A new report shows the costs of failing to prepare for change.
A new report from the Canadian Centre for Policy Alternatives and Ecojustice finds that global climate action will cause a steep drop in oil sands production — leaving Canada facing serious economic consequences and social impacts.
The report, Heads in the Sands: Understanding the social and economic risks of declining global demand for Alberta oil, models what a collapse in global demand for Canadian oil would mean for the economy, the environment, and communities in the oil sands, and calls on our governments to undertake a just and equitable transition away from oil and gas, now.
The Canadian Energy Regulator has forecast an 83 per cent decline in Canadian oil sands production by 2050 if the global community follows through on its climate change commitments.
The starting point for this report is the Canada Energy Regulator’s (CER) conclusion that, in a scenario where the international community takes action to achieve net-zero emissions by 2050, oil sands production could fall by 83 per cent by 2050. This report presents the results of new economic modeling that expands on the CER’s findings to consider how changes in oil production would play out at the level of individual oil sands projects as well as for jobs, public revenues and environmental liabilities.
Three key takeaways:
- We do not get to choose if (or when) the world stops buying our oil.
Global demand — not federal or provincial climate policies — determines the future of oil sands production. As other nations increasingly transition away from oil to meet their climate commitments, oil sands production will drop dramatically — starting as early as 2030. This decline will occur regardless of domestic efforts to reduce emissions.
- This market-driven decline will have massive economic, social, and environmental impacts — especially on Albertans.
The report models the consequences of this potential decline in oil sands production in terms of jobs, public revenue, and environmental liabilities, finding:- A decline in total revenues generated by the oil sands from more than $100 billion in 2023 to just $5 billion in 2050.
- A consequent collapse in public revenues collected from the oil sands through royalties and taxes from around $20 billion today to near-zero by mid-century.
- A drop in total employment connected to oil sands construction and production from roughly 100,000 workers today to around 5,000 by 2050.
- Stranded assets of nearly $70 billion from projects that shut down before paying off their debts.
- Unfunded environmental cleanup costs could be as high as $130 billion.
- There is a short runway to prepare for the global transition away from oil.
The report forecasts these impacts could be felt soon; as global demand declines significantly in the 2030s, 15 projects shut down in that decade and only a handful are still operating by 2050 – at reduced capacity. The costs of inaction are incredibly high and, if provincial and federal governments do not start preparing soon, frontline communities will pay the price.
An urgent message for federal and provincial governments
Co-authored Hadrian Mertins-Kirkwood, a senior researcher with the Canadian Centre for Policy Alternatives and myself, this report provides key context for governments and frontline communities in the oil sands about the nature, magnitude and timing of impacts of an unmanaged, market-driven decline in oil sands production, so that they can take necessary steps to prepare for the future.
“Canadian governments and the oil industry itself are banking on Canada being the last oil producer standing in a world that’s moving away from fossil fuels. But what if they’re wrong?” asks Hadrian Mertins-Kirkwood.
“We are not prepared for a scenario where the world stops buying Canadian oil. An unmanaged collapse of the sector would be devastating for an unconscionable number of workers and their communities.”
At the end of the day, we can’t control global oil markets, but we can plan for a future where the oil sands no longer provide the jobs and revenue they once did. Fortunately, we can see what’s coming and we have time to prepare. The federal and Alberta governments must support First Nations, municipalities, and other communities in the oil sands region to participate in a different future, one that puts the well-being of people and the environment first.
The silver lining: Oil sands clean up creates new jobs and a healthier environment
The main silver lining identified by this analysis is that the early shut-down and clean-up of oil sands projects could create significant benefits, offsetting some of the impacts.
- Environmental benefits: Reduced oil sands extraction will immediately reduce greenhouse gas emissions, air pollution, and freshwater use, resulting in widespread benefits for human health, ecosystem integrity and climate change.
- Indigenous Rights: Reduced oil sands extraction will reduce impacts on the rights of Indigenous Peoples, upon whose lands the oil sands are situated, and reclamation of the oil sands would contribute to the restoration of these rights.
- Job creation: A comprehensive reclamation and clean-up program could create 15,000 jobs in environmental reclamation services by 2050, as long as Alberta ensures its oil sands reclamation security fund is adequately funded.
Calling on governments to prepare, now
An unmanaged decline is not something that Alberta and frontline communities can afford, however, with the decline starting in the 2030s, we only have a short runway to prepare.
It will be necessary for the federal and Alberta governments to diversify provincial and local economies in advance and establish transition supports that oil sands workers and communities can access as jobs and revenues are lost.
Our governments cannot bury their heads in the sands. We must plan for the reality of our oil and gas markets rapidly shrinking. Albertan communities cannot afford to wait.