By Robert Roach
A new discussion paper from Canada West Foundation outlines the importance of the oil and gas industry to the Canadian economy and asks readers to take this into account when debating how to address greenhouse emissions in Canada.
Look Before You Leap: Oil and Gas, the Western Canadian Economy and National Prosperity (a free copy is available at
cwf.ca) argues that the idea that economic pain in one region will not spill over into the rest of the country is naïve. If the oil and gas industry is hamstrung by poorly designed climate policy, the whole country will feel the negative economic effects.
Our report is not saying that addressing greenhouse gas emissions is less important than economic considerations. But it does argue that climate policy should recognize the economic costs that will be incurred if the oil and gas industry is unduly targeted and that we should take proactive steps to avoid them.
Economic pain would be widespread
Western Canada’s economy is intimately linked to the rest of Canada’s economy. At the same time, the oil and gas industry is a key driver of the western economy as well as a major economic stimulus across Canada.
Highlighting the economic costs of climate policies that would undercut Canada’s oil and gas industry does not resolve the debate. But it does clarify the stakes and put pressure on policy-makers to do more than cross their fingers and hope that the economic pain is contained to places like Alberta and Saskatchewan.
In 2008, the 30.6 per cent of the Canadian population living in the four western provinces accounted for 37.5 per cent of the country’s GDP. This over-performance has helped keep the national economy growing and Ottawa’s coffers full enough to pay for programs like equalization.
The oil and gas sector is far from the only reason for the region’s economic success, but it is a key factor. It is estimated that the oil and gas industry will add $3.5 trillion to Canada’s GDP over the next 25 years.
The West, however, accounts for over half of Canada’s GHG emissions. This raises a fundamental challenge: How do we curb GHG emissions without compromising the national economic benefits and wealth redistribution made possible by the western Canadian economy?
Having our cake and eating it too
Some will say the answer is “you can’t.” Others will argue that the green economy will fill in the void left behind by a hobbled oil and gas sector. Maybe it will, maybe it won’t, but either way, replacing an industry as fundamental as oil and gas will take time.
At the Canada West Foundation, we feel that we can have our cake and eat it too – that we can put our heads together and come up with climate policy that does not single-out one industry and cast it as the villain while still reducing GHG emissions.
The impetus for this is that Canadians in all parts of the country stand to lose if the oil and gas sector withers under the hand of badly designed climate policy. We are all in this together. The more we realize this, the less likely it will be that bad policy will be created.
