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Canada falling $60-billion short annually on investments needed to hit climate change targets: report – Financial Post



Investors remain wary of higher risks for returns in long-term transformative projects to reduce emissions, RBC report says

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Canada must make it more profitable for investors to back transition to low emissions in large polluting industries such as oil and gas if the country is ever going to hit its greenhouse gas targets, according to a new report.


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Investors remain wary of higher risks for returns in long-term transformative projects to reduce emissions, which could have a demonstrable impact on achieving climate change-thwarting goals, than in renewable energy where three quarters of the country’s green investment dollars fund projects, the Royal Bank of Canada says in the report.

There needs to be about $70 billion a year spent on green technologies in Canada to meet carbon neutral targets by mid-century, but only about $10 billion is being invested annually, RBC economist Colin Guldimann said in the report released Monday.

“Large-scale projects that could create meaningful change, for instance in heavy-emitting sectors, are often costly, come with higher investment risk, and don’t provide significant near-term financial returns,” Guldimann says.


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“With a relatively large share of industrial emissions, including from the oilpatch, Canada faces a challenge in ensuring that sustainable finance reaches all parts of its economy.”

As a season of deadly wildfires and floods around the planet shows the urgent need to tackle greenhouse gases, there is more investment than ever in funding to fight climate change. But too often it chases quick returns on investment (ROI) in renewable energy instead of broad structural changes to reduce emissions in industries such as oil and gas, and cement.

An oil pumpjack working in Alberta.
An oil pumpjack working in Alberta. Photo by James Maclennan/Sun Media/Postmedia News files

Part of the problem is that many industrial processes rely on fossil fuels to produce the very high heat they require, Guldimann says. Substitutions may not be effective nor generate sufficient returns for investors.


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Part of the solution lies in boosting sustainability-linked finance allowing businesses in those sectors to pay lower interest or utility rates if they cut emissions below targets, Guldimann says. Contracts guaranteeing carbon prices or government carbon price subsidies would also draw investors to a type of funding that has so far been limited, he says.

Tom Rand, a co-founder and managing partner of Toronto-based ArcTern Ventures, says carbon prices are child’s play. Rand says what’s needed is radical capitalism in the form of a massive investment intervention to save the planet from the breakdown in civic infrastructure — millions of climate refugees triggering far-right politics, for example — that he says international security experts forecast will accompany climate change.


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“There are trillions and trillions of dollars just sitting in money market accounts doing nothing, earning nothing,” Rand says in a television interview about his book The Case for Climate Capitalism. “So if we put the right signals in place, the private sector will shovel that money into solving this problem because they will be motivated by making money on those trillions of dollars.

Canada will need to attract investors with greater risk appetite … to help fund this slice of the transition

Colin Guldimann, RBC economist

“The resources are there, the technology is there, they have big engineering companies capable of executing on this stuff. We just need to have a policy framework that puts rules into place that enables that money to flow in that direction, and lo and behold, we’d all be better off in the long term economically and environmentally.”


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Guldimann says there’s already an abundance of capital that companies have marked for engineering. It just needs the policy framework, like Rand mentions, for an increased ROI to boost investor interest.

Canadian investment in engineering structures and industrial equipment averages nearly $120 billion annually while corporate after-tax profits add another $130 billion, he says. The funding should be funnelled through sustainable finance models to increase ROI, he says.

“Canada will need to attract investors with greater risk appetite, and those willing to wait longer to get their initial investment back, to help fund this slice of the transition,” the economist says. “It should ensure that rules for green and sustainable finance allow for these projects to be labelled as such, so emissions-intensive sectors can access the capital they need to transition.”


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Higher costs due in renewable energy could push some investors in that industry to longer-term projects. Rising steel, copper, aluminium and fibre prices plus a four-fold increase in logistics costs have increased wind turbine prices over the last six months, and they’re expected to rise 10 per cent in the next 12 to 18 months, according to consultant Wood Mackenzie.

Rising steel, copper, aluminium and fibre prices plus a four-fold increase in logistics costs have increased wind turbine prices over the last six months.
Rising steel, copper, aluminium and fibre prices plus a four-fold increase in logistics costs have increased wind turbine prices over the last six months. Photo by Maxim Shemetov/Reuters files

There could also be a push by some Canadian pension funds to divest from some fossil fuel activities, or perhaps redirect funding to industry emission transformations, after a report this month criticized their investment portfolios.

The Ottawa-based Canadian Centre for Policy Alternatives found the Canada Pension Plan, while calling itself a climate action leader, had actually increased shares in fossil fuel companies by 7.7 per cent between 2016 and 2020. The centre said it couldn’t determine how the investments had been allocated, but said Canada’s pension funds had declared the need for a quick transition to a low-carbon economy.


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The centre’s report followed a United Nations report this month saying the planet is on an “irreversible” path of climate change impacts including lethal heatwaves and extreme hurricanes. UN Secretary General António Guterres said the report “must sound a death knell for coal and fossil fuels, before they destroy our planet.”

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Alberta Premier Jason Kenney said an abrupt transition is out of the question for Canadians because they need fossil fuels to survive the northern climate.

“It is a utopian notion that we can suddenly end the use of hydrocarbon based energy,” he said. “The challenge is to shrink carbon and CO2 output, and Alberta is increasingly a world leader in that respect.”

Kenney cited provincial funding of carbon capture and storage, and a proposed Edmonton plant to make hydrogen fuel, as efforts to control emissions.

Financial Post


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The investment crisis that nobody talked about in the 2021 campaign – The Globe and Mail



Much of the debate in the 2021 campaign focused on the next couple of years – if not the next couple of months.

Throwing money at the housing market, taxing house flippers, half-price restaurant meals: all the parties had promises that were meant to appeal to enough voters for just long enough to squeak by in a tight race or two.

The long view has been conspicuously absent. A better campaign would have taken seriously the issue that the C.D. Howe Institute examined in a report issued on Thursday about the bad-and-getting-worse outlook for business investment in Canada.

Since 2015, the amount of capital for each worker has been at best stagnant, and the rate of gross investment weak, the study says. Even worse, business investment in Canada has lagged the United States and other countries. In the second quarter of 2021, businesses invested just 50 cents in Canada for each available worker for every such dollar invested in the United States.

Coping with the debts of the pandemic. Battling climate change and transitioning from fossil-fuel dependency. Bolstering the health care system as aging baby boomers enter their 70s and 80s and the labour force shrinks. All of that will require money, which will require growth, which will require higher productivity – which will require higher investment.

The typical rebuttal is to chalk up the problem to the woes of the energy sector. But the study notes that investment in the U.S. energy sector fared much better than in Canada, indicating that it’s not just the commodity price environment at work in this country. Co-author and institute chief executive officer William Robson said in an interview that another key issue is that the decline in oil patch investment has not been balanced by a rise in investment in other parts of the economy that could create high-productivity, high-earning jobs.

Mr. Robson notes other warning signs: companies focused on distributing capital through share buybacks, for instance, and pension funds snapping up assets outside of Canada.

A realistic debate would start with the acceptance that Canada needs to have a marginal corporate tax rate no higher than that of the United States, he says. But he acknowledges that such an approach is likely out of step with the populist temper of the times. “There’s not a lot of sympathy for business. There’s not a lot of sympathy for people that have made a lot of money, however they made it,” says Mr. Robson.

Taxing questions

In a recent letter to the editor, Karim Fazal contends that taxes on higher earners can boost economic growth, and allow the rich to get richer, citing a 2014 study from the Organization for Economic Co-operation and Development on income inequality. Failing to reduce income inequality can reduce economic growth, he adds. So, is taxing the rich the way to faster economic growth?

That’s not quite what the OECD said. The 2014 paper did indeed conclude that income inequality cuts into economic growth in the long run. But the OECD said it is primarily the gap between the lowest earners and the rest of society that is responsible, not the gap between high earners and everyone else. So, reducing the wealth of the 1 per cent, as a goal, doesn’t boost growth. The paper did say that tax increases on the wealthy don’t harm economic growth, although it went on to note that closing loopholes rather than raising rates could be both more efficient and fairer.

Reducing the gap between lower earners and the rest of society is what will boost the potential of an economy, the OECD states. But that goes beyond mere income transfers, and includes ensuring access to high-quality education and health care. Those policies increase social mobility and “create greater equality of opportunities in the long run,” the OECD paper states.

So, the key question is not how high taxes are on the rich, but how great opportunities are for the poor.

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Deflated expectations: Capital Economics has revised upward its outlook for inflation in Canada in the next few quarters, pointing to persistent supply disruptions in North America and the sharp jump in maritime freight costs globally. In a research note issued last week, the consultancy now says it expects that inflation will remain near 4 per cent until March, 2022, rather than declining to 3 per cent by then as it had earlier predicted. However, senior Canada economist Stephen Brown wrote that he still forecasts inflation easing to less than 2 per cent in the second half of 2022, as freight rates revert to more normal levels, energy-specific inflation tumbles and the rate of increase in new house prices declines.

Follow me on Twitter, @PatrickBrethour or ask your Taxing Question here.

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Investment Consultants With $10 Trillion Make Net-Zero Pledge – Bloomberg



A dozen investment consultants advising on $10 trillion of assets are pledging to cut net greenhouse-gas emissions to zero by 2050.  

The group, including Cambridge Associates and Willis Towers Watson, started the Net Zero Investment Consultants Initiative, which identifies nine steps to reach that goal, according to a statement Monday. 

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International export offices worth the investment, according to Saskatchewan government – Global News



The Saskatchewan government is moving full steam ahead on its plan to open four new international export offices.

The offices will be opening in London, United Kingdom; Dubai, United Arab Emirates; Mexico City, Mexico; and Ho Chi Minh City, Vietnam.

The move will give Saskatchewan a stronger presence in those regions, by expanding the province’s international network, according to the government.

Read more:
Sask. eyes nuclear reactors, international offices, major tech investment in growth plan

The province says the establishment of these spaces is being implemented in an effort to facilitate investment trade efforts to grow and diversify Saskatchewan’s exports, assisting in COVID-19 economic recovery.

“Now we’re going through the process of hiring managing directors for those offices and we hope to have two of them open in November and two more in the first quarter of the calendar year,” said Jeremy Harrison, Saskatchewan Minister of Trade and Export Development.

The number of international offices will be doubling as the province already has a permanent presence in Japan, India, Singapore and China.

The offices in Japan, India and Singapore were open for businesses earlier this year, whereas the one in Shanghai, China has been operational since 2010.

Staff at the offices work full-time for the provincial government to promote trade and economic interests.

Harrison says despite the pandemic, Saskatchewan companies are able to export approximately 65 per cent of what they produce.

Some popular export items include potash, oil, wheat, canola seeds, lentils, canola oil, peas, canola meal, soya beans, and barley.

Some popular items Saskatchewan exports.

Canada Trade Data Online

Just like the cost to export these products, operating those international offices isn’t cheap.

Read more:
Saskatchewan opening 3 trade offices in Asia with the help of Stephen Harper

“It’s about a million dollars per year, per office, our entire international engagement will be about $9 million this year with the eight offices and the administration associated with that, but I mean with the return on investment being over $30 billion of international trade last year…” Harrison explained.

“Of course the offices aren’t responsible for every dollar of that trade, but that being said, having that long-term, on-the-ground presence really has paid significant dividends to the province, we would view it as being a tremendous return on investment,” he added.

Harrison also says with Saskatchewan negotiating its own deals, rather than the Canadian government, the province has been able to secure lower tariffs.

Click to play video: 'Tension with China grows with blow to Canadian canola farmers'

Tension with China grows with blow to Canadian canola farmers

Tension with China grows with blow to Canadian canola farmers – Mar 5, 2019

The trade and export development minister goes on to say the Saskatchewan government decided to take trade matters into its own hands, opposed to relying on the federal government because it believes it can secure better deals overall.

In 2019, the minister, with the help of former Conservative Canadian Prime Minister Stephen Harper and his company called Harper and Associates, lobbied senior officials with the government of India to lower tariffs on Saskatchewan peas and lentils.

Harper and Associates is being paid for its role in assisting with the establishment of the international offices. The contract is yearly, and is renewed annually.

Harrison said the meeting resulted in the province temporarily reducing the tariff from 30 per cent to 10 per cent from June to August in 2020 and onwards.

Read more:
Saskatchewan prepares for trade with United States under Biden administration

Jason Childs, associate professor of economics with the University of Regina explains why the provincial government may have felt enticed not to leave trade matters to federal government officials.

“I think the perception that Saskatchewan feels underrepresented abroad and our interests aren’t being served, I think that says a lot about what’s going on,” Childs said.

He adds international offices are not uncommon among provinces in Canada, and they are supported across party lines.

Click to play video: 'International trade essential to Alberta’s food trade: Minister of Agriculture'

International trade essential to Alberta’s food trade: Minister of Agriculture

International trade essential to Alberta’s food trade: Minister of Agriculture – Mar 26, 2020

By Saskatchewan being at the helm of its own trading decisions, Childs says the province can head trade missions that are dedicated to vouching for the specific agricultural products the province has to offer the rest of the world.

“So, the products we produce here in Saskatchewan, are going to be radically different than say the products produced in Quebec or southern Ontario, which are much more manufacturing-driven,” Childs said.

He says if the Canadian government was making these deals, then time government officials spend on having to represent the other jurisdictions across the country would be split.

Childs continues to say there are some notable benefits to Saskatchewan having its own international trading partners to advocate its own interests to, rather than other Canadian provinces or somewhere else in North America.

“Sheer population, sheer market size, the Canadian market is only 38 million people, whereas some of the countries we’re talking about Vietnam, China, India and the U.K., there’s hundreds of millions, billions of people involved, right so it’s a much larger market,” Childs said.

Harrison says these exports will bring numerous job opportunities to residents.

—With files from Mickey Djuric

© 2021 Global News, a division of Corus Entertainment Inc.

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