Two Trump-loving Prairie governments face a costly new reality under U.S. president Biden

Feature by Gregory Beatty

Most Canadians breathed a massive sigh of relief after Joe Biden’s election win over Donald Trump. Not all Canadians, granted, because as we know Trump does have his fans in the Great White North (you can see them on Facebook arguing they don’t have to wear facemasks in a pandemic and the CBC is a Justin Trudeau propaganda outfit).

Two of Trump’s biggest Canadian fans are probably Alberta premier Jason Kenney and Saskatchewan premier Scott Moe. If they sighed at news of Biden’s win, it was in disappointment.

Kenney and Moe both lead populist conservative governments, so on a range of issues from fossil fuels come hell or high water to low taxes, deregulation, privatization, “law and order” and religious “freedom”, they’re in line with Trump.

But by Wednesday, Jan. 20 Trump will be out of the White House and Biden will move in. Alberta and Saskatchewan are already struggling with weak, resource-dependent economies, not to mention the pandemic. Now, they’ll face a new challenge.

Or maybe not. It all depends on what type of Biden administration we see.

So far, most of the cabinet and agency appointments have been Obama era veterans. That doesn’t bode well for a progressive agenda, says Simon Enoch, Saskatchewan head of Canadian Centre for Policy Alternatives.

“The Obama analogy is apt,” says Enoch. “There was a lot of hope that there was going to be progressive change [under Obama], but it was gradually extinguished. And with Biden, we’re seeing the same sort of corporate Democrats who don’t have progressive credentials.

“Obviously, it’s going to be better than the Trump administration. But that’s an awfully low bar.”

There are a few wild cards. One is the Jan. 5 Senate run-off election in Georgia. If the Democrats win both seats, they’ll control the Congress and Senate, and have freer rein to pass legislation. But even if they don’t win, Biden can still accomplish a lot through executive orders.

Another wild card is what sort of heat the administration will feel from the party’s younger, progressive wing — including newly-recruited voters in Georgia and Arizona who helped Biden flip those states.

“I think you’ll definitely see some pushback, especially with the climate issue, because that’s something that can’t wait,” says Enoch. “The sense of urgency is more now than during the Obama years. The climate generation that’s coming up recognizes that, and the need for fundamental change. The question will be whether their voices will be loud enough, and strong enough, to move the Biden administration.”

Climate change was a central plank in Biden’s platform. And when I asked Ian Hussey, research manager at Edmonton’s Parkland Institute, if he expected the Biden administration to take climate change seriously, he said, “I absolutely do.”

Major Biden policy commitments include rejoining the Paris Accord, reaching net-zero by 2050, reducing methane emissions and restoring the clean fuel standards and electricity regulations that were rolled back by Trump.

Those sync with the federal Liberal government’s climate goals — so in the ongoing battle between Ottawa and Confederation’s two climate change bad boys, it’s advantage Ottawa.

Other policies are being floated too, such as ending fossil fuel subsidies, restricting drilling on federal lands (including the Arctic Wildlife Preserve Trump was eyeing), toughening disclosure requirements for fossil fuel companies and investors to account for climate risk, and possibly applying carbon tariffs to exports from high carbon jurisdictions.

Good News, Bad News

Hussey says some moves, such as restricting drilling and ending subsidies, might actually give a short-term boost to Alberta and Saskatchewan oil and gas production by opening up North American and global markets.

But others will definitely hurt. Hussey expects one early casualty to be Jason Kenny’s huge gamble to commit US$5.3 billion in direct investment and loan guarantees to the Keystone XL pipeline — banking on a Trump win. [See sidebar]

“The Keystone investment absolutely is at risk now,” says Hussey. “Biden not only put in his platform that he was going to withdraw the presidential permit, he also made several fiery speeches about taking climate science seriously and mitigating and adapting to climate change.”

While Kenney and Moe are prominent populists in their own right, Trump was the king of that crowd. Losing him as an ally, Enoch predicts, will sap the two governments of some of their populist rhetoric.

“Even if they didn’t embrace outright denialism like Trump, they could at least point to his administration and say ‘Look, these guys are deregulating, they’re cutting taxes, and we have to stay competitive,’” he says. “I remember Brad Wall talking about that when Trump was elected. There was this competitive argument that if we didn’t do the same, we’d lose out. Kenney and Moe won’t be able to do that now.”

Bigger challenges may come, too. One Hussey points to is the carbon tariff on exports.

“For years now, it’s been a sport in Canada to set carbon reduction targets and then not meet them,” he says. “We’re not the worst offender, as many countries have failed to meet their targets. But we are in that group, and [we’ve missed] our targets by a lot.”

A carbon tariff would be a game changer, Enoch agrees.

“Right now, with the arguments Kenny and Moe make about a carbon tax, there’s no economic cost to not having a tax. If a [tariff] was imposed, all of a sudden there’s an economic downside to not having a tax. Their arguments go out the window, because our top trade partner would impose a tariff on countries that aren’t meeting their climate commitments.”

The European Union is considering a carbon tariff too. For sure, exports from Alberta and Saskatchewan would be impacted.

And if it’s applied at the national level, all regions of Canada could be affected.

Per capita, Alberta and Saskatchewan’s GHG emissions are sky-high compared to other provinces. Those provinces, in recent years, have taken steps to reduce emissions. If their exports start getting slapped with carbon tariffs because of Alberta and Saskatchewan’s intransigence, they’re not going to be happy.

The same goes for Ottawa, which will face heat at the international level. And that could lead to Ottawa and the other provinces teaming up to deliver some tough love.

Hussey hopes it doesn’t come to that.

“I would hope more for creative, cooperative problem solving,” he says. “If Ottawa gets its back up, you could see Alberta and Saskatchewan dig in their heels even more. That’s not good for us on the prairies, and Canada as a whole.”

Hussey favours an idea put forward by author Seth Klein and the Alberta Federation of Labour for a new federal transfer program that would run alongside Canada’s current transfer and equalization programs.

“It would be based on GHG emissions by province or territory,” says Hussey. “If you have more GHGs, like Alberta and Saskatchewan, you receive more money.”

The provinces would use the money to restructure their fossil-fuel dependent economies. (Klein says it would have to be carefully configured to not “perversely incentivize” high GHG emissions).

Bottom line for the Kenney and Moe governments is that with oil prices in a permanent slump and a new policy direction on climate change likely in Washington, D.C., they are not dealing from a position of strength.

Still, short-term, Hussey doesn’t expect much change.

“I think it’s naïve to think the Alberta and Saskatchewan governments won’t continue to promote Republican-style policies on fossil fuel development and climate change,” he says. “Ultimately, they have an interest in stoking their base. Many people have bought into the idea the oil industry can be greened to the point where it can be part of a long-term future that takes climate science seriously. Of course, that’s not factually correct.”

Climate change is only one hot-button issue where the Biden administration’s impact will be felt. There’s also the post-pandemic recovery. Governments world-wide have spoken bravely about “building back better”, and Enoch is curious to see what the Biden administration does there.

“I think there’s a consensus,” says Enoch. “Even the IMF has said we want governments to spend right now. We don’t want them to tighten their belts because we don’t want to see the same recessionary impact as the 2008 financial crisis. With the Canada and U.S. relationship, instead of a race to the bottom, hopefully what we’ll see is a race to higher standards.”

Sidebar

Life After Oil

A puffed-up Canadian politician puts US$5.3 billion of taxpayers’ money at risk by investing in a hotly contested pipeline, only to see the project cancelled by a newly elected American president. Not quite on par with a Mack Sennett Keystone Kops comedy, perhaps, but still slapstick material.

Cancellation isn’t quite guaranteed for the Keystone XL pipeline but incoming U.S. president Joe Biden campaigned on promises to kill it and the Parkland Institute’s Ian Hussey expects his administration to shut it down.

The irony, says Hussey, is that with two pipeline expansions underway (Trans Mountain heading west and Enbridge Line 3 into the U.S. northeast), Alberta doesn’t really need Keystone.

“Where it would help is with the industry’s ability to grow substantially in the next 20 years,” Hussey says. “We already have enough capacity to move the fossil fuels we produce on the prairies. So having Keystone is like a cherry on the cake.”

As much as Kenney and Scott Moe would like to eat that cherry, their dream to grow the oil industry much beyond its current capacity isn’t realistic, says Hussey.

“When you look at forecasts of how much fossil fuel production is going to grow in the next 20 years, really all we’d be doing is flooding the market with a fuel that’s already being over-produced. The reason why prices have been so low for so long is that there’s too much oil in the world, and there isn’t enough demand. That’s a permanent reality.”

The stark truth, too, is that with all the technological innovation in recent years, the oil industry is no longer a job generator.

“That was done to reduce labour costs,” says Hussey. “So the smaller amount of investment we’re going to see going forward will mean even less jobs than in the past. Prairie people still associate the industry with the boom we had in the first 10 years of this century. That’s simply not the way the industry operates now.”

To boost employment, Hussey recommends Alberta and Saskatchewan take Ottawa up on any “build back better” offers that come their way.

“When we invest in other industries such as healthcare, education and public transit, we see more employment per million or billion dollars invested than in the oil industry,” he says. “So there are more job opportunities investing in the green economy than in fossil fuels.

“It’s a carrot versus a stick, where Ottawa can say, ‘There’s real money here, and there’s a lot of unemployed prairie people’,” says Hussey. “We’re not saying the fossil fuel industry needs to shut down overnight, but we know because of climate science we need to green our society and wind down the industry over the next 30 years.”