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As Alberta's NDP government grapples with a cratering economy while simultaneously pondering ways to help burnish the province's tawdry environmental image, debate inside Premier Rachel Notley's administration has been guided somewhat by an existential question: Why are we here?
A story that appeared in The Globe and Mail this summer has been making the rounds among senior advisers in the Notley government. The piece examines Norway's $1-trillion, oil-financed sovereign wealth fund and contrasts it with the relatively meagre amount ($15-billion) Alberta has amassed in its Heritage trust fund. But it is a quote in the story that has put into sharp focus the fork in the road the province faces.
"Do you want to have this [oil production] benefit the generation that happens to be around while this is happening, or do you want to distribute the gains over multiple generations?" Leo de Bever, the respected former head of the Alberta Investment Management Corp., asks in the story.
"It depends," he continues, "on whether you are concerned with a geographical entity called Alberta and its long-term future after oil or whether you think we're all sort of camping out and when the oil runs out we're going to pick up stakes and move somewhere else."
Most Albertans would say the answer to that question is obvious: It's the obligation of current generations to leave the province in as good – or better – shape for future cohorts as it is in now. And yet when it comes to oil sands development and its impact on the environment, there were few inroads made in the past 40-plus years of Progressive Conservative rule to make a transition to a lower-carbon economy. This is what Ms. Notley and her government are talking about doing and it has the petroleum industry petrified.
As you might expect with a social democratic government, there are conflicting opinions about the pace at which the NDP should push change. One camp inside government suggests Ms. Notley go slow, a process that could still result in historical reforms, but not at the complete cost of oil and gas community support. That approach would inevitably disappoint others who believe the party has a rare opportunity to bring in bold, progressive amendments that would gain the province much-needed international environmental cred and help the economy in the future.
By hiking corporate tax rates 20 per cent, Ms. Notley has already shown she is not about to let the current fiscal climate scare her off all of her campaign pledges. But the environmental transformations being considered are the ones that really have the oil patch nervous, especially the talk about pricing carbon.
Two options the government is examining are joining Ontario and Quebec's cap-and-trade system and introducing a wide-ranging carbon tax such as the one brought in by the B.C. government in 2008.
Early indications are the cap-and-trade model does not have enormous appeal. The two central Canadian provinces in it are relatively low carbon emitters. Consequently, there would seem to be little incentive for Alberta to join a scheme that would involve it buying carbon credits from Ontario and Quebec. This would result in a massive transfer of capital out of the province; money that could be better used helping to diversify the economy.
B.C.'s revenue-neutral carbon tax, which applies to industry and the public alike, would seem more attractive. It is now set at $30 a tonne and brings in about $1-billion annually, which the government has used to lower other taxes. While the tax has helped to reduce carbon emissions somewhat, most modelling suggests it alone will not be enough to help B.C. meet its 2020 GHG emission targets. (B.C.'s goal is a 33-per-cent reduction of GHG emission below 2007 levels by the end of the decade.)
It certainly is plausible a similarly structured carbon tax will be an option proposed by the Alberta government's panel on climate change, being headed up by University of Alberta energy professor Andrew Leach. The panel is due to report at the end of October. But as Mr. Leach told me recently, there is no quick fix to the climate question.
"There isn't a panacea here," he said in an interview. "Understanding the consequences of our policies, getting that cost-benefit analysis right, those are the most difficult parts of our challenge. It's not just an oil sands problem – it's a consumer price problem. It's exposure to low-income consumers given the current economic climate."
Mr. Leach wants to avoid the deep chasm that exists in parts of Canada between environmental climate policy and reduction targets and results. There is no point in announcing goals, he said, without having regulatory change assured to make it happen.