No Worker Left Behind

Countries around the world are transitioning their economies to reduce carbon emissions and slow the impact of the climate crisis. In Canada, the federal government has a plan to reduce national emissions to 40% below 2005 levels by 2030. Alberta has made many positive steps toward building a clean energy future. Our province must further embrace the chance to be a clean-energy leader, or we risk being left behind as other places invest and innovate.

Albertans and Canadians need to be well-positioned to benefit from the opportunities that will arise as the world builds a low-carbon economy. All levels of government need to engage with their constituents to ensure policies will support a more equitable future for all.

Workers on the front lines of the energy transition need to lead the discussion about how best to transform Canada’s energy economy. The Canadian union movement has been instrumental in developing the concept of just transition and has considerable experience in its implementation.

The Alberta Federation of Labour (AFL) recently published an industrial blueprint on how to create 200,000 energy jobs in Alberta as we build a sustainable economy by 2050. This report weaves together key points of the AFL’s plan with insights from financial institutions and policy research groups, as well as contextualization and information provided by Parkland Institute’s February 2022 conference, “Implementing a Just Transition.”

Background: Alberta Oil and Gas Jobs, Capital Spending, and Demand

The energy transition needs to be discussed against the background of the shrinking job market in the Canadian oil and gas industry. From September 2014 through December 2022, the Canadian oil and gas industry cut 19% of its workforce — 43,548 jobs — due to structural changes and increasing automation. About 81% of these job cuts — 35,160 jobs — were in Alberta. 

There are three connected reasons for Canadian oil and gas job cuts: decreasing capital spending, increasing use of automation, and increasing use of modular facility designs. Fewer engineering, construction, operational, and office jobs are now needed to produce growing volumes of oil and gas.

Accelerating automation is arising in the context of the climate emergency which is largely caused by the burning of fossil fuels. Leading oil and gas companies are speeding up automation to lower production costs by cutting jobs because they know they will soon be competing in a shrinking market.

The International Energy Agency estimates that global oil demand will peak in the mid-2030s and global natural gas demand will peak in 2030. Demand for Alberta oil and gas is expected to meaningfully decline in the 2030s.

A 2022 forecast from the Alberta Energy Regulator (AER) indicates that throughout the 2020s, oil sands capital spending will be about 40% of the 2014 peak of $33.9 billion. For the crude oil and natural gas industries, the AER expects capital spending to be 65-70% of the 2014 peak of $26.7 billion throughout the 2020s. These levels of capital spending and the deepening automation mean that the lost jobs are probably not coming back, and more job losses are expected.

The future of Alberta’s energy industry may seem bleak. It does not need to be. In fact, building a sustainable economy is an enormous opportunity to adapt and reinvigorate our energy industry.

The AFL’s Industrial Strategy for the Energy Industry

The AFL’s industrial strategy is a proposal for an orderly transition between now and 2050 to maximize the opportunities and minimize the traumatic consequences of a disorderly transition. A disorderly transition creates a stronger likelihood for job losses and community decline.

The AFL’s strategy has three parts:

1. Maintain as much oil and gas extraction as is possible in a net-zero emissions future.
2. As much as possible, transition oil and gas production, as well as captured carbon dioxide (CO2), to feedstock for materials manufacturing.
3. Expand Alberta’s clean-energy economy — electricity, hydrogen, critical minerals and metals, sustainable aviation fuel, and geothermal — to five to 10 times the current size.

The AFL’s job creation analysis indicates their industrial strategy can create and sustain more than 200,000 energy-related jobs over the 2030-2050 period. This is 34,000 more jobs than existed in the oil and gas industry in 2014 at the height of Alberta’s oil and gas investment boom.

The AFL document estimates that Alberta’s oil and gas sector could retain at least 100,000 direct jobs in 2050, including 85,000 in hydrocarbon and CO2-based manufacturing (e.g., carbon fiber, asphalt binder, and recyclable plastics). For reference, Alberta’s oil and gas sector employed about 136,000 workers in 2022.

The hydrogen and sustainable fuel (e.g., biofuel) industries could employ 70,000 workers by 2050. Blue hydrogen is made from natural gas and supported by carbon-capture technology. Green hydrogen is made by using renewable electricity to split water into hydrogen and oxygen. Alberta has the potential to build a blue hydrogen production industry in the next decade, and the potential to transition from blue to green hydrogen in the early 2030s, when the cost of electrolysers falls. 

Clean, reliable, low-cost electricity is the foundation of the future economy. Electricity-generation capacity from non-emitting sources across Canada, including in Alberta, needs to roughly triple by 2050. Decarbonization of Alberta's grid will primarily be achieved through the use of wind and solar power. This means Alberta also needs to develop electricity-storage capacity. Storage can come from batteries and eventually green hydrogen in Alberta, and from British Columbia’s hydro dam reservoirs if new transmission lines are built connecting the two provincial grids. The AFL estimates the clean electricity sector could create 20,000 jobs by 2050.  

Alberta can become an important player in the North American critical minerals and metals industry, particularly in the mining and processing of minerals and metals and the manufacturing of battery cells and components. Investments will also be needed to install electric-vehicle charging infrastructure throughout the province. The AFL estimates 8,000 jobs can be created by 2050 in electric transportation, batteries, and critical minerals and metals.

If Alberta pursues a net-zero building strategy, then thousands of residential and commercial buildings will need to be retrofitted with rooftop solar, heat pumps, high-efficiency gas furnaces, and other energy-efficiency measures, such as improved insulation and new windows and doors. The AFL estimates 14,000 jobs can be created by 2050 in Alberta’s building-retrofit industry.

How to Pay for Alberta’s Energy Transition Job Creation Strategy

There are five revenue sources that the Government of Alberta can use to help fund the province’s public services and an energy transition job creation strategy:

1. Corporate income taxes.
2. Income taxes paid by wealthy Albertans.
3. Royalties on oil sands production.
4. Windfall profit taxes during periods of high commodity prices.
5. A new federal Just Transition Transfer to provinces and territories.

Corporate income taxes – Alberta should align with the other three western Canadian provinces by returning to a 12% corporate tax rate. If Alberta had kept a 12% rate for 2019-2021, then the provincial government would have collected $6.3 billion over this period in addition to the $11.7 billion it received.

Income taxes paid by wealthy Albertans – Alberta’s income tax system has favoured high-income earners for a long time. If Alberta set the same income tax rate as British Columbia for the top 7% of income earners — who make $131,221 a year or higher — then Alberta’s annual revenue would increase by $1.255 billion.

Royalties on oil sands production – Albertans as the resource owners are not receiving their fair share of oil sands resource wealth. Most major oil sands projects are entering post-payout status when the royalty rates are the highest, but the royalty rate only rises to 40% of the project’s net revenues when West Texas Intermediate is at $120 a barrel. Albertans should earn at least 50% of net revenues when oil prices are high, and the price for when the maximum rate applies should be $80 or $90 a barrel.

Windfall profit taxes during periods of high commodity prices – Compared to the United Kingdom’s 35% windfall profit tax on oil and gas extraction, and the European Union’s 33% windfall tax on the oil, gas, coal, and refinery sectors, the Government of Canada has proposed a modest 15% windfall tax, called the “Canada Revenue Dividend,” on the profits of banks and life-insurance companies above $1 billion in 2020 and 2021. The Parliamentary Budget Officer (PBO) estimates this measure would generate $3 billion.

The PBO estimates that applying the Canada Revenue Dividend to the oil and gas sector and to big-box stores would generate $4.4 billion. Prime Minister Trudeau has said that his government will not apply the windfall tax to the oil and gas sector and grocery stores because the cost of the tax may be passed on to consumers during a period of high inflation.

The Government of Canada’s second proposed measure is a permanent hike of the tax rate from 15% to 16.5% on the profits of banks and insurers above $100 million. The PBO estimates this measure would generate $2.3 billion over the next five years.

A new federal Just Transition Transfer to provinces and territories – The final revenue reform recommendation is a federal Just Transition Transfer payment to the provinces. Transfer payments could also be paid to First Nations, Inuit communities, and Métis settlements. The funds for the provinces would be disbursed based on emission levels. Alberta emits 38% of Canada’s greenhouse gases (GHGs), so our province would receive 38% of the funds. World Bank chief economist Nicholas Stern recommends countries spend 1-2% of gross domestic product (GDP) on the energy transition. If the federal government followed this advice in funding the Just Transition Transfer, then Alberta should receive $10 billion to $20 billion per year.

If this funding were granted over the entire proposed transition period (three decades), it would be more than enough to fund the $300 billion needed to pay for Alberta’s energy transition job creation strategy (a sum comparable to the total investments in the oil sands in the last 50 years).

 The $300 billion total does not include funding for transition programs for workers and communities, nor does it include the significant increase in funding that will be needed for post-secondary education. Fortunately, investments by the private sector would be in addition to the federal funding and would potentially increase the total by 100% or more, given the private sector is expected to contribute the most toward the energy transition because of the huge business opportunities that it presents.

 This means it should be possible for the Government of Alberta to use some of the federal transfer funds to help pay for programs for affected workers and communities, and for growing and improving universities and technical schools so they can adequately serve our workforce and societal needs.

The Government of Alberta must also contribute to the energy transition strategy alongside the federal government and the private sector. Alberta’s contribution of 1-2% of provincial GDP would be $3.356 billion to $6.712 billion per year. This is one reason why the Alberta government needs to return to a 12% corporate tax rate and to reform the oil sands royalty system so Albertans earn at least 50% of net revenues when oil prices are high.

How to Maximize the Benefits for Local Workers, Communities, and Businesses

Three strategies can ensure we maximize the local benefits of building a sustainable economy:

1. Regional development planning involving diverse stakeholders.
2. Community benefit agreements and social procurement.
3. Active labour market policies (ALMP), including a labour market development plan and increased funding for technical schools, union training centres, and universities.

Communities across Alberta have diverse assets and opportunities. Successful economic transitions require robust and community-led regional development plans. Regional plans should address local priorities and maximize the benefits going to local workers, communities, and businesses. The best way to achieve these outcomes is to develop the plans through a multistakeholder committee that includes municipal leaders, Indigenous leaders, trade unions, nonprofit groups, and business leaders from diverse industries.

Government infrastructure projects and other large development projects — whether privately funded, publicly funded, or a combination of both — should require community benefit agreements (CBAs). CBAs can address many important issues, such as ensuring government infrastructure and other large development projects employ local workers and source an agreed upon amount of local goods and services (a practice called “social procurement”).

Governments must create a labour market development plan to ensure Alberta retains and develops the workforce needed to execute our province’s energy transition industrial strategy.

The labour market development plan should:

1. Assess the likely impacts the energy transition will have on existing jobs and industries.
2. Outline the possible new job opportunities that can be created by implementing an Alberta energy transition industrial strategy.
3. Specify the ALMP the Government of Alberta must implement to retain and develop the workforce needed to grasp the opportunities that arise as we build a sustainable economy.
4. Envision the types of programs, outreach, and recruitment needed to diversify our workforce and ensure workers from equity-seeking groups can fairly benefit from the opportunities arising from Alberta’s energy transition strategy.

Vocational and skills training will be critical to the success of Alberta’s labour market development plan and energy transition job creation strategy. This will require increased funding to technical schools, union training centres, and universities.

Conclusion

The energy transition will involve some big challenges for Alberta and Canada. Alongside the challenges, there will be tremendous opportunities for Alberta workers, communities, and businesses. Alberta has a highly trained and experienced workforce. Many future jobs require skills Alberta workers already have, though for certain workers some retraining will be necessary. Many workers have transferable skills that are needed and in high demand in the new, low-carbon energy economy. There are and there will be tremendous job opportunities for young people who receive training in the trades, data science, and information technology. With a growing and aging population, there will also be significant demand for public sector workers in K-12 education, post-secondary education, health care, childcare, seniors care, public administration, career and employment services, urban and regional planning, land stewardship, and other fields.

Analysis of a recent economic model indicates that regardless of the path that Canada takes to reach net-zero emissions, Alberta’s economy is expected to grow. There will be some challenges if a faster restructuring of Alberta’s economy occurs in the coming years. The oil sands industry would play a smaller role, but our provincial economy would likely also be more diversified and resilient because of growth in sectors outside of oil and gas, like information technology, services, agriculture, and manufacturing. Diversification will also likely build on Alberta’s existing oil and gas resources and strengths, such as increasing investments and jobs in petrochemicals, biofuels, and hydrogen.

We should be hopeful, optimistic, and community-minded as Alberta and Canada work to maximize the benefits of building a sustainable economy and minimize the risks of failing to transition. We can achieve great things if we work together, and we have many competitive advantages if we plan and act quickly and decisively.