Gimmicks and handouts won’t turnaround Calgary’s downtown—business investment will
On April 18, Alberta Premier Danielle Smith and Calgary Mayor Jyoti Gondek will meet to discuss Calgary’s economic future after weeks of back and forth about the city’s call for provincial support to reinvigorate Calgary’s downtown. Proponents of the city’s plan, which includes a new multisport field house and performing arts centres, say it will spur economic growth in the province. But gimmicks and handouts won’t turnaround Calgary’s downtown or the broader provincial economy—we need business investment for that.
Business investment is crucial for economic growth and higher living standards. When businesses invest in physical and intellectual capital, they equip workers with the tools and technology to produce more and provide higher-quality services, which fuels innovation and productivity growth.
Unfortunately, Alberta has an investment problem, due largely to federal regulations and policies that have hamstrung the oil and gas industry in the quest towards a mandated “green transition.” These regulations, which have been stacking up since 2015, include a new uncertain, complex and subjective approval process for infrastructure projects (particularly pipelines), a ban on tankers exporting Alberta oil off the west coast, and a hard cap on oil and gas emissions while ignoring the other three-quarters of the economy that emits.
As a result, Alberta’s energy sector has struggled to complete projects and access markets overseas, leading to a significant decrease in capital investment in Alberta’s oil and gas industry, from $58.1 billion in 2014 to $21.5 billion in 2022. And this drop in investment can’t be explained away by the 2014 oil price collapse, as prices more than fully recovered in 2022.
Alberta’s overall net capital stock—perhaps the broadest measure of investment as it includes the depreciation of existing assets—shows a similar trend. According to 2020 study, after recording the fastest growth in net capital stock of any province by far from 1990 to 2014 (4.2 per cent), Alberta recorded the slowest growth from 2014 to 2018 (1.0 per cent). The study concluded that “the deteriorating economic environment for Canada’s oil and gas industry after 2014 undoubtedly is the major contributor to the relatively poor investment growth performance in Alberta.”
Moreover, according to energy investors, costly and uncertain regulations are a key reason that Alberta has become a less attractive place to do business. And on that front, Alberta’s challenges are far from over. In the recent federal budget, the Trudeau government introduced a slew of new policies meant to reduce carbon emissions and aggressively continue Canada’s mandated transition to a “clean economy,” which will undoubtedly cost the Albertan economy.
Finally, a recent study by the National Bureau of Economic Research (NBER) provides some perspective on the economic cost of Ottawa’s green transition. According to the study, green plans in the United States will not improve economic growth while imposing significant costs on Americans. Those extra costs mean the U.S. economy will be less effective at producing goods and services people demand and reduce the country's economic growth (inflation-adjusted) by 2 to 3 per cent.
This is just one study on top of many published over the last few years showing the enormous costs green energy plans in the U.S. and Canada will impose on citizens. And since our green plans are even more extensive than U.S. plans, Alberta may suffer even larger costs than our southern neighbours.
It’s important for provincial and local leaders to prioritize policies that improve economic growth, but spending millions if not billions of taxpayer dollars “revitalizing” Calgary’s downtown won’t fuel an economic turnaround. Instead, policymakers at all levels of government must collaborate and address Alberta’s investment problem.