Canadians are used to taking seriously the threat of separation when it comes to Quebec, but a more serious, less manageable form of conflict may eventually emerge in the federation between Western Canada and the rest of Canada.

The Canadian government has been successful so far in managing the “conflict of taste” that has led to Quebec’s historic discomfort in the Canadian federation, because the federal government possesses the tools to address that challenge. But it does not have the same tools to manage the “conflict of claim” that is creating increased dissatisfaction with Confederation in the West. The result is that Canada is a less stable federation than many observers realize. Interestingly, the future of our unity depends largely on whether the West is able to establish a lasting political alliance with Ontario, even though that would mean Quebec no longer being critical for national coalitions.

Conflicts of taste revolve around differences in political preferences between regions within a federation. Quebec is animated by a different culture, history and language than the rest of Canada, which has created a conflict of taste. But legislative mechanisms exist to help mitigate that friction, including: Provincial powers over key cultural institutions such as education and health, special fiscal and immigration arrangements for Quebec, guaranteed bilingualism in federal institutions and tax-collection powers unique to Quebec. Quebec’s ability to wield federal power through a Central Canadian alliance with Ontario has also helped partially alleviate the province’s discomfort within Confederation.

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Conflicts of claim are more difficult because they involve disputes over “sharing the wealth” (as opposed to building wealth together). These arise when a smaller, richer region is called on to transfer wealth to larger, poorer regions within a federation. The obvious example is the way that Alberta and other resource-rich parts of the West have been made to subsidize the rest of Canada through equalization, tax and numerous other net contributions to the federal system.

Because of the difference in populations, it takes significant transfers from the smaller, richer provinces in order to have a material per capita impact on the more populated poorer regions. Meanwhile the larger, poorer regions (in Canada’s case, Quebec in particular) can control through their political voting power the size of the transfers they wish to extract from the smaller, richer region. In these arrangements, conflict arises when the smaller, richer region feels as if the benefits from being part of a federation are outweighed by the cost of serving as a largely powerless cash cow.

This could feasibly become the case for Alberta, which is called on to provide other provinces with massive wealth transfers, even as other provinces have worked to hurt Alberta’s economy both through past policies — such as the National Energy Program — and recent ones, such as B.C. and Quebec’s opposition to allowing Alberta oil to be transported for export through their provinces. Even with the federal commitment to building the Trans Mountain pipeline (while B.C. attempts to block it and Alberta considers retaliatory measures against B.C.), Alberta as well as Saskatchewan feel their prosperity is being existentially threatened. Investment is stymied by stifling federal policies, including cumbersome regulatory processes, clean fuel standards and looming tanker bans.

Unfortunately Canada, notably, lacks formal institutions that provide small regions like Alberta with proper federal representation, such as an elected and powerful Senate, as exists in the U.S. and Australia. But several actions taken by both federal and provincial governments could still help avoid a looming constitutional crisis arising from conflict of claim. Much of the accommodation will need to occur using federal-provincial co-ordination mechanisms.

Specifically, the federal government should avoid top-down policies and instead seek co-operative agreements with the provinces in areas of regulatory, carbon and fiscal policy to avoid conflicts of claim. As I have argued with Janice MacKinnon on this page (Financial Post, January 8, 2019), rather than forcing its preference for a carbon tax onto the provinces, it would be appropriate for the federal government to develop a set of emission-reduction targets with the provinces via a federal-provincial agreement. Each province would agree to its own credible plan that would reach the target the way it prefers to reach it, rather than the federal government dictating the means to achieve the objective. Similarly, a regulatory federal-provincial agreement should be pursued based on best-in-class regulatory approaches for resource development, such as those used in other countries (for example, Australia).

The federal government should also revamp its almost inoperative provincial stabilization program to better help provinces that face sharp declines in revenues, as Alberta and Saskatchewan did during the last commodity-price crash. This includes removing limits that only allow the fund dispense an insignificant maximum of $60 per capita (that’s less than a quarter-billion dollars for Alberta, a province with more than $300 billion in annual GDP) and that exclude resource revenues from being considered in the stabilization formula. This should at least partially quell objections in the West over equalization, which does a poor job at sharing economic risks.

Alberta should also consider a new deal for more fiscal flexibility. It should push for federal cash transfers to be converted into personal tax points, as in Quebec, giving the province a bigger share of the personal income tax. This would enable Alberta to have more control over its tax system, which has been critical to the province in attracting skilled labour and dealing with volatile resource prices.

Given the current dissatisfaction the West over the fairness of the federation, it appears all too likely that the upcoming federal election will involve politicians pitting provinces and regions against one another on the question of resource development. That would be a pity. Canada needs federal leadership working with our provincial governments to reduce tensions arising from conflict of claim in Canada, or the outcome could get ugly.

Jack M. Mintz is the President’s Fellow at the University of Calgary’s School of Public Policy (SPP). This article is based on his new SPP paper “Two Different Conflicts in Federal Systems: An Application to Canada,” available atwww.policyschool.ca.