It seems almost inevitable that the Canadian government will bail out (once again) the oil and gas sector. But should governments around the world give bailouts to the wealthiest and most polluting industry in our economy?
“A smart response to this emergency could go a long way to addressing the larger ecological crisis looming on the horizon,” writes The Narwhal. Worldwide, the International Energy Agency is calling for governments to take into account climate challenges when designing stimulus and support packages. “This situation is a test of governments and companies’ commitment to clean energy transitions,” wrote executive director Fatih Birol.
Does a Fossil Bailout Make Sense?
In his recent article (first published in Policy Options and The Energy Mix) Mitchell Beer shows how the pandemic response must mobilize around low carbon solutions.
With the coronavirus pandemic devastating the global economy and pushing world oil prices over a cliff, the federal government has two potential options in dealing with the oil and gas industry. It can give in to the predictable lobbying from fossil fuel interests, or it can use the virtual shutdown of the economy for industry mobilization.
[Recently] Prime Minister Justin Trudeau passed a package of “extraordinary” measures, including $55 billion in business supports, aimed at keeping the Canadian economy afloat while the country largely shuts down to slow the spread of the virus. Right on cue, the prospect of a massive oil and gas bailout emerged as a widely touted, seemingly inevitable next step.
Calls for a fossil bailout began circulating, with the Alberta government and 65 of that province’s CEOs pitching Ottawa on a $15-billion industry relief plan, including share purchases for distressed oil and gas companies and a suspension of the federal carbon tax.
Wisely, federal officials signaled that Ottawa’s priority was to help out unemployed oil and gas workers, while directing funds to rehabilitate a backlog of abandoned oil wells that would otherwise take up to 2,800 years to clean and cost $260 billion in Alberta alone.
“We know the oil and gas sector has been particularly affected, and specific help is needed,” said Carlene Variyan, communications director to Natural Resources Minister Seamus O’Regan. “We’re looking at all options—including helping maintain jobs in the industry by enabling workers to put their skills to use remediating the environmental liabilities associated with orphan wells.”
Should bailouts be linked to net-zero 2050 target?
The government appears to know what to do. December’s Throne Speech, which has been eclipsed by the pandemic, set a 2050 deadline for Canada to achieve net-zero emissions, supported by new initiatives on energy-efficient buildings, zero-emission vehicles, “clean, affordable power”, cleantech investment and climate adaptation.
Before the 2019 election, a two-member Advisory Council on Climate Action urged federal action on a zero-emission vehicle mandate and deep energy retrofits. One of the council co-chairs, Steven Guilbeault, now sits at the cabinet table as Minister of Canadian Heritage.
None of this is to suggest that Ottawa can or should be distracted from its most immediate priority: “flattening the curve” on the spread of the coronavirus.
But protecting the country and stabilizing the economy is not synonymous with shoring up a declining industry that has lost the confidence of international investors, currently loses money on every barrel of oil it produces, and accounts for a massive proportion of the country’s greenhouse gas emissions.
That’s where Ottawa’s other option comes in. It begins with the industrial mobilization Trudeau has already announced, to deliver the rapid testing capacity, ventilators, masks and gowns the health system needs to confront the immediate crisis. But after that, there are other legitimate needs and important supply chains that can stabilize jobs in every region of the country, while setting the economy up for a quick rebound after the pandemic is under control.
Ottawa can begin tapping into those opportunities by:
Staying the course: O’Regan and Finance Minister Bill Morneau should stand their ground on directing any new oilpatch funding to workers and environmental remediation, not company buyouts. Politicians of most partisan stripes like to argue that governments shouldn’t pick winners and losers in a free market. This isn’t the time to bail out small and medium companies that have already enjoyed years of outlandish government subsidies and tax breaks.
Designing an orphan well program that works: Canadians rightly expect value for money when investing public funds. That means dollars for the orphan well program need independent oversight to deliver real jobs and real results. In the best of worlds, delinquent fossil producers would have cleaned up their own mess rather than leaving as many as 343,000 abandoned wells behind. As it stands, it might take a creative federal response to a solution that really falls (and, so far, fails) under provincial jurisdiction to get the work done and the jobs created.
Investing in low-carbon jobs: In the fall 2019 election that now feels like ancient history, the Liberal Party platform promised interest-free loans of up to $40,000 to support energy retrofits in 1.5 million homes. The intent was good, but the numbers may have been off—we need far more retrofits, and the cost could be much lower. Nearly a decade ago, builders in Windsor, Ontario brought costs down from $85,000 to $10,700 per home, by combining 95 retrofits in a single project. In the age of coronavirus, social distancing has shut down most construction sites. But deep energy retrofits require new skills for a small army of contractors and tradespeople and quickly ramping up e-training creates worthy, needed jobs for community colleges and construction teams. A period of social isolation is exactly the right time to double down on that work.
Fighting two epidemics at once: Rural communities are hurting as badly as urban ones and many of them were in more tenuous shape before the pandemic hit. In February, the co-founder of Canada’s first mental health organization run by and for farmers was shocked to see more than 400 people show up for a public meeting in Edmonton — and to learn that most of them knew a farmer who had taken their own life. The farm mental health crisis is often about deep economic uncertainty made worse by climate-driven weather extremes. Investing now in agriculture extension services and income supports for proven, sustainable, less carbon-intensive practices will make farms more resilient and food supplies more secure, help stabilize rural economies and protect Canadians whose lives were already at risk before COVID-19 arrived.
All these measures deliver cash infusions to help stabilize jobs and incomes during the pandemic. They all strengthen essential building blocks for a more stable, diversified, resilient economy which will be with us long after oil and gas enters its inevitable managed decline.
In the end, putting carbon solutions and community resilience at the heart of Canada’s pandemic response is about value for money. It’s a reliable path to investing in Canadians, especially the most vulnerable among us and not corporate bailouts. As much as any other moment in living memory, this pandemic demands solidarity. Ottawa has an opportunity to meet today’s urgent need, while taking a significant step towards the future economy it already wants to build.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.