Justin Trudeau’s basic argument is that Canada and the world face both historic challenges and unique opportunities — and the Liberals are better suited than the Conservatives to overcoming those challenges and seizing those opportunities.
Mind you, the two parties don’t entirely agree on which issues are most deserving of attention right now. But there is no bigger challenge than climate change and the transition to a low-carbon future it requires. And Tuesday’s federal budget — described by the Canadian Climate Institute as “the most consequential budget in recent history for accelerating clean growth in Canada” — could be a pivotal piece of the Liberal response.
The actual consequences of this budget will take years to measure. But in response to political and economic pressure, Trudeau’s Liberals have at least significantly upped the ante.
“In our minds, there is probably no more pressing issue of economic policy than accelerating Canada’s transition to a low carbon economy,” a senior finance official told reporters during a briefing on Tuesday. “We cannot, as a country, afford to be left behind.”
Keeping up with the neighbours
The obvious impetus for all of this is the Inflation Reduction Act recently passed in the United States. Though it was couched in terms of affordability, the American legislation was actually a massive package of subsidies for clean energy and technology.
Comparisons with President Joe Biden’s signature legislation are somewhat unfair — the United States has to lean heavily on subsidies because there is no chance of Congress passing any kind of carbon-pricing policy. But the Trudeau government could not afford to ignore it.
U.S. President Joe Biden is shown a Chevrolet Silverado EV by General Motors CEO Mary Barra during a visit to the Detroit auto show to highlight electric vehicle manufacturing in Detroit, Michigan on Sept. 14, 2022. (Kevin Lamarque/Reuters)
“In what is the most significant economic transformation since the Industrial Revolution, our friends and partners around the world — chief among them the United States — are investing heavily to build clean economies and the net-zero industries of tomorrow,” Finance Minister Chrystia Freeland said Tuesday.
“Today, and in the years to come, Canada must either meet this historic moment — this remarkable opportunity before us — or we will be left behind as the world’s democracies build the clean economy of the 21st century.”
Freeland’s third budget as finance minister offers $16.4 billion in tax credits for clean tech manufacturing, clean electricity and hydrogen over the next five years, adding to the $6.7 billion in supports for clean tech investment announced last fall. Freeland also has agreed to add $500 million to the $4.1 billion in support announced last year for carbon capture, utilization and storage.
Beyond those subsidies, the government has committed billions toward a handful of potentially lucrative funds, including $15 billion for the Canada Growth Fund, $8 billion for a “net zero accelerator” and $20 billion through the Canada Infrastructure Bank.
Provinces need to be at the table as Canada competes with U.S. Inflation Reduction Act: Freeland
“Message to provinces – you guys have a strong fiscal position right now,” said Finance Minister Chrystia Freeland. “When it comes to supporting investments in the clean economy, provinces are going to need to be at the table too.”
The Liberals also are moving to shore up the federal carbon price. Under a mechanism called “contracts for difference,” companies that receive funding through the Canada Growth Fund would be eligible for compensation if the industrial carbon price fails to rise as scheduled.
In other words, if some future government pauses or outright repeals the price, it would come at a direct cost to the government.
The “backbone” of the plan, the senior official said, is funding for clean electricity — billions of dollars that will go toward cleaning and expanding Canada’s grid.
“If there’s one single input that is essential to the transition to a low-carbon economy in Canada, it is the availability of low cost, clean electricity,” the official said.
Ideally, these actions would boost Canada’s economic growth. But they also give the Liberal government a positive and forward-looking economic narrative.
The clean economy ‘pyramid’
The enthusiastic technocrats in the Liberal government envision their approach as a four-level pyramid. Carbon pricing and regulation form the foundation. Atop that sit investment tax credits and “strategic finance,” with “targeted programming” at the apex.
Voters probably aren’t going to commit the graphic to memory but “it feels like a coherent package,” said Dale Beugin, executive vice president at the Canadian Climate Institute.
“To me, that’s the right way to think about this. Don’t try to do the [Inflation Reduction Act] from scratch because you don’t have to — you don’t have to spend all that money. [But] do some things. Make sure it’s as targeted as you can and aim that support at the places of comparative advantage, or where the market’s not going to [act].”
Some pieces of the pyramid may prove sturdier than others. Contracts for difference will have to be carefully designed, Beugin said. Tax credits always run the risk of “free ridership” — of rewarding actions that would have happened anyway. Electrification requires working with provinces and, as Beugin notes, “federalism is always a tricky game.”
Greening the grid will require federal and provincial governments to work with each other. (John Woods/The Canadian Press)
The Climate Action Network also pointed out on Tuesday that one piece of the government’s promised climate agenda — eliminating subsidies for fossil fuel industries this year — was conspicuously missing from the budget.
But neither the Conservatives nor the New Democrats were eager to condemn the promised new spending for clean energy and technology. Conservative Leader Pierre Poilievre repeated his condemnation of the federal carbon price, cast aspersions on the notion of contracts for difference and repeated his belief that the Trudeau government is spending altogether too much money — but he did not single out any of the government’s clean economy measures for criticism.
Conservative leader threatens to vote against federal budget
Speaking ahead of the tabling of the federal budget, Pierre Poilievre urged the prime minister to cancel tax hikes and inflationary deficit spending.
Maybe that means Poilievre has found some climate policy he can support.
Both Poilievre and NDP Leader Jagmeet Singh did criticize the budget’s lack of emphasis on housing. Liberals might counter they are already taking action to make housing more affordable, but it’s not obvious that what they’re doing is enough. If that’s still the case when the next election comes, the Liberal government’s chances of retaining power might be severely diminished.
The same could be said of crime or inflation, or any of the other issues that can grind away at a government’s standing and leave more voters craving change.
The measures announced on Tuesday may be relatively unchallenged — and this budget may prove to be truly consequential in building the economy of Canada’s future. But if the Liberals want to see this plan to fruition, there are other challenges to overcome and opportunities to seize.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
