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If Canada instead implemented a production phase-out strategy, it would have a considerable negative impact on Alberta's GDP growth; the yearly growth rate would be decreased by around 0.1 percent when global oil prices are low and by about 1.0 percent when global oil prices were high.3 These adjustments in annual growth rates cause significant variances in the level of real GDP in 2050. In the case of an intermediate world oil price, the GDP cost to Alberta of the production phase-out strategy is around $60 billion, or roughly 15% of Alberta's GDP at the time. At a high global oil price, the GDP cost would be $130 billion—more than 30% of province GDP.The GDP expenses listed in Table 2 are considerable. The Canadian recession induced by the COVID-19 epidemic was the country's deepest since the Great Depression of the 1930s, with real GDP decreasing by almost 15%. As severe as it was, the sharp economic fall lasted less than a half-year in the middle of 2020, and three years later, the economy was nearly entirely recovered. In comparison, the GDP costs illustrated in Table 2 would be just as significant (if not higher) for Alberta's economy as the COVID recession was for Canada's, but the costs would be permanent and continuous. To put it another way, the PPF/Navius modeling experiment implies that implementing an oil-and-gas production phase-down would be equivalent to permanently eliminating one out of every five or six dollars created in Alberta's 2050 economy.4

Some extra expenses not included in the Navius 

model would be particularly significant in Alberta: short-term transitional expenditures incurred as a result of the policy-driven phase out of oil and gas. For example, if oil-patch workers are laid off as a result of production cuts, they will incur significant costs as they search for new jobs, relocate, invest in retraining, and eventually find work in a different economic sector, possibly in another Canadian province. The same is true for many businesses that provide services to the oil and gas industry. Production cuts would reduce demand for their services, and there would be significant consequences as these enterprises redirected their capital, entrepreneurial efforts, and labor forces to more productive and profitable pursuits. These costs are omitted from the Navius model because it assumes full employment; yet, in the actual world, such costs are quite relevant and often fairly significant, even if they endure only a few years.Section 4: Take the model seriously but not literally.Economic models should never be interpreted as literal reconstructions of the economy; rather, they should be considered seriously if they provide important insights into how various sections of the economy interact. The Navius model is not intended to make precise predictions about the future, but rather to investigate the approximate effects of various types of climate policies. It is particularly beneficial for illustrating the disparities between competing policy options, which is the primary goal of the PPF/Navius paper.

The two potential policy packages discussed in that study

 

should not be interpreted as accurate or literal representations of specific policies. The "aggressive decarbonization" policy strategy is represented in the model as an economy-wide carbon price that rises as needed to meet the net zero aim by 2050. However, its overall economic impact would be fairly comparable to any set of economy-wide regulations that resulted in roughly equal marginal abatement costs across regions and sectors. These could include "flexible" laws that integrate compliance trading among significant GHG emitters, such as British Columbia's Low Carbon Fuel Standard or the Clean Fuel laws, which are currently being created by the federal government. The "production phase out" policy approach is represented in the model as a gradual, forced decline in oil and gas production commencing in 2035. This is a relatively accurate representation of any policy-driven output reduction of this magnitude that occurs during this time period.Taking the modeling results in the PPF/Navius paper seriously but not literally, we can summarize the main findings:Broad-based and economy-wide measures can be implemented to attain net zero GHG emissions by 2050. A policy that phases down Canadian oil and gas production is not required to attain this goal

Implementing an active phase-out of Canadian oil 

and gas production would raise the economic cost of reaching net zero, potentially by several percentage points of GDP by 2050.The GDP cost of a policy-driven phase-out of oil and gas would be heavily influenced by market conditions, including DAC and CCS costs, as well as global oil prices. The higher the price of oil, and the lower the prices of DAC and CCS, the greater the economic burden of ending oil and gas production.The economic impact of eliminating Canadian oil and gas production would be particularly high in Alberta. Under some reasonably expected market conditions, the cost to Alberta might be considerably over 15% of GDP by 2050, possibly up to 30%.Section 5: Final RemarksTwo aspects of GHG emissions are critical to the selection of effective and low-cost climate measures. First, GHGs are emitted by hundreds of thousands of point sources, including cars and trucks, residences and buildings, manufacturing processes, and power plants. And the costs of lowering GHG emissions differ greatly among these various areas, sectors, and facilities. Second, every tonne of GHGs emitted reaches the same atmosphere, causing the same consequences for the global climate. The climate does not distinguish between a ton of emissions from Edmonton and a ton of emissions from Etobicoke.