A Toronto-Montreal high-speed rail would be an investment in jobs and a green Canada – StCatharinesStandard.ca

The Liberal government recently announced new income support measures, including an extension of the CERB program until September and easing EI eligibility criteria through 2021.

The package, estimated to cost $37 billion, is important — providing much-needed relief to those affected by the COVID-19 pandemic — but to reignite the damaged Canadian economy, it can only get us so far.

Canada’s unemployment rate is still extremely high. According to Statistics Canada, it stands at 10.9 per cent, down somewhat from May’s record high of 13.7 per cent.

Despite this small decline, almost 2.2 million Canadians were unemployed in July, nearly twice as many as in February. Clearly, the country needs jobs, and for jobs, real investments are required.

This comes at a time when another front is in urgent need of action — the fight against climate change.

Since first elected, Trudeau’s government has often spoken about the need to invest in Canada’s transition to a zero-carbon economy, but no meaningful action has been taken.

Even the assignment of a special “green recovery task force” didn’t result in any concrete action for emerging from the pandemic through sustainable investments.

Canada’s actions are disappointing when compared to other countries. Since the beginning of the COVID-19 crisis, France and Germany, for example, have committed $36.7 and $27.1 billion (U.S.) respectively in funding for clean energy projects. Democratic candidate Joe Biden also revealed a $2-trillion (U.S.) climate plan over four years.

At the same time, Canada has committed only $2.4 billion (U.S.) for clean initiatives.

But it seems that finally, five years after Trudeau came to power, the stars are aligned for his government to make bold investments in the spirit of a Green New Deal that would tackle both crises at the same time.

Helping it first is the current composition of the government. Bill Morneau, who clashed with Trudeau over the scope and scale of proposed green initiatives, is now out of the way.

Chrystia Freeland, the newly appointed finance minister, seems on board, telling reporters just a few days ago: “All Canadians understand that the restart of our economy needs to be green. It also needs to be equitable and inclusive.”

And behind the scenes, it is going to be climate-champion Mark Carney, who was hired as an informal adviser to the prime minister. The former central bank governor will provide economic expertise through a climate-change prism.

The second piece of the puzzle is the fact that Canada can take advantage of historically low borrowing rates to finance its Green New Deal investments.

Sure, the deficit it’s running is massive, and will have to be dealt with in future years. But real investments are an absolute must to get people back to work, and we can take comfort in the fact that the country can borrow money almost for free.

For example, Canada can now issue 30-year government bonds and pay its debt-holders just over 1 per cent in annual interest.

In fact, Canada can lock in historically low borrowing rates for a period as long as 50 years. It already once before (in 2014) issued ultralong bonds (maturing in 2046), which at current prices pay only 1.03 per cent in annual interest.

With the cabinet on board and cheap financing readily available, what kind of investments should the government pursue as part of its green recovery plan?

One such project could be introducing a high-speed rail between Toronto and Montreal. A few months ago, I argued on these pages that such a service is a great idea not only environmentally but also financially.

A Toronto-Montreal connection (potentially linking Ottawa) would hit the “sweet spot” of city-to-city high-speed routes that can be operationally profitable.

Hence, a project like this has all the desirable features that the government is seeking. It will create thousands of jobs and support Canadian companies; it is green by definition; it is a long-term investment that has many positive externalities; and it can be financed cheaply. What’s not to like?

For additional ideas the government may consult the Task Force for a Resilient Recovery, an independent group of Canadian finance, policy and sustainability leaders who recently published a preliminary report with suggestions for $50 billion of green investments mostly in the areas of climate-resilient and energy-efficient buildings, zero-emission vehicles and renewable energy.

The upcoming speech from the throne is scheduled for September 23. Let’s hope that it will include a commitment to build a Toronto-Ottawa-Montreal high-speed rail as part of a radical green plan.

Trudeau’s government must deliver on its promise to transition Canada to a zero-carbon future, making sure this transition is inclusive and equitable, to use Freeland’s words.

Financed at 1 per cent for 50 years? Now that’s also a bargain.

Amir Barnea is an associate professor of finance at HEC Montréal and a freelance contributing columnist for the Star. You can follow him on twitter: @abarnea1

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