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An alternative economy for Cape Breton

by Garry Leech

An alternative economy for Cape Breton

This article was originally published in the Cape Breton Independent

Let us take a moment and envision an economic model for Cape Breton that creates jobs, contributes to environmental sustainability and shifts control over the local economy to the people of Cape Breton rather than leaving us at the mercy of corporations and unpredictable global markets. Many claim that such a transition would be great but it is not possible. In actuality, it is possible, as I will illustrate.

Given that Cape Breton’s population has declined by more than 15 percent over the past 20 years, thousands of Cape Bretoners regularly “commute” to Alberta for work and one-third of the island’s children live in poverty, it is evident that the current economic model is not working. It is a model that has been based on making Cape Breton reliant on outside forces, particularly corporations from away and the unpredictable global economy.

An alternative model could be democratically-determined at the community level and make Cape Breton more self-sufficient and environmentally sustainable. To illustrate the feasibility of such a transition I will first draw on existing examples to show what an alternative locally-owned green economy in Cape Breton (and in other communities throughout Canada for that matter) might look like. And then I will examine ways in which such a transition could be implemented, particularly with regard to funding.

Imagining an alternative model

Let’s begin by imagining a green-based economy that creates good jobs for Cape Bretoners. Most Cape Bretoners depend on oil and electricity to heat their homes during the winter. But more than 90 percent of the oil used in Atlantic Canada is imported from overseas and its price is determined by volatile global market fluctuations. This makes little sense given that we are sitting on an endless source of natural heat.

Geothermal heating systems have a very small ecological footprint because they use the earth’s natural underground warmth to heat houses. Cape Breton is ideally situated to take advantage of this natural heat source and we only need look at Sweden to see how such a transition can be implemented. Over the past couple of decades Sweden has increased its use of geothermal heating in order to decrease its reliance on volatile fossil fuel markets. About 30 percent of the country’s homes are now heated with geothermal energy and 75 percent of all new homes have geothermal heating.

According to the US Environmental Protection Agency, geothermal systems save homeowners up to 70 percent in heating costs compared to conventional oil, gas and electric systems. The US government actually put its money where its mouth is when the US Embassy in Sweden announced earlier this year that it is converting eight of its properties to geothermal heating, which will save the US government an average of $5,000-$5,500 per house in electricity and fuel oil costs while also reducing greenhouse gas emissions.

When compared to large hydro projects, geothermal power generates 30 percent more manufacturing, construction and installation jobs and, crucially, 25 percent more long-term operations and maintenance jobs. Geothermal heating systems also create more than four jobs for every one job in fossil fuel-fired power plants. And many of these jobs require trades skills such as welding and pipefitting that would diminish the flow of Cape Breton tradespeople heading out west in search of work.

A Cape Breton family that spends $3,000 a year on oil and electric heating could cut that cost by two-thirds with a geothermal system, which would translate into an extra $2,000 of disposable income annually. Meanwhile, the installation and maintenance of geothermal systems in homes and other structures across the island would generate hundreds of jobs.

Cape Breton could also become greener by replacing the island’s three coal-burning power plants with community-based wind energy projects. Denmark has made renewable energy a priority and, as a result, 33 percent of the country’s electricity is now generated by wind power at a cost lower than that produced by fossil fuels. According to the National Energy Agency, wind power costs six cents per kilowatt hour in Denmark, which is the same rate that Nova Scotia Power (NSP) charges for its coal-generated electricity. Furthermore, the installation of geothermal heating in homes across the island would mean that Cape Bretoners would consume less electricity and eliminate the pollution that is currently emitted by NSP’s power plants.

And as is the case with geothermal heating systems, wind energy projects generate significant jobs at the local level. In fact, the wind energy sector in Denmark is responsible for creating between 6,000 and 8,000 new jobs annually in a country of 5.5 million people. When adjusted for the population difference, these figures mean that wind energy could generate between 165 and 220 jobs annually in Cape Breton.

Government subsidies for the wind energy sector in Denmark average about $400 million annually, including providing families with a tax exemption for generating their own electricity or for joining wind turbine cooperatives. By 2004, more 150,000 Danes were either members of wind turbine cooperatives or owned their own turbines and some 5,500 turbines had been installed across the country.

It is important that wind energy projects be locally-owned, by community-based cooperatives for example. A recent report published by the Institute for Local Self-Reliance shows that local-ownership creates twice as many jobs and has three times the positive economic impact at the community level than large energy projects owned by corporations from away. More than half the renewable energy generated in Germany is produced by locally-owned producers, which means that many communities, as would be the case with a shift to geothermal heating, are no longer at the mercy of global fossil fuel markets. In short, communities have greater democratic control over their energy production and consumption.

There are other areas, such as food production, that could also be revolutionized to improve both our ecological footprint and our health. In the 1990s, following the disintegration of the Soviet Union, Cuba lost its primary oil supplier. As a result, it was forced to transition away from large-scale fossil fuel-dependent agriculture to smaller organic farming. The government broke-up many of the country’s large state-owned farms and handed them over to smaller farm cooperatives.

Due to a shortage of chemical fertilizers and pesticides resulting from the US economic embargo, Cuba began experimenting with organic farming practices and implemented the largest transition from conventional industrial farming to small-scale organic farming that the world has ever seen. More than 80 percent of Cuba’s agricultural production is now organic and the transition created 140,000 new agricultural jobs, many in cooperatives where workers are now their own bosses.

Today, only 8.4 percent of the food that we consume in our province is produced on Nova Scotia farms; fifteen years ago it was closer to 15 percent. There are approximately 250 farms on Cape Breton Island and with federal subsidies redirected away from large agricultural corporations and towards smaller local organic farms we could reverse the decline in local food production. Such a shift would reduce the costs of fresh, healthy organic food while driving up the cost of junk foods that are artificially cheap due to massive subsidies.

The building of geothermal-heated greenhouses would also significantly prolong the growing season, thereby increasing local food production and food sovereignty. According to a US study, one acre of geothermal-heated greenhouses generates $436,000 in sales per year and creates nine jobs. Ultimately, implementing an agricultural shift similar to that in Cuba could, when adjusted for the population difference, create 1,750 new jobs in Cape Breton.

Funding an alternative model

Such dramatic shifts in Cape Breton’s economy cannot be achieved through local actions alone, they would also require changing policies and priorities at the provincial and federal levels. It would require that the provincial and particularly the federal government stop prioritizing the interests of corporations and instead support community-based initiatives in order to provide the funding required to implement such a radical transition in Cape Breton and in other communities throughout Canada.

For instance, both Conservative and Liberal governments in Ottawa have overseen a slashing of the corporate tax rate over the past 15 years. In 2000, it stood at 29.1 percent; today it is 15 percent. The Canadian Centre for Policy Alternatives has conservatively estimated that each percentage point cut in the general corporate tax rate loses the federal government $1.4 billion a year. In other words, when the current corporate tax rate of 15 percent is compared to the 29.1 percent rate of 2000, Ottawa is relinquishing almost $20 billion annually in revenues.

If only 50 percent of the corporate tax cuts were reinstituted, resulting in a corporate income tax rate of 22 percent, it would generate an additional $10 billion in annual revenues for the federal government. If this amount were distributed nationally on a per capita basis, Cape Breton would receive $38 million a year from the federal government. And if Ottawa stopped subsidizing the oil and gas industry to the tune of $2 billion annually and redistributed that money on a per capita basis, Cape Breton would receive a further $7.6 million a year from the feds.

Additionally, the current oil royalty and tax regime in Alberta is among the lowest in the world, thereby greatly benefitting private companies. Alberta receives less than 58 percent of the oil and natural gas wealth generated in the province. This contrasts dramatically with Norway where the state retains 85 percent of the country’s oil and gas wealth. The Norwegian state pocketed more than $65 billion in oil and gas revenues in 2012. If Canada established a state oil company and implemented the same royalty and tax regime as Norway it would generate an extra $20 billion a year in oil revenues. That amount dispersed on a per capita basis would provide Cape Breton with a further $76 million annually.

And then there’s the $6.9 billion a year Ottawa hands out in agricultural subsidies, most of which goes to large corporate operations. If this largesse were to be redistributed on a per capita basis then Cape Breton would receive another $26 million annually,which would help fund locally-owned organic farms. The federal government has also provided corporations in Nova Scotia and British Columbia with $33 billion in contracts to build new warships over the next 20 years. If those contracts were cancelled and the money distributed on a per capita basis then Cape Breton would receive $6.3 million a year for the next 20 years.

Finally, the proposed white elephant known as the Sydney container terminal has an estimated price tag of $350-400 million to complete its first phase. Even if only 50 percent of the financing is public money provided by the provincial and federal governments, it amounts to a minimum of $175 million that could be used to fund a transition to a locally-based green economy rather than further integrating Cape Breton into the unpredictable global economy. This amount would translate into $17.5 million a year in funding for Cape Breton over the next ten years.

These are only a few of the many possibilities for redistributing public funding and would not require any tax increases for Canadians, only for corporations. These suggestions alone would provide Cape Breton with $171.4 million a year to help finance the transition to geothermal heating, wind energy and organic food production as well as to fund social programs and other infrastructure projects. To put this amount in context, the annual budgets of the four Cape Breton counties for this year total approximately $180 million. In other words, the $171.4 million in additional funding would almost double the annual revenues of all four of the island’s municipal governments.

So how would we spend this additional revenue? The cost of retrofitting the 42,325 private residences in Cape Breton with geothermal heating would be $846 million at the current market price of $20,000 per house (which would likely fall as a local economy of scale developed). If $84.6 million a year were spent on retrofitting, then every home on the island could be heated with geothermal energy at no cost to the homeowner in ten years.

And the investment required for Cape Breton to subsidize its wind energy sector at the same level as Denmark, when adjusted for population size, would be $10 million a year. If we were to double that investment then Cape Breton could realistically be generating 50 percent of its electricity with wind power in 20 years. Many of the wind energy projects could be managed by community-based cooperatives that could link together in associations that would use existing power lines to form local energy-sharing grids that would connect to the broader provincial and national energy grids.

Such investments in geothermal heating and wind energy would only utilize $104.6 million a year of the additional $171.4 million in annual revenues, thereby leaving $66.8 million a year to put towards expanding local organic agricultural production and improving social programs such as health care and education as well as other infrastructure projects.

This proposed economic transition would also directly generate approximately 3,000 local jobs and likely at least the equivalent number of spinoff jobs. The wages earned by these workers, along with the $2,000 in average annual heat savings for many families, would be spent in the local economy thereby creating even more employment opportunities and increase the municipal and provincial tax base for further funding of economic alternatives and social programs.

Conclusion

Ultimately, Cape Bretoners would gain ownership and democratic control over a significant portion of their economy, particularly with regard to energy and food production, thereby liberating us from the volatile corporate-dominated global economy. Such a transition would also make Cape Breton a leader in environmental sustainability because the economic footprint of Cape Bretoners would be diminished significantly.

Furthermore, this process would not be limited to Cape Breton, the same level of funding could be provided to municipalities throughout the country to make Canada a leader in green economics and sustainability, especially if the fossil fuel industry were to be systematically downsized over the next ten years as renewables came online.

So to all those naysayers who repeatedly state that such a transition is not possible, that we must choose between a healthy economy and a healthy environment, I say “baloney!” I have referred to only a sampling of the alternatives that already exist in the world and have provided a few suggestions for funding those alternatives. There are many more possibilities out there, the only thing we are lacking is political will. If we force our governments to stop subsidizing wealthy oil companies, agri-businesses and call centres, and end the preferential treatment given to corporate box stores and giant utility companies, and instead shift that funding and support to locally-rooted energy and food production among other things, the possibilities are endless.

Author: Garry Leech is a lecturer in the Department of Political Science at Cape Breton University and a member of the J. B. McLachlan Media Collective.

To download a PDF version of this article, click here


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