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Raising the state’s visible hand: Towards a people-centred green transition

The market’s invisible hand alone will not lead Canada into a green recovery

Canadian PoliticsEnvironment

Tar sands mining in Fort McMurray, Alberta. Photo by Kris Krüg/Flickr.

Canada’s ability to knit together an accelerated climate and economic revitalization plan has been put to the test as its decentralized governments aim for long-term recovery from COVID-19.

The country is in dire need of a green recovery, not least because the emissions collaterally decreased from pandemic lockdowns are temporary, but also due to the need to strengthen public health against a deteriorating environment, create resilient high-skilled jobs, and shift consumer behaviour.

The market’s invisible hand alone will not lead the country into a green recovery. Conversely, the state needs to raise its visible hand in deploying a mix of proactive and reactive policies to secure an equitable, people-centred green recovery.

The insufficiency of the market

The federal government’s carbon tax, which would mark a 566 percent increase from $30 per tonne of greenhouse gas (GHG) emissions to $170 per tonne in 2030, is emblematic of a broader tendency towards market-based responses to the climate crisis. As such, it provides a financial incentive to elicit consumption and production behaviour changes in curbing emissions.

However, putting a price on GHGs frames climate change as a market externality that requires an optimization of the current socio-economic system rather than pursuing it as a structural issue that obliges transformative measures.

Climate issues are deeply entrenched in our socio-technical systems that interconnect technologies, infrastructure, regulations, business operation models, and lifestyles; hence, mere fiscal strategies in progressive taxation and financing with a “sustainability” tag cannot comprehensively sustain green recovery in the medium- to long-term.

What is also needed is active state-led promotion of low carbon sectors—industrial and technological development with renewed regulations for a green economy; stronger regional integration and supply-chain resilience; and social welfare protection for people across sectors.

Surely, such interdependent and multilayered mechanisms in green transitions cannot be reduced to the single driver of shifting relative market prices.

Cross Winds Energy Park in Michigan’s Tuscola County. Photo from Flickr.

Equity considerations for just transition policies

It is still unclear whether enacted policies will produce an equitable transition from polluting sectors—specifically, how such a transition won’t render certain social groups worse off.

The Liberal government has frequently deployed the rhetoric of “retraining oil and gas workers” as an approach to green transition. While such statements have gained traction on the electoral trail, the reality is incredibly complex. A just transition should not be restricted to a reactive policy framework, but it must also include proactive government management to overcome the complexities of the transition.

It necessitates labour market policies that actively facilitate labour movements, as renewable energy generation will not autonomously create large scale employment. It also warrants policies that counteract disincentives in labour transitions, and training and investment policies to support them.

Significantly, employment in the renewable and clean energy fields are not growing fast enough to absorb jobs lost from the fossil fuel sector. Workers are disincentivized to transition, mostly given that the natural resources sector has traditionally enjoyed high social protection regimes that are not currently promised elsewhere.

The government has not proactively ushered in this process, as it continues to subsidize fossil fuel production, thus creating an incentive for workers to stay. Furthermore, the government’s absenteeism in implementing strategies for upskilling and industry upgrading also raises employment issues, insofar that workers’ training in “sunrise” sectors has not been made concomitant to the retirement process of polluting “sunset” sectors.

This lack of government intervention and protection has rendered workers susceptible to oil price fluctuations, economic shocks, and the sector’s terminal decline. Case in point: Alberta’s pre-pandemic unemployment rate among young men reached 19.9 percent, whilst the impact of the pandemic and Biden’s repeal of Keystone pipeline permits have further exacerbated this issue.

A state-led approach entails a two-pronged initiative of proactively incentivizing employment in the renewable sectors and equipping workers with adequate skills to do so. The financial capacity to facilitate this transition can come from increasing taxes on the wealthy and corporations, or strengthening the central bank’s “quantitative easing” efforts and utilizing government-issued debt.

So far, the Canada Training Benefit provides a starting point for society-wide upskilling, though $250 of tax credit is insufficient given the scope of the decarbonization challenge. Moreover, the federal government’s rhetoric of “retraining oil and gas workers” also necessitates further consideration on its equity impact.

Workers directly employed in fossil fuel sectors, which are disproportionately Canadian-born (88 percent) and male (77 percent), also enjoy over two times the national average in earnings. Accordingly, researchers have highlighted the risk of such policies in reinforcing inequality.

Women, migrants, and Indigenous workers are over-represented in invisible services and care work indirectly linked to the sector, but they are severely under-represented in the sector itself. Thus, policies designed to support natural resource workers must also consider the equity impacts of prioritizing generally high income, Canadian-born men over other marginalized workers, and communities that are negatively impacted by the shift to a zero-carbon economy.

Green recovery should entail sustainable transitions for all, but if only workers directly employed in the sector are supported with government policies, then such a transition could exacerbate underlying social inequities.

Lastly, the COVID-19 pandemic has unveiled the fragility of international economic arrangements. The stagnation of domestic industrial production, which has relied on years of outsourcing and offshoring production, has left Canada ill-equipped to deal with the crisis. Stagnant labour productivity and manufacturing share of GDP, coupled with the heavy reliance on extraction and export of unprocessed natural resources, has engendered a process of primarization that desperately calls for industrial diversification.

A green recovery aligns with such needs, as it propels a shift to a greener economy while upskilling workers and upgrading industries. Canada has lost opportunities to invest in worker training and clean technology in the past, and federal and provincial governments need to make meaning of the moment to revitalize Canadian manufacturing and implement direct policies to promote good jobs and benefit communities across the country.

To secure a just, people-centred green recovery, Canada needs both reactive policies to support workers and communities in affected regions, and proactive interventions to ensure an equitable zero-carbon economy. The scope of the policies must add up to the challenge.

This is an issue of intra- and inter-generational justice; denial, delay, and division (along party and regional lines) will lead to a cataclysmic future. Instead of asking if we should focus on green transitions amidst the current socioeconomic disarray, the question should be if we can afford not to.

Jodi-Ann Juexuan Wang is a MPhil candidate in Development Studies at the University of Cambridge. Her research focuses on the political economy of renewable energy, inclusive policymaking for equitable green transitions, and green industrial policy.

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