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AFB 2024: Fair and equitable transition

Alternative Federal Budget: what the federal government could achieve for a fair and equitable transition away from fossil fuels

August 24, 2023

10-minute read

Introduction

Canada’s transition from a fossil fuel-dominated economy to one that produces net-zero emissions will entail significant changes for industry and workers alike. Getting the transition right—this is, ensuring that the shift away from fossil fuel production and consumption makes workers and the economy better off—is essential not only for meeting Canada’s climate commitments but also for ensuring Canadians’ prosperity and winning buy-in for the kinds of far-reaching policies that decarbonization requires.

The labour movement (and increasingly by social justice and environmental advocates) has long championed the idea of a “just transition” to a cleaner economy as a framework for minimizing the costs of economic shifts while maximizing their benefits.1 A just transition is one in which workers and communities shape their own futures with the support of inclusive social programs and public investment in economic alternatives. That’s true whether the transition is driven by climate considerations or by other factors, such as biodiversity protection or technological change.

Central to achieving a robust and lasting just transition—one that seizes the opportunities presented by the global clean economy—is a green industrial policy. Without a plan to create good, green jobs in the communities that need them most, worker-focused just transition policies will ultimately fall short. It is not sufficient for the state to cushion the blow of sectoral or regional downturns without also ensuring there are new opportunities available in future-oriented industries.

Overview

The federal government has made significant strides in developing both a just transition plan and a clean industrial strategy over the past year. In February 2023, the government released a Sustainable Jobs Plan that laid out ten action items for supporting workers in a clean economy.2 Most of the items in the plan were previously announced and budgeted for, but the plan nevertheless represents the government’s first comprehensive effort at developing a workforce development strategy for the net-zero economy.

One of the key action items laid out in the plan is a Sustainable Jobs Act. The act was tabled in June 2023 and delivers on the government’s 2019 promise to introduce just transition legislation. If it passes, Bill C-50 would create a set of institutions to oversee the government’s sustainable jobs agenda, including an external advisory body of labour and other stakeholders.3

On the industrial side, Budget 2023 included $62 billion over the next decade in new investments in the clean economy, mainly in the form of tax subsidies for private investors. Notably, funding is conditional on meeting certain labour criteria and hiring a certain share of apprentices. This explicit linking of workforce development with clean economic growth is an important example of a just transition in practice.

However, for all this apparent progress, there are serious issues with the government’s current approach. Canada cannot achieve an inclusive green economy without addressing these fundamental concerns.

Failure to tackle fossil fuel production and commit to greener alternatives

Emissions from the production and consumption of fossil fuels accounts for the vast majority of Canada’s (and the world’s) greenhouse gas emissions. The oil and gas extraction industry alone—just getting the fuel out of the ground—accounts for more than a quarter of Canadian emissions. Achieving net-zero emissions thus necessitates a substantial reduction in the total amount of oil and gas produced (see Environment and Climate Change chapter).

Yet the Canadian government remains stubbornly committed to supporting the indefinite extraction of oil and gas. The government continues to approve new extraction projects, while both Budget 2023 and the Sustainable Jobs Plan support lifelines for the fossil fuel industry such as carbon capture and storage (CCUS) technology.4 This approach is ultimately incompatible with global efforts to combat the climate crisis— even if CCUS were economical, which it is not, all of the fuel we export gets burned somewhere anyway.5 To make matters worse, doubling down on the fossil fuel industry makes the Canadian economy increasingly vulnerable to declining global demand for dirty fuels while starving alternative industries of capital.6

To accelerate decarbonization and minimize the risks of stranded assets, industrial policy must focus on industries that have a future in a net-zero world. Canada is well-positioned to compete in many of these sectors, including renewable energy generation, steel and aluminum production, critical mineral mining, sustainable forestry and agriculture, battery manufacturing, digital green services and zero-emission vehicle manufacturing.7 These industries come with their own risks, such as the environmental costs associated with forestry and mining, but they are nevertheless essential industries in a net-zero carbon economy. Canada needs a clear and comprehensive vision for how it will grow greener industries without compromising on the well-being of workers or the environment.

Dependence on private sector leadership

The federal government’s general approach to clean economic development is to incentivize or “de-risk” private investment and only step in with direct public investment in limited ways on specific projects.8 This ideological commitment to market-based measures is both inappropriate and insufficient given the scale of the net-zero transition.

Among other issues, there is tremendous uncertainty about how willing the private sector will be to invest sufficient capital to decarbonize the economy on the timeline demanded by the climate crisis.9 The private sector may never step up to fund vital projects in the national interest if they are not obviously profitable, regardless of the subsidies on offer. Conversely, subsidies may pad the profit margins of investments that would have been made anyway, wasting money that could have been better spent on public initiatives.

By shifting responsibility for clean investment to the private sector, the public also forgoes the benefits that come with owning that infrastructure, such as a demonstrable financial return on investment. Ironically, however, by “de-risking” private investments the public is still on the hook should these projects ultimately fail. To drive rapid industrial change in the public interest, the Canadian federal government must play a larger and more direct role in managing the net-zero transition.

Insufficient measures to promote equity and inclusion

The government increasingly recognizes the importance of diversifying the workforce. Not only is it the right thing to do, but we also need to attract far more workers to green industries to build, maintain and operate the clean economy. Yet Canada’s social and economic policies are not promoting equity and inclusion in the workforce in a meaningful way.

Retraining programs for displaced workers are important, for example, but they cannot be narrowly tailored to current energy workers—who are more likely to be high-income white men—to the exclusion of other members of affected communities—who are more likely to be women, racialized, Indigenous or otherwise marginalized.10 On the job creation front, public funding cannot only be conditional on wages and apprenticeships, but also on ensuring a diversity of new hires.

To build a more inclusive workforce, labour policies must explicitly address the barriers facing equity-seeking groups while providing more generous funding to inclusive social programs.

Actions

To accelerate Canada’s transition away from fossil fuels while building a prosperous, sustainable and inclusive economy—one that can thrive in a net-zero world—the AFB takes the following actions.

The AFB will expand the mandate of the proposed Sustainable Jobs Secretariat and rename it to the Economic Transition and Sustainable Jobs Secretariat. In addition to its responsibility for workforce development policy, this expanded institution will oversee Canada’s industrial transition away from fossil fuels and into greener alternatives. Bridging economic diversification considerations with inclusive, workforce development priorities will allow the federal government to deliver more cohesive policy in both areas. To build the capacity necessary to deliver on this larger mandate, the secretariat will be funded with an additional $250 million over five years. The AFB will ensure this expanded mandate is reflected in the final version of the Sustainable Jobs Act.

The AFB will reorganize the federal government’s Regional Energy and Resource Tables under the purview of the Economic Transition and Sustainable Jobs Secretariat. While the tables’ mandate to develop regional economic roadmaps will continue, the AFB will require those strategies to include and explicitly plan for regional emission-reduction targets in line with national targets. The tables will also adopt a more participatory and transparent engagement approach that sees labour unions, Indigenous governments and community groups playing active roles alongside provincial/territorial governments and industry.

The AFB will fund a comprehensive, government-led National Green Industrial Strategy to be developed by the new Economic Transition and Sustainable Jobs Secretariat. In contrast to the hands-off, goal-agnostic approach the federal government is employing today, the new strategy will position the state as the primary coordinator of—and as a major direct investor in—clean economic development.

The federal government will determine specific priorities based on inputs from the refreshed regional tables, but may include renewable electricity, green manufacturing, zero-emission mobility and agriculture (see Environment, Infrastructure and Agriculture chapters for more details). Crucially, the strategy will work backwards from the goal of net zero by 2050 to align current investments with long-term viability in the global clean economy, as modeled by the Canadian Energy Regulator.11 The strategy will plug the gaps and ensure compatibility between the various roadmaps developed by the regional tables. The federal government will fund the secretariat with $60 million over three years specifically for this task.

The AFB will invest in economic diversification projects in communities undergoing transition. As part of the AFB’s reformation of the Canada Infrastructure Bank into the new Public Climate Bank (see Infrastructure and Cities chapter), it will allocate $15 billion specifically for regions moving away from emissions-intensive and/or environmentally destructive industries, such as fossil fuel extraction, toward cleaner alternatives—including but not limited to renewable electricity, green manufacturing, sustainable resource development and green public services.

The AFB will also make funds available to help industries transition toward cleaner practices, such as electric arc furnaces for steel production. It will prioritize projects that are publicly-owned, economically self-sufficient over the long term, and create local jobs and other spinoff benefits. These proactive investments will enable workers to move into new industries before the old ones have fully wound down, which smooths the transition and reduces the need for social support in those communities.

The AFB will apply rigorous labour and equity conditions on all federal infrastructure and transition spending, whether through the new Public Climate Bank, existing green investment tax credits or other funding and financing programs. While Budget 2023 introduced some prevailing wage and apprenticeship conditions, those conditions did not apply to all funding streams or to all workers (e.g., they cover construction but not operations).

The AFB will ensure that all publicly-funded projects pay a prevailing wage at every stage and that a minimum share of hours are worked by apprentices and by workers from historically excluded groups. These blanket conditions do not replace the need for community benefit agreements, which the AFB will continue to require for individual projects (see Infrastructure and Cities chapter).

The AFB will create a Just Transition Benefit to support workers in transitioning industries. This compensatory benefit will be available to any worker who loses a job directly or indirectly due to environmental policies, such as the fossil fuel phase-out (see Environment and Climate Change chapter) or efforts to protect and promote biodiversity. It is flexible by design, and can be used as income support, as an early-retirement incentive, as a training credit, as relocation support, or for other purposes, depending on each worker’s transition needs. The benefit is indexed to inflation, stacks with employment insurance, and will be available for as long as necessary while those workers seek re-training and/or re employment in alternative industries. The AFB allocates $1 billion over 10 years for this new program, which will be overseen by the Economic Transition and Sustainable Jobs Secretariat.

The AFB will fund a unified Inclusive Workforce Development Program to promote opportunities for underrepresented groups in the clean economy. This new program will consolidate and expand on a number of federal initiatives that have or will soon wind down, including the Sectoral Workforce Solutions Program and Community Workforce Development Program. While those programs have been relatively successful, they are insufficiently funded to drive recruitment and training on the scale required by the clean economy. This new program will receive $4 billion over four years with a target of supporting the training of 100,000 new workers per year, including 50,000 workers specifically from equity-seeking groups.

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