Christopher Ragan: Western alienation is real and cannot be dismissed

The Liberals' energy policies are bad economics and even worse politics, and the threat they represent for national unity can't be ignored as unhelpful whining.

By: Christopher Ragan

Preston Manning recently argued in the Globe and Mail that western alienation is now so potent that “a vote for the Carney Liberals is a vote for western secession.” Many have labelled his comments as “unhelpful” in the current political context, and that when Canadian patriotism has been so aroused by threats from the United States, the imperative is to come together and focus on how to face that singular challenge.

I agree that Mr. Manning’s comments were over the top — but only a little. Though the U.S. threats certainly demand serious thinking on our part, it is equally true that Canada faces many policy challenges of our own making. And though many people in Ontario and Quebec don’t like to admit it, western alienation is one of those challenges — and no Canadian should dismiss it.

I was born and raised in Edmonton and left in 1980 to attend university in Victoria — just as the National Energy Program (NEP) was introduced. Even as a displaced Albertan, it was easy to see the damage done to the Alberta economy as the Liberal government of Pierre Trudeau intervened in the oil market to transfer massive sums of money to other parts of the country. Forty five years later, many Albertans still remember the NEP and have never forgiven the government that put it in place.

Even though the NEP was dismantled by the Mulroney government in 1985, Albertans still harbour a deep distrust of Ottawa Liberals. I don’t agree with all of Alberta’s complaints — especially the claim that Alberta doesn’t get its fair fiscal share inside Canada — but Justin Trudeau’s Liberal government did little or nothing to address the sense of western alienation over the past nine years. In some cases, it introduced policies that were outright antagonistic.

Topping this list is probably Bill C-69, the Impact Assessment Act, known in the west as the “no new pipelines act” and seen as proof that the federal government has no problem with introducing policies that hamper the economic expansion of Alberta and Saskatchewan. This is especially galling when one of the motivations is to reduce Canada’s GHG emissions, even though there is a real possibility that the export of Canadian liquified natural gas could lead to a reduction in global GHG emissions.

Some people respond to the complaints about Bill C-69 by pointing out that the federal government purchased the TMX pipeline and therefore obviously supports the development of oil and gas. But this argument fails to recall that the pipeline was left high and dry after its private-sector owner abandoned it when it was deemed to be uneconomic because of all the policy and regulatory uncertainty. In other words, the federal government bought the pipeline only because its own policy environment was so unfriendly to the project that it had to intervene. The feds deserve credit for stepping in to buy and build the pipeline, but they need to accept blame for creating the problem in the first place.

Some of the Trudeau government’s other climate policies have also been antagonistic to the west. The main problem isn’t the industrial carbon-pricing system, which is well-designed and has garnered support from much of Alberta’s industry because it is a much better approach than more prescriptive and intrusive regulations. The real problem is the derogatory language and tone from the governing Liberals. Over the past nine years, the production of oil and gas has clearly been seen in Ottawa as bad, even immoral, and the idea of “phasing out” the oil sands was bandied about with no seeming recognition of the immense economic benefits that both the west and Canada receive from developing these resources. Trudeau’s decision to appoint a hard-core environmental activist as the minister in charge of climate policy was proof to many westerners that his government couldn’t care less about damaging Alberta’s primary economic engine.

Which brings us to the federal government’s planned emissions cap for the oil and gas sector. Unless it is repealed, the emissions cap will create two economic problems and one political problem. On the economic side, the cap will be a very high-cost way to reduce emissions, as it layers a cap-and-trade system (only for oil and gas producers) on top of the existing industrial carbon price. If oil and gas producers face a much higher carbon price than firms in other industrial sectors, this will force higher-cost emissions reductions in that sector when lower-cost reductions will go unexploited elsewhere. Total costs for the economy will therefore be higher than what is necessary to achieve the same emissions reductions. A lower-cost approach would be to scrap the emissions cap and raise the industrial carbon price that applies equally to all heavy industries.

A second economic point is the serious risk that the planned emissions cap ends up working like a production cap because oil and gas producers may be unable to switch their production methods sufficiently to reduce emissions without cutting production. In this case, the associated loss of income would represent a significant cost for the sector and for the country.

On the political front, it should be clear that any policy directed specifically at the oil and gas sector is a policy overwhelmingly directed at Alberta and Saskatchewan. It has been hugely divisive politically since it was first proposed a few years ago, and if it is implemented, this division will surely rise. The emissions cap has increased the sense of alienation in a region that is already feeling under attack. Once again, it appears to the west that Ottawa simply doesn’t care about them and their economic opportunities; even worse is the possibility that it reveals an intentional effort to harm the western economy — all to appeal to millions of Ontario and Quebec voters who support environmental protection but who know or care little about the nature of the western economy.

So, western alienation is a real thing, and it has been simmering along for quite a while. It’s certainly no accident that for decades the federal Liberals have been virtually shut out of any elected seats in the prairies.

But there is a way forward. While I don’t accept Mr. Manning’s claim that a Liberal victory means support for western secession, I certainly believe that the next prime minister needs to take the problem very seriously and must consciously reverse some of the policy mistakes of the past decade. Conservative leader Pierre Poilievre is already saying a lot of the right things on this front and has been doing so for years. As for Liberal leader Mark Carney, he needs to do much more work to be trusted by the west. It is not enough to be raised in Edmonton. It is not enough to be an experienced and intelligent and well-connected economic policymaker — which he clearly is. And it is probably not enough to promise faster reviews of major projects in the national interest — which is a very good idea but may not be easily believed due to the institutional complexities involved.

If Mark Carney wants to prove that he understands the sources of western alienation, and also wants to be convincing in his stated desire to make Canada an energy superpower for both conventional and clean energy, there is a simple thing he can do. He can repeal the oil and gas emissions cap and commit to future federal climate policies that apply more-or-less equally across the country and across industries. This simple act alone would prove that he really is in favour of expanded oil and gas production, and it would go a long way toward cooling off some of the simmering western alienation. And if he made this promise soon, and talked it up effectively for the next 10 days, it might even win him a few western seats on April 28.

Christopher Ragan is an economist and is the founding director of the Max Bell School of Public Policy at McGill University.

Note from the editors: The Line wants to apologize to Christopher Ragan and our readers for a bizarre glitch this morning that resulted in several paragraphs of this article repeating in the text. We don’t know what happened but it seems to be resolved now.

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