Alberta Should Use Industrial Policy to Embrace the Job-Rich Energy Future

The world’s economy is in transition. Oil and gas are being used differently and renewable energy is cheaper and more plentiful.

Despite this transition, the Alberta government is steadfastly denying that it is real, even going so far as to ban renewable energy development. Instead of powering the new global economic reality, the Alberta government is sticking its head in the sand.

Denying economic opportunities in the new energy reality hurts Alberta workers. Oil and gas jobs are fewer and farther between, while demand for low-carbon solutions rise.

This Diversify Alberta blog series will address the imbalance facing Alberta workers. It will highlight the opportunities as the world transitions away from carbon-intensive fuels. It will show the need to rethink the role of government in Alberta’s energy economy.

You may have seen an old term (“industrial policy”) popping up in recent news stories. Alberta is no stranger to industrial policy. Premier Peter Lougheed used it during the 1970s to help create the province’s petrochemical industry and the oil sands sector. This approach is being dusted off and revamped to help countries like the United States and China re-engineer their economies in response to the global energy transition.

Prior to the widespread adoption of neoliberal policies that reduced government influence in the economy, industrial policies were widely used to build and grow key sectors, like heavy industry. The idea was to nurture “national champions” until the companies were competitive in national and global markets.

South Korea, for example, restricted foreign automakers unless they entered joint ventures with local firms and heavily subsidized domestic corporations, like the Hyundai Motor company.

Closer to home, Lougheed created the Alberta Energy Company, half-owned by Alberta citizens, to invest in the oil sands and later in conventional oil and gas production. The Alberta Oil Sands Technology and Research Authority was created in 1974 and developed the SAG-D process, now the dominant method to extract bitumen. And the Alberta Gas Trunk Line Company Ltd. diversified from transporting natural gas to petrochemical manufacturing, helping the province become the second largest petrochemical cluster in North America.

Government support for industrial policy declined beginning in the late 1970s with the election of Ronald Reagan in the United States, Maggie Thatcher in Britain, and Brian Mulroney in Canada. Now it’s time to dust off and update ideas.

Last year, the Alberta Federation of Labour (AFL) released the “Skate to Where the Puck is Going” report. We argued for a return to Lougheed’s approach to diversifying the Alberta economy. That begins with rethinking the role of government in the economy.

Return of the Entrepreneurial State

Under the Canadian Constitution, provinces have jurisdiction over natural resources. Premier Lougheed urged Albertans to think like owners of those resources, especially oil and gas, because the top priority of oil and gas companies is to serve the interests of their shareholders, not the people of Alberta. We need to once again embrace Premier Lougheed’s vision of a provincial government that serves the interests of the resource owners, not just the companies that exploit the resources.

The AFL calls that type of government the “entrepreneurial state.” Government with a vision for the future, willing to take calculated and smart risks, and prepared to lead. It is a rejection of four decades of conservative policies that focused on “creating the right environment for investors,” which is mostly shorthand for corporate tax cuts and subsidies while cutting workers’ wages.

The AFL’s vision for the future includes building manufacturing plants in Alberta to produce advanced materials that use Alberta hydrocarbons, especially bitumen, as feedstock. The idea is to build domestic, non-combustion markets that will grow as global demand for oil begins to decline sometime during the 2030s. If Alberta can maintain existing oil patch jobs while creating thousands of new manufacturing jobs, workers can prosper into the 22nd century.

Advanced materials are just the start. The AFL vision includes:

  • Turning captured carbon dioxide into materials (e.g. carbon nanotubes, cloth, and vodka),
  • Using natural gas to create hydrogen with new processes (e.g. methane pyrolysis),
  • Providing the power for industrial growth by doubling or tripling the provincial power grid with clean energy technologies,
  • Retrofitting the commercial and residential building stock to achieve net-zero,
  • And building infrastructure (e.g., economic corridors) to support rapid growth of the clean energy economy.

Alberta finally has the opportunity, with the energy transition, and the means possible using industrial strategy and policies to diversify the provincial economy through value-added activities to avoid the boom-and-bust rollercoaster of commodity extraction.

Industrial Strategy

The goal of the AFL’s industrial strategy is to create new clean energy industries that can compete in international supply chains. This might mean mining critical minerals used in batteries, then processing them into battery metals that can be sold to North American battery plants. Or it could mean commercializing Alberta Innovates’ groundbreaking research on how to turn bitumen into the feedstock for manufacturing carbon fibre. There is no shortage of opportunities that suit Alberta’s competitive advantages of abundant resources and highly skilled workers.

But the government cannot do it alone. Modern industrial strategy stresses collaboration between multiple stakeholders and the drafting of plans that take advantage of the resources each party brings to the table. European governments have used this approach to great effect in sectors like hydrogen. The United States has begun employing a similar blueprint for its game-changing $369 billion Inflation Reduction Act.

Workers must have a seat at the table and labour voices should be part of these collaborative efforts. We bring a unique perspective, decades of experience in energy industries, and we must have a role in Alberta’s response to the energy transition.

Industrial Policy

The number one industrial policy of the AFL report is the principle that when the Alberta government invests in a company or a project, it should receive equity in return. De-risking new energy technologies is a legitimate job for the government. But that shouldn’t mean simply priming the pump for private investors. When the Alberta government helps de-risk projects, there should be shared rewards for Alberta workers and communities.

Alberta should also not shy away from another Lougheed policy tool: public ownership. Crown corporations have been used many times in Alberta’s history to accomplish what the private sector was hesitant to do. This approach has fallen out of favour in the past four decades, but the threats and opportunities of the energy transition are too significant to ignore policies that have a solid track record of success. If Alberta is going to ace this course, we need all the policy clubs in the bag.

The AFL report sets out seven types of industrial policies, which we’ll cover in this Diversify Alberta blog series. If properly implemented, the Alberta government would have a powerful toolbox with which to manage the energy transition in a way that benefits all Albertans.

More of the Same or a 21st Century Alberta Energy Economy?

Premier Danielle Smith and the United Conservative Party (UCP), the oil and gas industry, and the business community have doubled down on the energy status quo. They plan to ride the fuel-consuming markets to the bottom, then cash out, leaving Albertans holding the bag.

The AFL has a fresh, modern approach to economic policy and job creation. Instead of fighting against change, we have a plan to mitigate energy transition risks while taking full advantage of the opportunities created by the transition. With the right industrial strategy and policies, Alberta can create more good-paying union jobs than ever before.