Addressing climate change: Still fretting over the skin in the game problem

I followed the coverage of the new federal government climate change plan this week with some interest.  My general view is that it was mostly met with a shrug.  There were a few dire warnings in the National Post and the media was able to scrounge around and find a few experts suggesting it was not nearly enough.  They want a Denmark-style elimination of all oil and gas extraction by 2050 (unlike the UK, Norway and others who at least as of now expect to be pumping away in 2050).

My main concern – as an economic development guy – remains the skin in the game problem.  If the Prime Minister had announced Ontario – or how about Quebec? – would lose one-third of its GDP by 2050 with no clear path forward, I suspect this news would have been met with much more consternation.

If the PM had guaranteed that Alberta, Newfoundland and Saskatchewan would be made ‘whole’ by 2050 – in other words we guarantee we will replace that lost GDP with equally high value economic activity, no one would have been fussed.  Of course no one could make this guarantee but as I have said before when you have winners and losers in national policy decisions there is an obligation on the part of the national government to help with the transition.

The simplest solution – as I have written before – would be to count up all the lost revenue over the next 50-60 years or more to AB, SK and NL and cut them a cheque.  That way the full cost of our carbon commitment would be borne by all Canadians and not just a few.  Now you might retort that AB, SK and NL have disproportionately benefited from oil and gas too over the years so maybe we make some adjustment for that but in the end, the idea would be that if one set of Canadians wants policies that hurt another set of Canadians, maybe they should share the cost.

Of course this is not going to happen.

We will undoubtedly see billions and billions of federal cash flowing into the oil and gas producing provinces to build new industries – we are already hearing about hydrogen, nuclear energy, agriculture, tourism as potentials.

It will be very hard to replace the capital intensive, high wage, high tax/royalty, oil and gas industry.  Current politicians likely console themselves by the fact they won’t be running things in 30 years and they will be able to reflectively argue “I told you so” as Alberta reverts to a pre-oil agriculture and tourism economy.