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Alberta

A Matter of Fact: Environment Minister Steven Guilbeault’s future view of Canada’s oil and gas sector is unrealistic

Published

2 years ago

11 minute read

Canadian Minister of the Environment and Climate Change, Steven Guilbeault, speaks at the China pavilion during the United Nations Conference of the Parties (COP15) in Montreal, Quebec, on December 14, 2022. Getty Images photo

From the Canadian Energy Centre Ltd. 

Canada could play a key role in lowering global emissions by unlocking our LNG industry and helping Asian countries replace coal

Federal Environment and Climate Change Minister Steven Guilbeault is continuing to plot a painful course toward a short-sighted phase out of Canada’s world class oil and gas sector based on an unrealistic view of world’s future energy mix. 

In an interview with Euractiv, Guilbeault said he supports the phase out of unabated fossil fuels, those without the technology to minimize emissions, by 2050 to align with the International Energy Agency’s Net Zero Scenario, a path that is largely out of touch with the current global reality. 

Based on that increasingly unlikely scenario, the minister said he anticipates Canada’s oil and gas sector will follow suit with a 50% to 75% reduction in the production of oil and gas by 2050, which would be devastating for our economy, hurt our economic allies, and make little to no progress towards reducing global emissions. 

Here are the facts. 

Fact: The IEA’s Net Zero Scenario is largely aspirational, not practical 

Guilbeault’s vision of a massive global reduction of fossil fuel usage is growing even less likely amid a lingering energy crisis prompted by several years of declining investment in oil and gas followed by Russia’s invasion of Ukraine. 

The fact is, this year the world will use more oil and more coal than any time in human history. 

According to the IEA’s latest short-term outlook, global oil use will hit a record high of 102 million barrels per day this year and is expected to grow to 106 million barrels per day by 2028. Last week, OPEC forecasted that by 2045, global oil demand will reach 110 million barrels per day.  

Meanwhile, demand for natural gas, particularly liquefied natural gas (LNG) is soaring. 

By 2040, global LNG demand – driven primarily by growing Asian economies – is expected to reach 700 million tonnes, a more than 75 per cent increase from 2022. Demand for LNG is expected to outpace supply by the middle of this decade. 

Relying on the IEA’s Net Zero scenario, Guilbeault said he believes oil use will decline to between 25-30 million barrels per day, a 75 per cent reduction. Rapid deployment of renewables, he said, would fill that void despite some significant hurdles that could hinder a sweeping transition.  

The bottom line is pretty clear. In the IEA’s most likely scenario, oil and gas will still account for 47 per cent of the global energy mix in 2050, a reduction of 5 per cent from 2021. While the share of renewables will more than double, it is still expected only to account for 29 per cent of the world’s energy mix in 2050. 

Fact: A rapid phase out of oil and gas would hurt Canada and its allies 

Canada’s oil and gas sector is a critical part of our economy, supporting hundreds of thousands of jobs from coast-to-coast, including thousands of jobsin manufacturing, environmental, and financial services tied to the industry, especially in Ontario and Quebec. 

A recent analysis by commodity data firm S&P Global focused specifically on the oil sands suggests that efforts to meet federal emissions targets for 2030 would likely force the industry to slash production by up to 1.3 million barrels per day. 

According to the analysis, that could result in the elimination of between 5,400 and 9,500 jobs. With just over 54,000 oil and gas extraction jobs in Canada, that would mean the elimination of as much as 17% of the workforce. 

In addition to jobs, the industry is also an economic bulwark, generating $168 billion in GDP in 2021, about 7.2 per cent of Canada’s economic activity. Oil and gas also accounted for nearly a third of Canada’s exports in 2021, injecting $140 billon into the economy. 

Amid the ongoing global energy crisis, some of Canada’s international allies have turned to Canada to be a potential key supplier as they look for stable and responsible suppliers to replace Russian oil and gas. 

The leaders of Germany and Japan made direct appeals to Canada to supply more LNG to help meet their energy needs. 

Yamanouchi Kanji, Japan’s ambassador to Canada, made it clear that some of our Asian allies see Canada as a key player in the world’s future energy, particularly when it comes to LNG. 

“The world is waiting for Canada,” he said earlier this year. “Canada can and should play a very important role to support the energy situation not only in Japan and South Korea, but the world.” 

Fact: Reducing global emissions starts with Canadian natural gas 

If Canada is truly serious about tackling global greenhouse gas emissions, we could make a much bigger impact by supplying energy-hungry Asian countries with some of the cleanest LNG on the planet to replace coal. 

Climate change is a global issue, not a local one. 

Despite being one of the world’s largest energy producers, Canada is still only responsible for about 1.6 per cent of total global emissions.  

Developing Asian counties, particularly China, have turned to coal to help power their growing economies. A switch to natural gas to generate power reduces emissions by 50 per cent on average, according to the IEA. Canadian natural gas shipped as LNG could perform even better, reducing emissions from coal by about 65 per cent, according to Energy for a Secure Future. 

With analysts expecting world LNG demand to double over the next two decades, Canada could make a real measurable impact on lowering global emissions by unlocking its LNG potential. 

A recent study by Wood Mackenzie found that Canadian LNG exports could reduce net emissions in Asia by 188 million tonnes per year through 2050. Put another way, that would be the annual equivalent of removing the emissions of all vehicles on Canadian roads, or wiping out nearly three time’s B.C.’s total emissions. 

Meanwhile, a coalition of six companies representing 95 per cent of Canada’s oil sand production have jointly committed to achieve net zero emissions by 2050. The Pathways Alliance is looking to harness emerging technology like carbon capture and storage as well as small modular nuclear reactors to reach that target. 

The reality is that if Canada significantly curtails its oil and gas industry, other national producers, some of which lack Canada’s commitment to democratic ideals and the environment, will fill that void. This could see bad actors like Russia continue to maintain a strategic and economic advantage over Europe by maintaining European reliance on its energy. 

Fact: Phasing out oil and gas would hurt Indigenous communities 

Over the last decade, Indigenous communities have emerged as key players in Canada’s energy sector, allowing First Nations in many cases to create intergenerational opportunity for their people. 

From pipelines to LNG terminals, dozens of Indigenous communities have entered into ownership agreements on major oil and gas projects. 

In B.C., 16 First Nations will acquire a 10 per cent stake in the Coastal GasLink pipeline once it’s completed later this year. In Alberta, another 23 First Nation and and Métis communities are now approximately 12 per cent owners of seven operating Enbridge oil sands pipelines, the largest Indigenous energy transaction ever in North America. 

And in northwest B.C., the Haisla Nation is 50 per cent owner of the proposed Cedar LNG project, which would be the first Indigenous-owned LNG terminal in the world. 

“When Europeans, Asians and Americans think of Canada’s Indigenous peoples, they often think we oppose all energy development. We aren’t victims of development. Increasingly we are partners and even owners in major projects,” Haisla Nation Chief Councillor Crystal Smith said during an April press conference after leading a delegation of Indigenous leaders to meet key international diplomats. 

Indigenous employment in Canada’s oil and gas sector has continued to grow, rising by more than 20 per cent since 2014 to reach an estimated 10,400 jobs in 2020. 

Indigenous-owned businesses also benefit from the industry, with three major projects – the Trans Mountain Expansion, Coastal GasLink, and LNG Canada – spending some $9 billion with Indigenous- and locally-owned businesses.   

 

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Alberta

Alberta Income Tax cut is great but balanced budgets are needed

Published on February 28, 2025

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By Kris Sims 

The Canadian Taxpayers Federation is applauding the Alberta government for giving Albertans a huge income tax cut in Budget 2025, but is strongly warning against its dive into debt by running a deficit.

“Premier Danielle Smith keeping her promise to cut Alberta’s income tax is great news, because it means huge savings for most working families,” said Kris Sims, CTF Alberta Director. “Families are fighting to afford basics right now, and if they can save more than $1,500 per year thanks to this big tax cut, that would cover a month’s rent or more than a month’s worth of groceries.”

Finance Minister Nate Horner announced, effective this fiscal year, Alberta will drop its lowest income tax rate to eight per cent, down from 10 per cent, for the first $60,000 of earnings.

The government estimates this income tax cut will save the average Alberta worker about $750 per year, or more than $1,500 per year for a two-person working family.

Albertans earning less than $60,000 a year will see a 20 per cent reduction to their annual provincial income tax bill.

The budget also contained some bad news.

The province is running a $5.2 billion deficit in 2025-26 and the government is planning to keep running deficits for two more years.

Total spending has gone up from $73.1 billion from last budget to $79.3 billion this year, an increase of 8.4 per cent.

“If the government had frozen spending at last year’s budget level, the province could have a $1 billion surplus and still cut the income tax,” said Sims. “The debt is going up over the next few years, but we caught a lucky break with interest rates dropping this past year, so we aren’t paying as much in interest payments on the debt.”

The province’s debt is now estimated to be $82.8 billion for 2025-26.

Interest payments on the provincial debt are costing taxpayers about $2.9 billion, about a 12 per cent decrease from last year.

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Alberta

Alberta 2025 Budget Review from the Alberta Institute

Published on February 27, 2025

By

The government has just tabled its budget in the Legislature.

We were invited to the government’s advance briefing, which gave us a few hours to review the documents, ask questions, and analyze the numbers before the official release.

Now that the embargo has been lifted, we can share our thoughts with you.

However, this is just our preliminary analysis – we’ll have a more in-depth breakdown for you next week.

*****

The 2025/26 Budget is a projection for the next year – what the government expects will happen from April 1st, 2025 to March 31st, 2026.

It represents the government’s best estimate of future revenue and its plan for expenditures.

In the budget (and in this email) this type of figure is referred to as a Budget figure.

*****

The actual final figures won’t be known until the 2025/26 Annual Report is released in the middle of next year.

Of course, as we’ve seen in the past, things don’t always go according to plan.

In the budget (and in this email) this type of figure is referred to as an Actual figure.

Importantly, this means that the 2024/25 Annual Report isn’t ready yet, either.

*****

Therefore, in the meantime, the Q3 2025/26 Fiscal Update, which has figures up to December 31st, 2024, provides a forecast for the 2024/25 year.

The government looks at the actual results three quarters of the way through the previous year, and uses those figures to get the most accurate forecast on what will be the final result in the annual report, to help with estimating the 2025-26 year.

In the budget (and in this email) this type of figure is referred to as a Forecast figure.

*****

Accurately estimating, and tracking these three types of figures is a key part of good budgeting.

Sometimes, the economy performs better than expected, oil prices could be higher than initially forecast, or more revenue may come in from other sources.

But, other times, there’s a recession or a drop in oil prices, leading to lower-than-expected revenue.

On the spending side, governments sometimes find savings, keeping expenses lower than planned.

Alternatively, unexpected costs, disasters, or just governments being governments can also drive spending higher than budgeted.

The best way to manage this uncertainty is:

  1. Be conservative in estimating revenue.
  2. Only plan to spend what is reasonably expected to come in.
  3. Stick to that spending plan to avoid overspending.

By following these principles, the risk of an unexpected deficit is minimized.

And if revenue exceeds expectations or expenses come in lower, the surplus can be used to pay down debt or be returned to taxpayers.

On these three measures, this year’s budget gets a mixed grade.

*****

On the first point, the government has indeed made some pretty conservative estimates of revenue – including assuming an oil price several dollars below where it currently stands, and well below the previous year’s predictions.

The government has also assumed there will be some significant (though not catastrophic) effects from a potential trade war.

If oil prices end up higher, or Canada avoids a trade war with the US, then revenue could be significantly higher than planned.

Interestingly, this year’s budget looks very different depending on whether you compare it to last year’s budget, or the latest forecast.

This year’s budget revenue is $6.6 billion lower than what actually happened in last year’s forecast revenue.

But, this year’s budget revenue is actually $600 million higher than what was expected to happen in last year’s budget revenue.

In other words, if you compare this year’s budget to what the government expected to happen last year, revenue is up a small amount, but when you compare this year’s budget to what actually happened last year, revenue is down a lot.

*****

On the second point, unfortunately, the government doesn’t score so well.

Expenses are up quite a bit, even though revenue is expected to drop.

According to some measurements, expenditures are increasing slower than the combined rate of population growth and inflation – which is the goal the government set for itself in 2023.

But, when other expenses like contingencies for emergencies are included, or when expenses are measured in other ways, spending is increasing faster than that benchmark.

This year’s budget expenses are $4.4 billion higher than what was actually spent in last year’s forecast expenses.

But, this year’s budget expenses are $6.1 billion higher than what was expected to happen in last year’s budget expenses.

Perhaps the bigger question is why is expenditure increasing at all when revenue is expected to drop?

If there’s less money coming in, the government should really be using this as an opportunity to reduce overall expenditures.

*****

On the third point, we will – of course – have to wait and see what the final accounts look like next year!

*****

Before we wrap up this initial analysis, there’s one aspect of the budget that is likely to receive significant attention, and that is a tax cut.

Originally planned to be phased in over the next few years, a tax cut will now be back-dated to January 1st of this year.

Previously, any income below about $150,000 was subject to a 10% provincial tax, while incomes above $150,000 attract higher and higher tax rates of 12%, 13%, 14%, and 15% as incomes increase.

Under the new tax plan, incomes under $60,000 would only be taxed at 8%, with incomes between $60,000 and $150,000 still paying 10%, and incomes above $150,000 still paying 12%, 13%, 14%, and 15%, as before.

Some commentators are likely to question the wisdom of a tax cut that reduces revenue when the budget is going to be in deficit.

But, the reality is that this tax cut doesn’t actually cost much.

We’ll have the exact figures for you by next week, but suffice to say that it’s a pretty small portion of the overall deficit, and there’s a deficit because spending is up a lot, not because of a small tax cut.

In general, lower taxes are good, but we would have preferred the government work towards a lower, flatter tax instead.

The Alberta Advantage was built on Alberta’s unique flat tax system where everyone paid the same low flat tax (not the same amount, the same percentage!) and so wasn’t punished for succeeding.

Alberta needs a plan to get back to a low flat tax, and we will continue to advocate for this at the Alberta Institute.

Maybe we can do better than just returning to the old 10% flat tax, though?

Maybe we should aim for a flat tax of 8%, instead?

That’s it for today’s quick initial analysis.

In next week’s analysis, we’ll break down the pros and cons of these decisions and outline where we might have taken a different approach.

In the meantime, if you appreciate our work and want to support more of this kind of independent analysis of Alberta’s finances, please consider making a donation here:

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