From the Fraser Institute

By Tegan Hill

As Albertans look toward a new year, it’s worth reviewing the state of provincial finances. When delivering news last month of a projected $4.6 billion budget surplus for fiscal year 2024/25, the Smith government simultaneously warned Albertans that a budget deficit could be looming. Confused? A $4.6 billion budget surplus sounds like good news—but not when its on the back of historically high (and incredibly volatile) resource revenue.

In just the last 10 years, resource revenue, which includes oil and gas royalties, has ranged from a low of $3.4 billion in 2015/16 (inflation-adjusted) to a high of $26.1 billion in 2022/23. Inflation-adjusted resource revenue is projected to be relatively high in historical terms this fiscal year at $19.8 billion.

Resource revenue volatility is not in and of itself a problem. The problem is that provincial governments tend to increase spending when resource revenue is high, but do not similarly reduce spending when resource revenue declines.

Overall, in Alberta, a $1 increase in inflation-adjusted per-person resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year, but a decline in resource revenue is not similarly associated with a reduction in program spending. Over time, this pattern has contributed to historically high levels of government spending that exceed ongoing stable levels of government revenue.

And while the Smith government has shown some restraint, spending levels remain significantly higher than reliable ongoing levels of government revenue. Put simply, unpredictable resource revenue continues to help fund Alberta’s spending—and when resource revenues inevitably fall, Alberta is at high risk of plummeting into a deficit.

Indeed, Finance Minister Nate Horner continues to emphasize that we are “living in extremely volatile times” and warning that if oil prices fall below $70.00 per barrel a budget deficit is “very likely.” According to recent forecasts, the price of oil may hit $66.00 per barrel in 2025.

To avoid this fate, the Alberta government must do more to rein in spending. Fortunately, there’s plenty of options.

For example, the government spends billions in subsidies (a.k.a. corporate welfare) to select industries and businesses every year. A significant body of research shows these subsidies fail to generate widespread economic benefits. Eliminating this corporate welfare, which would generate significant savings in the budget, is a good place to start.

If the Smith government fails to rein in spending, and Alberta incurs a budget deficit, it will only mean more government debt on the backs of Albertans. And with Albertans already paying approximately $650 each in provincial government debt interest each year, that’s something Albertans simply can’t afford.

With a new year set to begin, the Smith government continues to warn of a budget deficit. But rather than simply prepare Albertans for more debt accumulation—financed by their tax dollars—the government should do more to avoid red ink. That means cutting wasteful government spending.

From EnergyNow.ca

By Irina Slav

The facts behind energy transition are so staggeringly counter to common sense that the only way to achieve them is by force, and the only path ahead is failure.

I was going to wrap this eventful year with a nice little post of gratitude  but, as usual, the news flow has forced me to revise my plans. So much has happened in the last week days failing to report on it would be a real shame. You may want to put down the hot beverage or, then again, not put it down, you’re the master of you.

A few years ago, during some election campaign or other — we’ve had so many it’s hard to keep track — one of the most popular parties in Bulgaria chose as its slogan “Work, work, work!” Naturally, the slogan became the butt of many jokes almost immediately.

More recently, we were graced with the “Fight! Fight! Fight!” adage from the Trump campaign that was nowhere near as amusing. It also worked. Meanwhile, the transition army is moving fast towards a “Force! Force! Force!” stage in its efforts to keep the green ball rolling.

Consider the latest gem from the International Energy Agency, out this week. The press release for the report was headlined Global coal demand is set to plateau through 2027, with the subheader summary stating that “New IEA report finds that strong deployment of renewables is set to curb growth in coal use even as electricity demand surges, with China – the world’s biggest coal consumer – remaining pivotal.”

What the report actually admitted, however, was that coal supply and demand hit an all-time high this year, they are both likely to scale new highs next year and keep going in that direction until at least 2027. The way things are going with the transition, coal will probably continue growing beyond 2027 as well because much as Fatih and the Transitionettes want it to die, they can’t tell China and India what to do — or anyone else, really, when push comes to shove.

Push appears to have come to shove in Canada already, with the federal government suddenly deciding to walk back its plan for a net-zero grid by 2035. Now, it will be aiming for a net-zero grid by 2050, which is what is going to be happening elsewhere as well —except perhaps in the UK, where everyone’s gone truly insane but more on that later.

So, Canada last week released something called Clean Electricity Regulations that originally, I gather, were supposed to outline plans to remove hydrocarbons from its already pretty green grid by 2035. The provinces, however, objected. And they must have objected strongly enough for an ounce of sanity to crawl into the regulations. Resource minister Jonathan Wilkinson of “We are not interested in investing in LNG facilities” fame called it “flexibility”. Whatever works to make one feel good, I guess.

Here’s a fun fact: the new Clean Electricity Regulations with the revised target come out literally days after the Trudeau government pumped up its emission cut plan, aiming for cuts of 45-50% from 2005 by 2035. All it took was six days and the start of what might end up being complete government meltdown to reconsider that deadline and delay it by 15 years. But stranger things have happened and some are happening right now, one of them at the U.S. Department of Energy.

The regulator of the department, Inspector General Teri Donaldson said in an interim report that the loan office of the DoE should stop giving out loans to green project developers on suspicion of conflicts of interest, or, as Reuters put it, “contractors who vet them may be serving both the agency and potential borrowers.”

From Donaldson’s report: “The projects funded with this authority, which involve innovations in clean energy, advanced transportation, and tribal energy are inherently risky in part because these projects may have struggled to secure funding from traditional sources such as commercial banks and private equity investors.”

Yet these same projects got DoE funding, which naturally raises the question of whether this funding success was at least in part related to the department’s failure to ensure everyone involved in the process was impartial and driven exclusively by professional motives, and I cannot believe I managed to put this stinky situation so delicately.

Anyway, the DoE has struck back immediately, saying the report was full of errors, and accusing Donaldson of “fundamentally misunderstanding” the “implementation of contracting in the Loan Programs Office.” Yeah, that must be it. That’s why she was appointed Inspector General of the department — but by the Trump administration so it doesn’t count.

All of this, however, is pretty weak beer compared to what’s been happening in Europe. VW is not yet bankrupt and the lights are still on in Germany, for the time being, but in the UK, the government has apparently found a way to grow money on trees because the grid operators of the three constituent parts of the UK’s bigger island are planning to spend 77.4 billion pounds on grid upgrades with a view to accommodating more wind and solar into said grid.

The upgrade is a must if Labour’s 2030 decarbonization plan is to have a fighting chance even though the outcome of that fight is already clear and it rhymes with beet, feet, and meat. The money is to be spent between 2026 and 2031, which means that the money trees take two years to start bearing fruit.

Yet here is my concern: with every other form of plant life susceptible to the devastatingly catastrophic effects of climate change, who is to guarantee that the money trees will be spared the devastating catastrophe? No one, that’s who. The UK may fail to accomplish its task of decarbonizing the country’s grid because of the very climate change it wants to neutralize with that decarbonization, and how cruel of an irony is that? Very, is the answer.

Usually, the UK government is difficult to rival in insanity and anti-intelligence but this week we have a serious contender and it’s not Germany’s government. It’s Big Oil and the heavy industry. That’s right. Europe’s energy and heavy industries have been driven to insanity by the climate crusade army although I’d stop short of painting them as innocent victims.

They could have said something. They should’ve said something. And they should’ve said it loud and clear. But they didn’t, so now Big Oil and Big Heavy Industry are asking the EU to force — that’s right, force — consumers to buy their transition cost-loaded products. Because there is no other way of selling those products.

““We will need to focus on demand creation to achieve new investment prospects,” executives from the two sectors said in a letter to Wopke Hoekstra, EU climate commissioner, warning of an “industrial exodus” without intervention,” the FT reported this week.

It also reported that “companies trying to invest in production methods that may result in lower carbon emissions are “pricing themselves out of the market” due to high costs, and authorities need to step in to create demand for their products.” I think this is beautiful, in the same way that an orca catching its pray is beautiful, that is, in a rather terminal way.

I don’t normally like to brag about being right about things, not least because it’s invariably bad things I’m right about, so it is with a sigh of frustration and some boredom that I have to note I have been saying this for two years now — and of course I haven’t been the only one, far from it. The only way for the energy transition to work is through force, and a lot of it. The only way for the transition to work is to eliminate all alternatives to the Chosen Tech, and for some reason Big Oil and the heavy industry seem to believe this is a constructive approach to life, the universe and everything.

What I find most interesting in this situation is the fact that it is extremely easy to find evidence the forceful approach tends to result in outcomes that are the exact opposite of the intended ones. History is full of such evidence. Yet it appears the most essential industries for modern civilization have taken the green “It will work this time” pill and are eagerly digesting it. Which means two things we already knew: one, the transition is doomed as it has been from the start; and two, Europe’s going down unless it uses a fast-closing window to come to its senses. We all know it won’t — unless it’s forced to. Work, work, work, force, force, force, fight, fight, fight.

More From Irina Slav