The COVID-19 Crisis and Canadian Federalism3 Abstract This paper examines the potential impact of the COVID-19 crisis on six key dimensions of Canadian federalism: social protection; intergovernmental relations; fiscal federalism; emergency powers; Québec nationalism and politics; and regional alienation in Alberta. On social protection, it suggests that federal politicians and civil servants might explore implementing incremental reforms of Employment Insurance and other components of federal income support as a result of the pandemic. We find little evidence of transformative change in intergovernmental relations, although their frequency has greatly increased during the COVID-19 crisis. From a fiscal perspective, the pandemic has amplified pre-existing pressures for increased healthcare transfers and reform to the fiscal stabilization program. The decentralized and collaborative handling of the crisis has reduced concerns of abuses of power and set a major precedent in terms of respecting provincial autonomy that may have rendered obsolete the Emergencies Act. The COVID-19 crisis is likely to consolidate, if not further the decline of both the independence option and the PQ, as it highlighted, among other things, the fiscal might of the federal government. At the same time, it is likely to sustain, if not aggravate feelings of alienation in Alberta as the province will remain a non-recipient of equalization despite the deterioration of its fiscal situation.
Oil production and Equalization payments are two contentious and often overlapping subjects in Canadian politics. Alberta’s Premier recently argued that his province’s energy sector pays a disproportionate share of the Equalization payments that Quebec receives. This came after Quebec’s Premier referred to Alberta oil sands as “dirty energy.” Canadian federalism has become the stage for the debate on oil rents and the politics of Equalization. The purpose of Canada’s Equalization program is to reduce the horizontal fiscal imbalance between provinces to ensure public services of comparable quality. Whereas Canada is the world’s fourth largest producer and exporter of oil, proven reserves are largely concentrated in the Prairies’ oil sands. Eastern Canadian provinces, including Quebec, have so far been the main recipients of federal Equalization payments. But to what extent do oil revenues sustain Canada’s Equalization program? This paper argues that oil rents in no way sustain the Equalization program, because these are revenues that belong exclusively to the provinces. However, provincial ownership of natural resources and their uneven geographic distribution actually contribute significantly to the regional wealth disparities that Equalization tries to mitigate. This study provides an overview of oil policy and federal transfer payments, paying close attention to the structure of Equalization. The objective is to demystify some of the claims surrounding the relationship between oil revenues and their redistribution and thus better inform policy debates on equalization in Canada.