Renewable energy cannot fill the gap

Bloc Quebecois leader Yves-francois Blanchet told

CBC on May 6 that federal funds should be used to support renewable energy rather than fossil fuels. Blanchet said oil “is never coming back” and “putting any more money in that business is a very bad idea.”

Blanchet needs to do his homework. Oil and gas is Canada’s largest export industry and accounts for $8 billion annually in tax revenue. Until the recent price collapse, this sector employed over half a million people and accounted for roughly 10 per cent of Canada’s GDP. Renewables would be hard-pressed to fill this gaping hole in Canada’s economy and government coffers any time soon.

More to the point where Quebec is concerned, fossil fuels figure prominently in the revenue base used by the federal government in calculating fiscal capacity for the equalization program. Thirty-three revenue sources are factored in to the formula, including 50 per cent of resource value. Oil-producing provinces such as Alberta and Saskatchewan regularly pay in to the program.

In contrast, according to Canada Finance, Quebec received $13.1 billion from equalization in the 2019-20 fiscal year and $11.7 billion in 2018-19.

Alberta and Saskatchewan received nothing.

Quebec has received equalization funding every single year since the program was established in 1957, a total of $221 billion or 51 per cent of all revenue provided to “have not” provinces. This has been due in large measure to the historical strength of the oil and gas industry. The flow of equalization payments would look very different if oil and gas revenue was no longer a factor.

Without equalization revenue, Quebec would either be running deficits or raising taxes. If provinces like Alberta and Saskatchewan are no longer paying in to equalization because oil “is never coming back,” Quebec’s financial future moves on to much thinner ice.

Over time, a transition must be made to renewable energy. However, for a province like Quebec to wish for an immediate demise of fossil fuels is bad public policy and even worse economics. I would be interested to know how Mr. Blanchet will fill the $13-billion hole in the Quebec budget? He needs to be careful what he wishes for. Roy Schneider, Regina