Delaying Makes the Transition Worse - Centre for Future Work

Fossil fuel industries have already shed 50,000 jobs since 2014, as private employers respond to falling prices and falling profits by sacking workers, restructuring operations, and automating production. So far this transition away from fossil fuel employment has been driven by the profit-maximizing decisions of companies – without the planning and support required to reduce dislocation and take full advantage of alternative job opportunities. In this commentary originally published in the Globe and Mail, Jim Stanford argues a gradual, planned transition, with ample supports for early retirement, retraining, relocation, and income stability, could ensure that the switch to renewable energy sources occurs without lay-offs and community distress. The commentary summarizes arguments developed in more detail in the full Centre for Future Work report, Employment Transitions and the Phase-Out of Fossil Fuels.

The Energy Transition is Already Happening – Let’s Make it Smooth and Fair

By Jim Stanford

Like most industries in Canada, fossil fuel businesses suffered painful job losses during the COVID-19 pandemic and resulting recession. Plunging global prices and steep reductions in capital spending led to major job cuts. Fossil fuel industries (including oil, natural gas, coal, and related activities) lost 17,500 jobs in the 12 months up to September.

Unlike other sectors, however, few of those lost fossil fuel jobs will ever come back – even after health restrictions are eased. Several oil companies have already announced permanent staff cuts and downsizing. They know the pandemic merely accelerated a structural change in global energy that was already evident. Amazing advances and cost reductions in renewable energy technologies (from wind to solar to electric vehicles to hydrogen) mean fossil fuels cannot compete on cost grounds, let alone sustainability. And worldwide progress in emissions reduction (with more countries and companies committing to net-zero targets every month) confirms the imminent exit of fossil fuels from the economic stage.

It is now undeniable: fossil fuels will disappear from most uses in the foreseeable future. And fossil fuel industries will never again be an engine of economic growth and job creation in Canada.

Conventional wisdom portrays Canada as fundamentally dependent on extraction and export of natural resources – and fossil fuels are presently the biggest of these “staple” products. In hopes of delaying the inevitable, fossil fuel lobbyists make exaggerated claims of their importance to the labour market, and predict economic disaster if their businesses are not protected and subsidized.

The statistical reality, however, is very different: fossil fuel jobs constitute a very small portion of overall employment (less than 1%). Their importance was already fading rapidly before COVID-19 hit. From 2014 through 2019, fossil fuel industries lost 33,000 jobs, and their already-small share of total employment fell by one-quarter. Yet over the same period, Canada’s overall labour market strengthened steadily – achieving a record-low unemployment rate in 2019.

The phase-out of fossil fuels will occur over decades, and that gives us time to plan for effective and fair employment transitions. We can enlist the normal mechanisms of change and adjustment that occur all the time in Canada’s diverse, fluid labour market: including retirements, voluntary entries and exits, inter-regional mobility, and job-creation in growing industries. At least 4 million Canadians change their employment status every year: entering or exiting the labour force, changing jobs or careers, starting work or retiring from it. In that context, managing the phase-out of the remaining 150,000 fossil fuel jobs over, say, a 20-year period is neither unprecedented nor impractical.

The sooner we start planning for this transition, the easier it will be. For example, most existing fossil fuel workers will retire over the next two decades (they are older, on average, than the typical worker). By planning ahead, that natural turnover can take care of most of the gradual downsizing required. Senior workers in various locations can be encouraged to retire with incentives. Younger workers can keep working as the industry downsizes. Experience in other jurisdictions (like Germany’s 20-year shutdown of black coal mining) proves this can occur without a single involuntary lay-off.

The most challenging aspect of the transition will be supporting regional communities which currently depend heavily on fossil fuel jobs. Even there, however, the challenge is not as daunting as often claimed. Over half of fossil fuel jobs are located in large cities, where diverse alternative opportunities are available. There are 17 smaller census-defined communities in Canada where fossil fuel jobs currently account for over 5% of total employment. Those communities can and must be supported with ambitious incentives for regional diversification, retraining, and relocation. The overall cost of these programs would be small relative to other energy investments, and spread over many years.

The phase-out of fossil fuel industries is already occurring in Canada, and around the world. We aren’t doing any favours for fossil fuel workers by pretending we can stop it. Denying and delaying the inevitable, pretending the good times of earlier booms can somehow be reincarnated, will make the ultimate pain worse. Then, when an inevitable reckoning is forced upon us by global markets (which stop buying our carbon-based fuels), the dislocation will be sudden, destructive, and out of our control.

It is both more compassionate and more effective to get ahead of this transformation. And the first step is to acknowledge that it is happening.