economic diversification are fundamental to a just transition. In the initial phase of transition, public investments in local infrastructure projects can help provide jobs and the necessary infrastructure that local communities need to transition to being more sustainable and resilient in the face of increasing climate instability.

Rather than limiting one’s scope to renewable energy development alone, economic development plans should also include investments in energy efficiency measures and in already-low-carbon sectors of the economy, such as health care and education. Renewable energy generation, energy efficiency, and public sector provision are labour-intensive and local, and therefore should be prioritized in the transition away from a fossil-fuel-based economy.

While the public sector is essential to both leading and directing a just transition, the private sector must also contribute to the process. For example, preferential hiring is seen as a way of smoothly transitioning some workers from one job to another within the same company. Employers must also fulfill obligations to their employees, such as issuing records of employment and fulfilling pension obligations. As such, employers have a role to play in certain just transition processes, such as bridging workers to retirement.

Worksite-specific transition plans must be developed and executed under a larger just transition framework. This larger framework will fail to adequately protect workers and communities if it does not take worksite-specific data into account. Various government officials must therefore be given access to data on companies’ workforces and future business plans in order to create plans that include whether workers can be transitioned from one business segment to another in the same company, or temporarily absorbed into future capital projects.

The Transition of Alberta’s Coal Power Companies

Federal regulations announced by Stephen Harper’s Conservative federal government in 2012 mean 12 of Alberta’s 18 coal-fired electricity units must be retired by 2029 (some of the coal units can now be converted to gas because of regulations passed by Justin Trudeau’s Liberal government in 2018). In 2015, Rachel Notley’s Alberta NDP government accelerated the phase-out of the province’s six youngest coal units (the ones not affected by the Harper government’s regulations). In 2015, TransAlta, ATCO, and Capital Power owned the six units.

The Notley government wanted to avoid stranded capital as a result of the accelerated coal phase-out, so it entered into discussions with the three companies. In November 2016, the Notley government announced the Off-Coal Agreements with the companies, which will see the provincial government compensate the three corporations a total of $1.36 billion over 14 years (2017–2030), with the funds coming from the province’s carbon tax on large industrial emitters.

The Off-Coal Agreements are confidential, so details other than the level of compensation to the firms are not publicly known. Some general details have been made public; for example, the three companies agreed to keep their headquarters and a small number of employees in Alberta, and to keep investing in the province’s power system. The extent of these employment and spending commitments is unknown, but decisions made by the companies since November 2016 seem to indicate that the commitments made by the firms to the Government of Alberta are not overly onerous or restrictive.

In mid-2017, ATCO and TransAlta—the two biggest coal power producers in Alberta in 2016—announced plans to convert their coal units to natural gas before the 2029 federal deadline. ATCO said it would convert its units by 2020, and TransAlta said it would do the same by the end of 2023. In 2018, ATCO changed business strategies and decided to substantially reduce its profile as an electricity producer. In mid-2019, the company sold all of its Canadian-based fossil-fuel electricity assets, including nine generating units in Alberta.

Capital Power, on the other hand, initially said in 2016 that it would continue to operate its three Genesee coal units until 2029 and then it would convert them to gas. In 2017, the firm changed strategies to dramatically reduce its use of coal by the end of 2023. In total, 14 of Alberta’s 18 coal units will be converted to gas by 2029.

Since the Notley government announced the acceleration of the coal phase-out in 2015, TransAlta had net earnings in 2016 of $276 million (11.5% net profit) and net losses in 2017 of $118 million (5.1% net loss) and in 2018 of $90 million (4% net loss). Of the three companies that we studied, TransAlta is the only one with net losses in 2017 and 2018. This is at least in part because TransAlta has the most coal units to convert or retire of the three firms. TransAlta terminated a net total of 497 jobs in 2016–2018 (20.9% of their workforce).

In 2017, TransAlta released almost 30 million tonnes of carbon pollution, an increase of 7.6% since 2011. In 2018, the firm retired two coal units and temporarily mothballed two more. These operational changes resulted in the elimination of over nine million tonnes of annual carbon pollution, or about 30% of the firm’s annual GHG emissions.

ATCO had net earnings in 2016 of $675 million (16.7% net profit), in 2017 of $493 million (10.7% net profit), and in 2018 of $671 million (13.7% net profit). ATCO terminated a net total of 1,305 jobs in 2016–2018 (17.3% of their workforce). ATCO’s GHG emissions were almost 11 million tonnes in 2018, a decrease of 30% since 2011. This is likely the result of ATCO decreasing its use of coal.

Capital Power had net earnings in 2016 of $102 million (8.4% net profit), in 2017 of $134 million (11.7%), and in 2018 of $267 million (19.2% net profit). The company added a net total of 134 jobs in 2016–2018 (growing their workforce by 19.7%). Capital Power’s annual GHG emissions increased 8% from 2013 to 2017 because the firm became more reliant on coal. As of October 3, 2019, Capital Power has yet to publish its GHG emissions data for 2018.

Alberta’s Transition Programs for Coal Workers

Based on the recommendations of an advisory panel, the Notley government announced the creation of a $40-million transition fund to finance several support programs for the province’s coal workers. The programs began to operate in January 2018, and consist of six components:

  1. A bridge to re-employment relief grant;
  2. A bridge to retirement relief grant;
  3. Reimbursement for moving expenses for workers who have to move for a new job;
  4. A tuition voucher if workers wish to retrain within five years of being laid off;
  5. Career consultants and employment service providers were made available to assist workers in their transition;
  6. The provincial government provided employers and unions with a list of qualified facilitators who can be hired to assist employers, workers, and unions with setting up a workforce adjustment committee to create plans for individual worksites.

There were about 3,100 thermal coal jobs in Alberta in 2017. Of these, about 2,480 are in coal mining and processing, and all of these jobs are likely to be terminated by 2029. We estimate an additional 410 power plant jobs will be terminated by 2029. This is because gas plants require just one-third of the labour of coal plants. Based on the coal-to-gas conversion plans of the three impacted companies, most of these estimated 2,890 layoffs are likely to occur by 2023.

Offsetting these layoffs are the job creation estimates associated with increasing renewable power generation and energy efficiency measures and with converting 14 of the 18 coal units to gas. The coal-to-gas conversions are estimated to require $15 billion in private investments, and this investment could create 15,000 full-time equivalent jobs. Over 14 years (2017–2030), converting the generating units will create on average about 1,070 full-time jobs per year.

In 2016, a Pembina Institute report estimated an employment potential of 900 to 2,500 full-time equivalents per year for 2017–2030 related to ramping up to 30% renewable generation by 2030 and increasing energy efficiency. We estimate that about 300 of these annual full-time equivalent jobs would have been created in the upstream renewable energy industry outside of Alberta. 6

In sum, if Alberta continued with the former NDP government’s plans to increase renewable energy and energy efficiency and with the electricity firms’ plans to convert most of their coal facilities to gas, the estimated total number of jobs created by all of this economic activity would be between 1,970 and 3,570 annual full-time equivalent jobs, which is roughly comparable to the estimated 2,890 coal jobs that the province will lose by 2030.

Alberta’s Transition Programs for Coal Communities

Acting on a recommendation of its advisory panel, in September 2017 the Alberta NDP government announced a $5-million Coal Community Transition Fund. The provincial government announced in March 2018 that 12 projects in 17 coal communities had been funded, exhausting the full funding allocation.

In November 2018, the NDP government announced $200 million over the next 20 years for the Community Generation Program to support small-scale, locally generated electricity projects. Up to $50 million of the total funding envelope was earmarked to support projects in communities affected by the coal phase-out. In late May 2019, the new United Conservative Party (UCP) provincial government canceled the program.

Parkland County Case Study

Alberta coal communities have experienced significant change in the two years since the Coal Community Transition Fund was announced, let alone in the seven years since the Harper government’s 2012 coal-fired electricity regulations were announced. One way to examine how larger political and economic changes are affecting a local coal community is to research a municipal case study. We chose to develop a case study on the municipal district of Parkland County because it is likely the community most affected by the coal phase-out in Alberta.

Parkland County is a municipal district of over 30,000 residents west of Edmonton that includes Stony Plain and Spruce Grove (which are governed as separate municipalities). Parkland County is an interesting case study because it is part rural and part urban, and in 2015 nine of the 18 coal units in Alberta were located in the rural part of the county.

In 2017, TransAlta accounted for about a quarter of Parkland County’s annual tax revenue, or almost 10% of the county’s total annual revenue. TransAlta has also been the largest employer in Parkland County in recent years.

In August 2017, Parkland County Mayor Rod Shaigec asserted that the coal phase-out could result in $2 million per year in lost property tax revenue for the municipal district. Parkland County’s budget in both 2017 and 2018 was about $158 million. In 2019, the county’s budget is about $150 million, a 5.5% overall reduction. About $4 million of the revenue shortfall was cut from the operating budget, for a 3.75% cut to municipal operations.

Parkland County has already lost over 300 jobs at the Highvale Mine, and could lose up to another 700 coal mining and power plant jobs because of the coal phase-out. TransAlta, the owner of the Highvale Mine, plans to build Sundance 7, a new gas-fired generating unit, in Parkland County from 2020 to 2022. The company estimates the project will generate 400–600 construction jobs. Since 2018, Parkland County has also attracted significant private investments in pet food manufacturing, renewable energy, and leisure. The county is also working to expand opportunities in agriculture and related value-added industries.

In January 2019, the Alberta NDP government announced two highway construction projects in Parkland County. The two projects will cost a total of $155-195 million, and they will support 800 direct and indirect jobs.

In June 2019, the federal Liberal government announced it was granting Parkland County $2.2 million to develop the Tri-Region’s regional plan with Stony Plain and Spruce Grove. The funding is part of the $35-million Canada Coal Transition Initiative announced in 2018.

Analytic Discussion of the Research Results

The transition programs developed and implemented by the Alberta NDP government cover the main components of a just transition: bridge to re-employment grants, bridge to retirement grants, funds for moving expenses, tuition vouchers for workers who decide to return to school, career and employment consulting services, and multi-stakeholder workforce adjustment committees to create tailored transition plans for individual workers.

The just transition literature emphasizes the need for governments to fund retraining and education programs for displaced workers. These programs should include both skills development and career counselling to support workers through the process of transition, and this is the case for the Alberta transition programs implemented in January 2018.

The federal government is also supporting skills development and economic diversification projects through the $35-million Canada Coal Transition Initiative, announced as part of the 2018 federal budget. In 2019, $6.8 million of these funds were committed to Alberta coal communities to support the transition away from coal power.

The just transition literature also stresses the importance of provincial and national renewable energy programs as part of an industrial development and job creation strategy that guides the transition to a low carbon economy. Neither the Alberta nor the federal governments have developed a comprehensive green industrial strategy to date that would help absorb considerable numbers of laid-off coal power workers into renewable energy and other low-carbon sectors.

Local communities and governments in Alberta were consulted by the provincial government about the coal phase-out and given an opportunity to decide for themselves what transition looks like for them. Our municipal case study shows that Parkland County identified public infrastructure improvements that would enable the county to attract more private capital investment and job creation. Parkland County’s transition strategy aligns with the just transition principle that improved public infrastructure is one way that the benefits of a just energy transition can be accorded to the whole local community, not just the directly affected workers.

As mentioned above, in January 2019, the Alberta NDP government approved two highway construction projects in Parkland County. Two months later, the 2019 federal budget created a $120 million infrastructure fund over four years. Each year beginning in 2020, $21 million will go to Western Economic Diversification Canada to support economic diversification in Western Canadian coal power communities. Alberta coal communities can expect to receive a significant portion of this infrastructure funding in the next four years.

An important reason to transition away from coal power is the health benefits. Alberta residents, particularly those in the Edmonton metropolitan region, will have cleaner air with the retirement or conversion of most of the coal generating units set to occur by the end of 2023. Along with improving Albertans’ health, the transition away from coal could save Alberta’s public health care system an estimated $300 million per year related to poor air quality due to coal-fired electricity generation. However, most of the coal capacity will be replaced by gas facilities, so the Alberta electricity sector may still produce an estimated 25 million tonnes of annual carbon pollution in 2030 (down from 45.2 million tonnes in 2016), and this will contribute to global warming and thus adversely affect the natural environment and communities.

The just transition literature emphasizes that strong public services are needed to support diverse, low carbon, labour-intensive industries. However, Parkland County’s 2019 budget included a 3.75% cut to municipal operations because of reduced business property tax revenue related to the coal phase-out. On top of the financial strain placed on coal communities in the last two years, the UCP’s 2019 budget reduced capital grants for municipalities and cut spending on provincial public services.

Private employers must be involved in the energy transition planning and implementation process, and this has been the case in Alberta. Workforce adjustment committees that involve companies, labour unions, and other stakeholders are and will continue to operate at affected worksites to enable the smoothest transition possible for workers to another job, retraining, or retirement. This type of multi-stakeholder work to develop and implement tailored plans for specific worksites and workers is critical to the success of any just transition process.

Alberta Labour spokespeople told us that TransAlta, ATCO, and Capital Power have given the provincial government access to data about the companies’ workforces. Data sharing like this is important for any just transition involving private employers and has helped the Government of Alberta plan and rollout its transition programs for workers and communities. Given this data has not been publicly released, it is impossible for us to say how many affected coal workers will be able to transition to another business segment of their employer’s operations. This type of preferential hiring by employers is an important way to ensure a smooth transition for some workers.

Most of Alberta’s coal units will be converted to burning gas by 2023. This will financially benefit electricity producers because it enables the businesses to save on carbon costs and to reduce their workforces. Indeed, all three Alberta-based power companies affected by the federal and provincial governments’ accelerated coal phase-out are speeding up the transition even more than is required because it makes financial sense to do so.

While the choice by the Alberta and federal governments, via their regulatory and financial decisions, of a strategy to largely transition Alberta’s electricity sector from coal power to gas power is in the private interest of the electricity companies, it is not in the public interest of Albertans and Canadians. Alberta’s electricity sector may still annually produce 25 million tonnes of carbon dioxide equivalent emissions in 2030 because of the domination of gas-fired generation. Therefore, Alberta’s coal phase-out and increased use of gas-fired generation has undermined the central objective of the coal phase-out: the creation of deep GHG emissions cuts.

While it is true that natural gas produces less GHG emissions per unit of energy than both oil and coal, its release of methane—an even-more-potent GHG than carbon dioxide—results in a longer emissions life cycle than other fossil fuels. In short, natural gas is not a climate change solution. Rather, in acknowledging the reality that all fossil fuels must be phase-out by mid-century, it becomes clear that long-term investments in natural gas are misguided. Alberta’s and Canada’s climate targets and commitments mean that we must reduce gas combustion, not increase it.

Prior to its cancellation by the UCP government, Alberta’s Renewable Energy Program (REP) ran three competitive auctions that set record low prices for new renewable electricity capacity in the province. It is still early in the energy transition process, and restarting the REP would be a cost-effective way for Alberta to ramp up renewable generating capacity in the coming years.

Conclusion

The Off-Coal Agreements between the Government of Alberta and TransAlta, ATCO, and Capital Power, as well as the federal regulations on coal plants, provide two backstops for the coal phase-out and mean it is unlikely to be rolled back by the UCP or a future provincial government (though most of the phase-out will be complete before the 2023 Alberta election).

It seems likely that Alberta municipalities and First Nations affected by the coal phase-out will need further support from the provincial and federal governments as the transition to gas-fired and renewable energy continues in the coming years. After all, for decades these communities have relied heavily on coal power plants and their associated mines as substantial sources of property tax revenue and family-sustaining jobs.

This report is part of the Corporate Mapping Project, a research and public engagement initiative investigating the power of the fossil fuel industry in Western Canada. The CMP is jointly led by the University of Victoria, the Canadian Centre for Policy Alternatives, and Parkland Institute. This research was supported by the Social Science and Humanities Research Council of Canada (SSHRC).

ISBN: 978-1-894949-70-5

Emma Jackson

Emma Jackson is a settler on Treaty 6 land, where she recently completed her MA in sociology at the University of Alberta. Her research interests include feminist political economy, transnational migration, and geographies of resource extraction. Emma has a degree in geography from Mount Allison University, and over four years experience as a student organizer with the Canadian fossil fuel divestment movement. She was a research assistant at Parkland Institute for the SSHRC-funded Corporate Mapping Project from September 2016 through December 2018.

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Ian Hussey

Ian Hussey is a research manager at Parkland Institute. He is also a steering committee member and the Alberta research manager for the SSHRCC-funded Corporate Mapping Project. Before joining Parkland Institute, Ian worked for several international development organizations, including as the co-founder and executive director of the Canadian Fair Trade Network. Ian holds BA Honours degrees in Sociology and in English from Acadia University, an MA in Sociology from the University of Victoria, and his PhD courses and exams at York University focused on the sociology of colonialism and on political economy. His writing has appeared in the Globe and Mail, New Political Economy, Edmonton Journal, National Observer, and The Tyee.

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