Canadian governments stand to lose more than half of their revenue from oil and gas activities through 2040, and nearly nine-tenths of the taxes and royalties the industry says they will collect, as the global economy decarbonizes and shifts away from fossil fuel production, the UK-based Carbon Tracker Initiative concludes in an analysis released this week.

While the published report makes almost no reference to Canada or the United States, a side analysis supplied to The Energy Mix on behalf of Carbon Tracker shows governments’ fossil revenues eviscerated in both countries. By 2040, revenues fall 40% in the U.S. and 54% in Canada compared to the five-year averages from 2015 through 2019. Relative to the overheated projections and promises emanating from each country’s fossil lobby, they plummet 74% in the U.S. and 88% in Canada.

And yet, despite the widely-held belief that both economies are dependent on the fossil industry, governments’ oil and gas revenues between 2015 and 2019 amounted to just 0.3% of GDP in Canada and 0.2% in the U.S., said Carbon Tracker Junior Oil and Gas Analyst Axel Dalman. Those figures average out the deeper vulnerability of jurisdictions and regions like Alberta, Saskatchewan, northeastern British Columbia, and Newfoundland and Labrador in Canada, or Texas and North Dakota in the U.S. But they also show both countries with the financial resilience to help fossil-dependent regions along the road to a just, green transition.

Indeed, the overall numbers put Canada in 65th place on a list showing countries’ vulnerability to lost oil and gas revenues, while the U.S. came in 70th. The main Carbon Tracker report focuses in on the 40 most vulnerable petrostates in seven regions: Asia, Europe, the Middle East and North Africa (MENA), Africa, Latin America and the Caribbean, Oceania, and North America.

The wider analysis shows governments losing US$13 trillion in revenue over the next 20 years, including $9 trillion for the top 40 petrostates, with the majority of the drop “driven by lower prices, rather than lower volumes,” Carbon Tracker states. As a result, “populations that are heavily reliant on fossil fuel production face lower government revenues and job losses as the pace and inevitability of the energy transition increases.”

Suriname, Timor-Leste, Colombia, Cameroon, Sudan, Mexico, Gabon, Ecuador, Chad, Venezuela, Angola, and Bolivia emerge as the dozen most vulnerable countries, with potential oil and gas revenue shortfalls ranging from 76 to 94%. Within that group, Angola is most dependent on its income from fossil activities, which account for 56% of government revenue, followed by Timor-Leste at 52%. The study lists seven countries that depend on fossils for 40% or more of total public sector revenue.

While North America stands to be the biggest regional loser in a decarbonized future, with fossil revenues falling 77% through 2040 compared to fossil industry estimates, the Canadian and U.S. economies are more diversified—and therefore far less dependent on fossil fuel extraction than the industry likes to claim.

“Canada does have a lot more flexibility in shifting away from fossil fuel production than the petrostates,” Dalman told The Mix in an email. “It already has a well-developed tax system and a diversified economy, which is why oil and gas revenues make up such a small share of the total. That’s not to say decarbonization is easy—developed countries have a tough road ahead of them, too, but at least they don’t have a big fiscal shortfall from falling oil revenues on the horizon.”

He added that “fossil fuel industries have outsized power in a number of countries,” including Canada, the U.S., Australia, and Germany. Fossils “often like to portray themselves as somehow economically essential because they want to maintain their social licence to produce.” So “I wouldn’t discount the power of lobbying in maintaining those fossil fuel-centred narratives.”

With more than 400 million people living in the 19 most vulnerable countries, and 10 of those considered to have low human development based on United Nations criteria, the report shows the impacts of fossil fuel dependence and the urgency of a just transition extending far beyond North America.

“The petrostates are already at historically high levels of indebtedness, but differ in their financial position and ability to respond to these changes,” Carbon Tracker explains, noting that some of them have access to “significant sovereign wealth funds” or other sources of credit.

“However, such a fundamental shift as decarbonizing the world economy will involve trade-offs, in particular for the populations of economies that are heavily reliant on fossil fuel production,” the report states. “Accordingly, this has led to the principle of a ‘just transition’, making sure that populations are helped to manage the transition in a way that is fair and equitable. These discussions aren’t new, of course, but the increasing pace and inevitability of the energy transition means increased urgency.”