Canada West Foundation Blog

As reflected by the results of the 2011 census, the creation of new House of Commons Seats and the ongoing news about the westward titling of the economy, it is clear that the nature of the Federation is shifting. The latest research from the Canada West Foundation looks at the consequences for the region and the country, now that the West is truly “in”.

Taking Stock of the Federation by Dr. Roger Gibbins, President & CEO and Robert Roach, VP, Research, is the synthesis report from a roundtable held on February 9, 2012 in Calgary. This roundtable gathered sixteen participants who provided their insights on the contemporary political landscape, the likely direction of future change, and the potential for strains within the federation across the four western provinces.

“Each region in Canada is vitally important,” notes Dr. Gibbins. “While differences between the regions have evolved, they are still key variables in both Canada’s political environment and the economy. For the federation to work well, we must ensure that all regions— including the West—are heard, understood, and integrated into the whole.”

While participants expressed a general sense of optimism about the region’s future, they also highlighted some significant challenges western Canadians will face in securing a new position within Canada and the global economy. By addressing issues like market access, sustainable environmental management, labour shortages and a fiscally unbalanced federal state, we can ensure that the future remains bright.

Taking Stock of the Federation is part of Foundation’s The West in Canada initiative, which examines public policy innovation in the West, discusses and recommends ways to improve the Canadian federation, and analyzes regional economic, demographic and public opinion trends. Click here for your copy of the report.

Western Canada profits from its abundance of natural resources, however, in the changing global landscape, we need to take action to ensure our future prosperity. The latest research from the Canada West Foundation outlines the main contours of the contemporary energy world and takes stock of the trends shaping energy in western Canada.

State of the West: Energy – 2012 Western Canadian Energy Trends, by Senior Economist Michael Holden and Policy Analyst Robbie Rolfe, provides an overview of the provincial energy systems in western Canada, including the current state of energy production, consumption, and other associated activities and impacts. That information is framed in the context of the energy-related policy issues and challenges facing the four western provinces.

“Western Canada is characterized by a profound diversity of resources, consumption patterns, and economic and environmental impacts” said Michael Holden. “The energy picture in each province is unique, but their strengths are complementary. Through a more coordinated approach to energy policy, the western provinces can become more than the sum of their parts.”

Given the extent to which it permeates our daily lives, energy has come to dominate the economic, social, and political agenda in the region. State of the West: Energy provides a one-stop information resource on energy in western Canada, informing the debate surrounding energy policy in the West, and providing context to both where we are today and where we may go in the future.

State of the West: Energy – 2012 Western Canadian Energy Trends is part of the Foundation’s Powering Up for the Future initiative, which facilitates constructive debate on sustainable energy policy solutions for Canada and promotes the vital importance of western Canadian energy systems in the national, continental, and global economy. Click here to download a copy of the report.

By: Larissa Sommerfeld 

Alberta is now in the throes of the third week of the provincial election campaign. Given the critical importance of the province’s water resources to its economy and environment, it is worthwhile checking in to see how water policy is being addressed by the contending parties.

I’ve reviewed the platforms of the main parties and have highlighted their water policies below:

Alberta Party
The Alberta Party’s platform focuses on the five core ideas of healthcare, students, democracy, the economy and communities. It doesn’t specifically place environmental concerns front and centre. However, under the “economy” section, the Party commits to promoting a “positive brand image for our resource industries by insisting on best practices and a strong commitment to environmental stewardship.”

Evergreen Party
The Evergreens—a newer addition to Alberta’s political scene who have replaced the Alberta Greens—simply state in their party platform that “we will encourage conservation and reduction of water usage, and prevent the sale or export of water.”

Liberal Party
The Liberals do not mention water in their party platform at all. Rather, their key environmental policies focus on emissions and the monitoring of the oil and gas industry.

New Democratic Party
The NDP has some very specific water policy goals outlined in their platform including stopping the expansion of water markets and putting human and ecosystem needs first when it comes to water allocation. Regarding industry activity, the NDs support:

• Cleaning up tailings ponds, but at a cost to companies rather than taxpayers;
• Doubling the monitoring and enforcement activities of the Ministry of Environment and Water to “make sure the industry lives up to its environmental obligations under the law”; and
• Appointing an independent scientific panel to examine hydraulic fracturing.

Progressive Conservative Party
The PC Party does not have a comprehensive policy platform available on their website. In this case, we have to look at past policy to see where they might stand on water:

• Premier Redford renamed the Ministry of the Environment as the Ministry of Environment and Water last fall. According to Diana McQueen, the current Minister for Environment and Water, this was a “deliberate move to emphasize the priority that our government places on this resource.”
• The government has committed to increase funding to about $11 million for environmental monitoring; and
• An annual amount of $150 million has been committed to fund the Alberta Oil Sands Technology and Research Authority (AOSTRA) to support research that will help Alberta work toward meeting the Water for Life goals.

Wildrose Party
The Wildrose Party has a fairly robust environmental platform. Some of their commitments include creating a position for an Albertan environmental ombudsman and addressing water quantity issues in the south and water quality issues in the north. The Party is committed to finding ways to improve water storage by building more dams and/or reservoirs and states it will review and reform Alberta’s licensing system to “ensure that existing licenses are fully utilized while respecting the principle of first in time, first in right.” It also is supportive of new conservation technology that allows for the use of things such as grey water recycling and supportive of the movement toward a federal ban on bulk water exports to the US. Regarding industry, the Wildrose has stated it in its platform that it will:

• Work toward eliminating tailings ponds;
• Support water technology so that industrial use of water decreases; and
• Strictly enforce existing regulations on effluent-producing industries.

By: Michael Holden

“The fiscal restraint that many expected from this budget is more akin to paper cuts than deep wounds.”

The 2012 federal budget was, for all intents and purposes, the first delivered by the Conservative government under majority rule. It was expected to give us our first glimpse at how the Conservatives intend to govern over the next several years. Many assumed that the result would be a fairly dramatic shift toward fiscal conservatism and smaller government. The reality, by contrast, is decidedly middle-of-the-road. The Conservatives have delivered a prudent budget, one that largely fails to live up to the hopes of strong fiscal conservatives, but also largely fails to live up to the fears of their opponents.

To be sure, specific elements of the budget, such as delaying Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits until age 67, are bound to attract controversy and spark debate over the coming weeks and months. There are also deep cuts in some areas, among them foreign aid and the CBC. However, the budget also contains several initiatives that are either welcome or overdue (eliminating the penny leaps to mind). But in the final analysis, while the budget itself is a thick document, filled with a wide range of initiatives, this is, on the whole, a cautious and incremental plan. This is true especially considering initial expectations that the budget would pare back government spending in a big way.

In terms of the priorities outlined in the budget – once again called an “Economic Action Plan” – there is a clear emphasis on measures aimed at promoting economic growth and job creation. In particular there are several programs and initiatives that are recognizable as clear priorities for western Canada. These are discussed further below.

Budget Overview

As expected, the budget established an accelerated timeframe for eliminating the deficit and restoring fiscal balance, primarily focusing on the expenditure side of the equation. In last year’s budget, the deficit for the current year was expected to be $32.2 billion, a figure amended in November to $31 billion. Owing to a combination of resurgent revenue growth at the end of the year, spending restraint and lower-than-expected interest payments on the national debt, the deficit for this year is expected to be $24.9 billion. Moreover, the federal government now plans to balance the books in four years (2015-2016), one year ahead of the schedule laid out in last year’s fiscal plan. In fact, barring an unexpected downturn in economic fortunes, the budget will most likely be balanced within three years.

One of the big items that everyone was waiting for in this budget was news on the extent to which the government would be cutting program spending in the years ahead. This is the part of the budget where, depending on their point of view, people will be either the most disappointed or the most relieved.

Although many of the details still have to be ironed out, the federal government announced that its review of department spending will yield ongoing savings of $5.2 billion per year by 2016-2017. This total represents about 6.9% of the spending that was subject to the review process, but only 2% of overall federal spending. In addition, about 19,200 federal government jobs will be cut, about one third of which will be through attrition.

While these cuts represent real reductions for individual departments and agencies, it’s important to keep in mind that, in the aggregate, they are based on spending levels that have grown dramatically in recent years. Since the first Conservative minority government in 2006, federal spending has increased by 38.7%, while the federal public service expanded by 15.3% (adding more than 60,000 jobs in the process). When viewed in that context, the proposed budget cuts do not exactly suggest a broad-scale withdrawal of the federal government from the public arena.

In addition, other components of federal spending, like transfers to the provinces and to persons, will be rising throughout that period. Old age benefits are the obvious exception, but those changes don’t even begin to kick in until 2023. As a result, the overall effect of the government’s spending restraint will not be a decrease in total program expenditures as much as a slightly lower rate of growth over the forecast period.

Specific Programs and Initiatives

For the most part, the federal government’s fiscal plan delivers on the expectations set out in the Canada West Foundation’s pre-budget commentary. Perhaps most notably, it includes a commitment to modernize the regulatory system for major project reviews with the goal of a “one project, one review” approach. This approach is designed to reduce duplication, the administrative burden on businesses and the timelines for approval. While the specifics are still to be determined, this is a welcome development for western Canada, provided that it does not result in an abdication of government responsibility in the area of environmental stewardship.

The budget also contains measures aimed at job creation and addressing labour shortages in western Canada. These include some modest reforms to the Employment Insurance program, an enhanced youth employment strategy, hiring credits for small businesses and improvements to the Temporary Foreign Worker Program. The budget also mentions improvements to Canada’s immigration system, focusing on economic migrants that meet the labour needs of specific provinces and territories. However, there are few details on what that might mean.

Perhaps most significant for the West is new money for First Nations infrastructure, education and measures to improve training and incentives for the on-reserve Aboriginal population to enter the labour force. In its various consultations and roundtable discussions, the Canada West Foundation has heard repeatedly from western Canadian business and policy leaders that more needs to be done to improve living conditions on reserves as well as to improve Aboriginal participation in the workforce. In contrast with the aging population generally, the Aboriginal population is young and growing quickly. As such, they represent a significant, relatively untapped resource of labour in the West. On this issue, the measures contained in the 2012 budget represent a step in the right direction.

As we looked for in our pre-budget commentary, the 2012 budget also targeted spending cuts to specific areas and avoided cross-the-board measures that might have penalized effective or valuable programs. To be sure, there were few details, as usual, offered in the budget as to which exact programs would be affected by the plan, and as noted earlier, some will be unhappy about the areas that were targeted relatively heavily. But in general, the spending cuts reflected a gradual reshaping of government priorities and not a thoughtless chopping exercise.

The budget also emphasized measures related to innovation and research. This focus was signalled widely in advance of the budget, but the approach taken differed from the norm of recent years. Productivity improvements in Canada have been much sought-after, but elusive as previous government initiatives like lower corporate taxation and tax credits failed to deliver on that promise. With this budget, the government has signalled that it is changing tack. In a “Back to the Future” kind of way, there appears to be a return to more direct government involvement and incentives for high-risk venture capital and business innovation. While this type of direct involvement was (and still is) derided as the government getting into the game of “picking winners and losers,” the initiatives proposed in the budget echo many of the suggestions that we heard from business and policy leaders during our most recent series of Honourable James A. Richardson Roundtables this past autumn.

Another recurrent theme was a continued focus on trade and accessing new markets. In a sense, the budget offered nothing new on the subject; it mostly just restated the government’s recent accomplishments and highlighted the various trade- and investment-related initiatives currently underway. Although there was no new money for trade (in fact, foreign diplomacy and aid received disproportionately heavy cuts in funding), this budget signals that international trade remains a high priority for this government.

There were also some policy issues on which, in our view, the budget was disappointing or disappointingly silent. As noted above, in spite of the fact that trade and market access are stated priorities of this government, financial support for foreign affairs and diplomacy was cut. In addition, the budget includes no significant new measures or financial support relating to environmental protection, conservation, curbing greenhouse gas emissions or renewable energy. There was also disappointing silence on the subject of a Canadian energy strategy. Finally, there were no significant new funds for urban or trade-related infrastructure. While the federal government has made significant investments in this area in recent years, there remains a large infrastructure deficit in many parts of the West.

As a concluding note, it seems appropriate to devote a final thought to bidding adieu to the much-maligned penny which will cease to be minted in April, and stop being distributed later this year. Over the years we’ve all complained about the space pennies take up, we’ve gotten into trouble in school for flicking them at classmates, we’ve thrown them in fountains, used them for ill-advised science experiments and we’ve refused to pick them up when they lie alone and half-forgotten on the street. And now they will be no more.

Goodnight sweet penny. No longer will you fool me into thinking I’m rich based on the thickness of my wallet. May flights of angels sing thee to thy rest.

By: Larissa Sommerfeld

Pipelines, robocalls and economic angst seem to be dominating headlines these days. Yet, there’s an important topic that’s missing from the limelight—water.

Everyone knows that water is essential to our survival and our way of life. What would our national sport be without the ice? But how often do we make the connection between healthy ecosystems and a strong economy?

Not often enough. As economic development in western Canada continues to ramp up, it’s critical that we’re as mindful (if not more) of our water and the broader environment as we are our economic prospects.

Across western Canada, water is integral to a wide range of economic activity including fisheries, shale gas development, irrigated agriculture, oil sands development, and potash and uranium mining.

Yet, there’s a sleeping water policy giant that will be waking up in due course. Climate change, extreme weather, increasing demand for energy, food, commodities, decreasing water quality (often due to effluent discharge and agricultural run-off), depleted sources, mindless water consumption, aging infrastructure, and the drainage of wetlands are all placing immense pressure on our water supplies. If we don’t start mitigating these strains, we’ll have some real trouble on our hands.

If western Canada is going to continue to be a great place to live, we need to constantly be thinking one step ahead. Our economic activity in the natural resource sectors (energy, potash, uranium, agriculture and aquaculture) is projected to grow in the coming decades. This is great news for our economy, but only if we become even better stewards of our water. The time is now for water to take priority on the policy agenda, up alongside energy, health and education policy—before we get to a breaking point.

Water allocation (of which addressing Aboriginal water rights will be key) will be one of the most challenging policy issues in the years ahead and there’s no beating around the bush—it will have to be addressed because water is a necessary component of the western Canadian economy. Canadian author Marq de Villiers once said that “the trouble with water is that they aren’t making any more of it.” We’ve got to protect what we have, not only to keep our ecosystems healthy, but to sustain our economy as well. We have a finite supply of water so it makes sense to find ways to maximize how it’s used so it can meet the increased demand with the same amount of water. This is something we should all care about because our livelihoods depend on it.

Read more about water and economic development in our new report, Stress Points: An Overview of Water and Economic Growth in Canada.

By: Robert Roach, VP, Research

While the recession has affected countries throughout the globe in the past few years, Canada’s economy has done reasonably well. Yet, things are not all that they seem. Like a frog in a pot of warm water, Canadians have not yet realized the danger. A rapidly changing global economy is heating up the water in the pot.

The Boiling Frog Dilemma: Saving Canada from Economic Decline by Todd Hirsch, Senior Economist, ATB Financial and Robert Roach, Vice President of Research, Canada West Foundation, outlines ways that Canadians can get out of the pot before the water boils—and not only survive, but thrive, in the global race for good jobs.

Canadians need to become much more creative and this means a revolution in education and how creativity is harnessed in the workplace. Canadians need to embrace risk and stop lamenting the good old days when more things were made in Canada. They need to see the potential in lodging themselves at the top of the global value chain as the world’s designers, managers, educators, investors and creators. Canadians need to integrate their business practices with environmental stewardship, see the world as their oyster rather than a threat, and be much better neighbours to one another at home.

It is individual Canadians who need to change their own attitudes and habits. Governments can’t do it for them. The Boiling Frog Dilemma envisions new Canadian entrepreneurs who will move Canada from being largely invisible to totally indispensible in the global economy of the 21st century. The new entrepreneur puts into action the argument that nothing generates economic wealth except the power of ideas.

Read Rob and Todd’s op-ed in the Calgary Herald “People, not tax credits, will power the economy.”

To order The Boiling Frog Dilemma: Saving Canada from Economic Decline, visit www.toddhirsch.com

By: Robert Roach, VP, Research

In an article in today’s Globe and Mail, John Ibbitson argues that "One question will define national politics in our time: Are Western Canadians prepared to sacrifice for the sake of the nation, now that Ontario is less able to help?"

In addition to incorrectly implying that western Canadians chipping in to help the rest of the country is a new phenomenon, the question is the wrong one to ask.

The question Canadians should be focused on is how to ensure that the nation successfully adjusts to the evolving global economy. It is a mistake to start with a negative question that assumes the need for "sacrifice"—whatever that means—or puts pressure on the nation’s fault lines by immediately assuming that regional wealth redistribution is the solution to central Canada’s problems. This is the old way of thinking and this is not the time to bring it back.

The West knows what it is like to have its interests and economic prospects ignored and how damaging this is to the country and its potential. It will not, therefore, make the same mistake that central Canada has made in the past and be blithe to the blight of the other regions.

The West gets it—all regions benefit when all regions are heard and respected. The West will do its part, as it always has.

Ensuring Canada’s prosperity will happen naturally as the western economy continues to provide jobs and returns on investment. It will also happen at the political level through the equalization program, a strong tax base in the West that helps fill the national treasury, and by ongoing efforts by Canadians to ensure strong regional representation within the national government.

Ultimately, however, the economic recovery of Canada's industrial heartland will depend on the efforts of individual Canadians and their ability to harness the changes happening at a global level.

By: Shawna Stirrett

In November 2011 the Canada West Foundation in partnership with the National Round Table on the Environment and the Economy (NRT) conducted a series of roundtables about developing a low-carbon growth strategy for Canada with particular emphasis on the opportunities and risks facing the West.

You can read all about the main themes, policy recommendations, and overview issues in the report (click here to view) but, just for fun, here is a visual overview of the roundtables:

These word clouds were created from my notes, which were typed up during each of the sessions. Words that appeared more often in the conversation appear larger in the clouds and words that were less common are smaller. In a sense, these clouds give a visual overview of what ideas were most prevalent during the roundtables and which topic generated the most interest.

What is really fun is to see how the conversations—which were all structured around the same questions—varied from province to province.

For example, in Saskatoon, one of the main themes was on how to deal with carbon constraints in an environment of economic growth.

Those in Vancouver were most concerned about how carbon should be constrained, should it be a tax or cap and trade?

Calgary roundtable participants were pretty set on the need for a national framework around energy and emissions.

While in Winnipeg the discussion centered on how challenging it can be to put in place carbon policies when power is so cheap and emissions rates are so low in the province.

Of course these word clouds do not tell the whole story, but they do provide an interesting visual overview of what issues were important to roundtable participants and how the conversation varied across the region.

Click here to download a copy of Cautious Optimism: Western Perspectives on a Low-Carbon Economy.

By: Shawna Stirrett

Just prior to Environment Minister Peter Kent’s announcement in December 2011 that Canada had decided to withdraw from the Kyoto Protocol, the Canada West Foundation and the National Round Table on the Environment and the Economy (NRT) wrapped up a series of meetings in western Canada on developing a low-carbon growth strategy for the country. One of the key themes that emerged from these meetings was the role of national and international emission reduction targets such as those in the Kyoto Protocol.

Interestingly, there was consensus among the participants that Canada should not be overly focused on emission reduction targets. Participants argued that reduction targets have a tendency to send the wrong signals to producers and consumers. A focus on targets that are not accompanied by a clear strategy for meeting them can have a paralyzing effect rooted in uncertainty and fear.

For example, did every province under Kyoto need to reduce emissions by 17% by 2020, or was the target meant to be a national average? If it was a national average, did that mean that if some provinces did not meet the target, other provinces would have to make up the difference?

Another reason participants took issue with an emphasis on targets was that they can have the unintended consequence of promoting competition rather than cooperation. Targets can create the perception of a zero-sum game in which, as long as a province or country is doing better than another, it wins.

A final reason participants argued that there should be less emphasis on emission reduction targets is that they often overshadow other environmental considerations such as land management, water quality, protection of biodiversity and so on.

Instead of relying exclusively on emission reduction targets, participants argued that Canada should be setting environmentally quantifiable goals that are holistic in nature. These goals would ideally foster interprovincial cooperation, account for all aspects of environmental protection, encourage energy efficiency and facilitate the creation of a nationally coordinated plan for dealing with energy and environmental issues.

While the consensus of participants was that emission reduction targets should not be the main focus of environmental management in Canada and it’s path to a low-carbon future, this does not mean that they were in favour of pulling out of Kyoto. Nonetheless, there was a clear sense of the limitations of Kyoto-like targets for achieving our environmental goals.

For the full summary report of the western Canadian roundtables on a low-carbon growth strategy for the country, see the Canada West Foundation report entitled: “Cautious Optimism: Western Perspectives on a Low-Carbon Economy.”

By: Robbie Rolfe

I sometimes find myself getting weary of ideologues on environmental issues. One argument I find particularly tiresome is the insistence that there are significant tradeoffs when it comes to the economy and the environment. The conclusion of these extreme viewpoints is that we can be prosperous polluters or penniless hippies. Apparently, there is no middle ground.

These zero-sum views neglect market-based instruments (MBIs for short) that can make us both prosperous and green. The careful deployment of MBIs can address a major difficulty facing governments trying to encourage good environmental practices: people and businesses will not provide enough ecological goods and services because the costs of providing them accrue to individual persons or businesses while the benefits are enjoyed by the wider community. An MBI is a mechanism that shares the costs of environmental protection among its many beneficiaries.

Take a farmer who is nearing retirement and needs cash. If he sells his farm to a developer, he gets the money he needs. If he holds onto the land to ensure that it continues to provide a nearby city’s water system with valuable natural filtration, he takes a direct financial hit. There are significant tradeoffs in that situation: the farmer gives up some of his livelihood to maintain ecological benefits or gives up ecological benefits to enhance his livelihood. An MBI could pay the farmer for the ecological goods and services his land provides. To ensure a fair price, the amount the farmer gets could be set by a market, or at least market-like mechanisms. Taxpayers living in the city who benefit from the natural filtration on the farmer’s land could fund the MBI through their taxes, thereby sharing in the costs associated with the benefits they receive.

The good news is that these kinds of policies are increasingly under consideration in western Canada. The Alberta Land Stewardship Act, for example, urges the use of market-based instruments on a regional or local level to better provide ecological goods and services, particularly when it comes to land use and land management.

Though market-based instruments show great potential, we are only beginning to explore their varied applications. If we can tap that potential, then one day we may be able to have our cake and eat it too.

MBIs are explored in detail in a new Canada West Foundation report entitled The Invisible Hand’s Green Thumb: Market-based Instruments for Environmental Protection in Alberta. To download the report, click here.