U.S. President Joe Biden has announced a massive infrastructure plan intended to accelerate the transition to clean technology in a sprawling eight-year program that costs $2 trillion.
The plan also touches roads, bridges and broadband access; social policy, like public housing and funding for day care spots; and it raises and rearranges corporate taxes to pay for it.
But at its core, it’s a climate plan.
With the U.S. increasingly unlikely to impose a nationwide carbon tax or cap-and-trade system, Biden’s focus has shifted to spending record sums of public money on next-generation green technology — from 500,000 vehicle charging stations to a zero-carbon power grid to consumer incentives for electric cars and home retrofits.
“It’s not a plan that tinkers around the edges,” Biden said in a Pittsburgh speech Wednesday to promote what he’s calling the American Jobs Plan.
“It’s a once-in-a-generation investment in America — unlike anything we’ve seen or done since we built the Interstate Highway System, and the space race decades ago. In fact, it’s the largest American investment in jobs since World War Two.”
An effort this size will inevitably have effects beyond the U.S., and this one has a number of implications for Canada — some good, some bad and some to be determined.
First comes a caveat typical for any legislation proposed by an American president, and it’s that there’s no guarantee this will ever become law.
A bill hasn’t even been introduced in Congress yet and it already faces stiff Republican opposition, leaving one likely path to success, and it’s the narrowest one imaginable: if Democrats bypass the Senate’s normal 60-vote rule, they could try passing it through a budget process known as reconciliation, and that would require all 51 Democrats in the Senate, progressives and centrists, to unite around the bill.
This process will likely take months. In the meantime, here are some potential effects of the bill.
Economic stimulus hits the neighbourhood
When someone plows $2 trillion into your neighbourhood, the economic effects tend to spill onto your property.
For the neighbourhood of North America, there’s a general rule of thumb, according to Brett House, vice-president and deputy chief economist at Scotiabank: one percentage point of growth in the U.S. economy causes a half per cent increase in Canada.
In other words, enjoy the stimulus, Canada.
“Biden’s stimulus plan will not only benefit the U.S. economy but will also make Canada’s economy great again,” said Derek Holt, vice-president and head of Capital Markets Economics at Scotiabank.
“There will be significant leakage of U.S. stimulus into Canada as [U.S.] businesses and consumers buy more from America’s trading partners regardless of [Buy American rules],” said Holt.
Now, a word about Buy American.
Buy American: reality and rhetoric
There’s bad news for Canadian companies hoping to land some of these big U.S. government contracts.
Buy American provisions are inevitable in this bill.
Biden promised during the election campaign that public contracts under his infrastructure plan would go to U.S. companies — and he doubled down on that Wednesday.
“Not a contract will go out that I control … to a company that is [not] an American company — with American products all the way down the line, and American workers,” he said.
Let’s see the fine print first.
The actual bill hasn’t been introduced yet, and only when we see those details will it become clear whether the reality matches the rhetoric.
For example: Will the bill address existing trade agreements? Under the World Trade Organization agreement on procurement, free trade is guaranteed for some types of public contracts.
There are other question marks.
What about the WTO’s anti-discrimination rules? A skeptical former U.S. trade official suggested it would be a flagrant violation of those provisions for the U.S. government to hand out subsidies for buying only American-made cars.
Then there’s the challenge of disentangling what even counts as an American car, for example, versus a Canadian and Mexican one. Vehicles are built in cross-border supply chains, with pieces regularly moving back and forth.
But make no mistake that Buy American provisions are coming.
Canada’s chief trade negotiator, Steve Verheul, all but conceded this the other day when he said Canada is simply hoping for exemptions for some sectors, like clean energy.
Energy and climate: Good news, bad news
In the meantime, his plan would establish a clean-energy standard for power utilities to meet. This could mean new sales for Canadian hydro and alternative-energy companies.
For the oil sector, the news is less positive.
On the heels of cancelling the Keystone XL pipeline, Biden would scrap an existing credit in the tax code for U.S. companies that produce oil abroad.
One oil industry analyst in Canada, Rory Johnston, expects that to have, at most, a minor impact in the Alberta oilpatch. Not only has American investment there already dropped, but the sums involved in the credit are small.
The U.S. Environmental and Energy Study Institute cites one federal estimate that says ending the policy would be worth $12.7 billion, over 10 years, to all American oil companies operating around the world.
“[That’s a] very, very small amount in the overall scheme of things,” said Johnston, managing director at Toronto-based investment firm Price Street Inc.
But he said it’s yet another symbolic blow to the sector, revealing the political winds shifting against it.
A tilt in tax competitiveness
Could Canadian companies soon find themselves more competitive against their American peers, in terms of tax burdens?
Biden’s plan would raise U.S. corporate taxes seven percentage points, to 28 per cent, undoing some of the Trump-era cuts.
This would bring the U.S. back to its former international ranking: with higher marginal rates than Canada and almost every other developed country.
Jack Mintz, a tax expert and president’s fellow at the University of Calgary, said this is a long-term threat to U.S. companies.
He said they would be hit with a double whammy — first with a tax hike, then with the post-2023 phaseout of writeoffs built into the 2017 law signed by Donald Trump.
“There’s going to be almost a 50 per cent hike on the overall effective tax rate on capital in the United States between those two items,” Mintz said. “It’ll certainly make the U.S. less competitive.”
It’s not clear yet whether this helps investment in Canada, Mintz said. Because there’s another stick built into Biden’s plan — one designed to whack American companies that shift operations abroad.
Biden wants to end some tax exemptions for American companies drawing foreign profits and impose a new minimum international rate of 21 per cent.
Mintz called it a “Trump-like, America First-type strategy.”
Whether or not a U.S. company winds up facing a higher tax burden in Canada than back home will depend on other specifics of the tax code, and we’ll know more once we see the bill.
As for his general economic takeaway on Biden’s proposal, and its effect on Canada, Mintz said: “It’s hard to say whether it will be positive for Canada or not.”
Cargill to build new Canadian canola plant
WINNIPEG, Manitoba (Reuters) – Cargill Inc will build a $350-million canola plant in Regina, Saskatchewan, the U.S. agribusiness said on Thursday, in the latest project that aims to profit from booming demand for oilseeds.
Canola futures hit record highs this week and soybeans have hit multi-year tops as demand for canola to process into vegetable oil and animal feed exceeds supply.
Refiners are also planning to produce renewable diesel from canola and soybeans to comply with government mandates in Canada and several U.S. states to make cleaner-burning fuels.
“There’s going to continue to be strong pull, we believe, into countries like China, from a food perspective,” Jeff Vassart, President of Cargill’s Canadian unit, said in an interview. “We do see increasing demand for renewable diesel too and we want to make sure that we’re positioned for it.”
The plant will have capacity to crush 1 million tonnes of canola annually.
Privately held Cargill expects the plant to start operating by early 2024, creating 50 full-time jobs.
Cargill said it would also modernize its two canola crush facilities in Camrose, Alberta, and Clavet, Saskatchewan to increase volume.
In March, rival Richardson International said it would double its canola-crushing capacity at Yorkton, Saskatchewan, making it Canada‘s largest such plant. Cargill also said last month it would expand its U.S. soybean-crushing capacity.
Vassart said the company is confident that Canada will produce enough canola to match demand, as farmers boost yields and, to a lesser extent, expand plantings. If production does not increase enough, Canada may export less canola seed, he said.
Canadian canola stocks are expected to dwindle to an eight-year low by midsummer, but Cargill expects to be able to continue crushing at a strong pace, Vassart said.
(Reporting by Rod Nickel in Winnipeg and Rithika Krishna in Bengaluru; editing by Grant McCool)
U.S., other countries deepen climate goals at Earth Day summit
By Jeff Mason and Valerie Volcovici
WASHINGTON (Reuters) -The United States and other countries hiked their targets for slashing greenhouse gas emissions at a global climate summit hosted by President Joe Biden, an event meant to resurrect U.S. leadership in the fight against global warming.
Biden unveiled the goal to cut emissions by 50%-52% from 2005 levels at the start of a two-day climate summit kicked off on Earth Day and attended virtually by leaders of 40 countries including big emitters China, India and Russia.
The United States, the world’s second-leading emitter after China, seeks to reclaim global leadership in the fight against global warming after former President Donald Trump withdrew the country from international efforts to cut emissions.
“This is the decade we must make decisions that will avoid the worst consequences of the climate crisis,” Biden, a Democrat, said at the White House.
British Prime Minister Boris Johnson called the new U.S. goal “game changing” as two other countries made new pledges.
Prime Minister Yoshihide Suga, who visited Biden at the White House this month, raised Japan’s target for cutting emissions to 46% by 2030, up from 26%. Environmentalists wanted a pledge of at least 50% while Japan’s powerful business lobby has pushed for national policies that favor coal.
Canada‘s Prime Minster Justin Trudeau, meanwhile, raised his country’s goal to a cut of 40%-45% by 2030 below 2005 levels, up from 30%.
Brazil’s President Jair Bolsonaro announced his most ambitious environmental goal yet, saying the country would reach emissions neutrality by 2050, 10 years earlier than the previous goal.
Greenpeace UK’s head of climate, Kate Blagojevic, said the summit had more targets than an archery competition.
“Targets, on their own, won’t lead to emissions cuts,” she said. “That takes real policy and money. And that’s where the whole world is still way off course.”
PUTIN SAYS PROBLEMS GO WAY BACK
Most of the countries did not offer new emissions goals. Chinese President Xi Jinping said China expects its carbon emissions to peak before 2030 and the country will achieve net zero emissions by 2060.
Xi said China will gradually reduce its coal use from 2025 to 2030. China, a leader in producing technology for renewable energy like solar panels, burns large amounts of coal for electricity generation.
Russian President Vladimir Putin proposed giving preferential treatment for foreign investment in clean energy projects, but also made an apparent reference to the United States being historically the world’s top greenhouse gas polluter. “It is no secret that the conditions that facilitated global warming and associated problems go way back,” Putin said.
The U.S. climate goal marks a milestone in Biden’s broader plan to decarbonize the U.S. economy entirely by 2050 – an agenda he says can create millions of good-paying jobs but which many Republicans say will damage the economy.
The U.S. emissions cuts are expected to come from power plants, automobiles, and other sectors across the economy. Sector-specific goals will be laid out later this year.
The new U.S. target nearly doubles former President Barack Obama’s pledge of an emissions cut of 26%-28% below 2005 levels by 2025.
How Washington intends to reach its climate goals will be crucial to cementing U.S. credibility on global warming, amid international concerns that America’s commitment to a clean energy economy can shift drastically from one administration to the next.
Biden’s recently introduced $2.3 trillion infrastructure plan contains numerous measures that could deliver some of the emissions cuts needed this decade, including a clean energy standard to achieve net zero emissions in the power sector by 2035 and moves to electrify the vehicle fleet.
But the measures need to be passed by Congress before becoming reality.
The American Petroleum Institute, the top U.S. oil and gas lobbying group, cautiously welcomed Biden’s pledge but said it must come with policies including a price on carbon, which is a tough sell among some lawmakers.
‘THE U.S. IS BACK’
The summit is the first in a string of meetings of world leaders – including the G7 and G20 – ahead of annual UN climate talks in November in Scotland. That serves as the deadline for nearly 200 countries to update their climate pledges under the Paris agreement, an international accord set in 2015.
Leaders of small island nations vulnerable to rising seas, like Antigua and Barbuda and the Marshall Islands, also spoke at the summit.
World leaders aim to limit global warming to 1.5 degrees Celsius above pre-industrial levels, a threshold scientists say can prevent the worst impacts of climate change.
A Biden administration official said with the new U.S. target, enhanced commitments from Japan and Canada, and prior targets from the European Union and Britain, countries accounting for more than half the world’s economy were now committed to reductions to achieve the 1.5 degrees Celsius goal.
European leaders including German Chancellor Angela Merkel and European Commission President Ursula von der Leyen expressed delight that the United States was back in the climate fight.
“The importance of this day in my judgment is the world came together,” Biden’s climate envoy John Kerry told reporters at the White House.
(Reporting by Jeff Mason and Valerie Volcivici; additional reporting by Vladimir Soldatkin in Moscow; Elaine Lies and Aaron Sheldrick in Tokyo, David Ljunggren in Ottawa; Jake Spring and Lisandra Paraguassu in Brasilia, David Stanway in Shanghai, writing by Timothy Gardner; Editing by Richard Valdmanis and Lisa Shumaker)
Ontario third wave, blame piled on Doug Ford
By Steve Scherer
OTTAWA (Reuters) – Ontario Premier Doug Ford, facing backlash over his government’s handling of the pandemic, resisted calls to resign on Thursday as Canada‘s most populous province grappled with a third wave of COVID-19 infections that critics said could have been prevented.
With pressure building on hospitals, Ottawa is sending federal healthcare workers to help. Ontario had 3,682 new infections on Thursday and 40 deaths, the highest of any province.
#Dougfordmustresign has trended on Twitter this week, while newspaper editorials and provincial opposition leaders also called on Ford, 56, to step down.
Some 46% of Ontario residents have a negative view of Ford, up nine percentage points from a week earlier, according to an Abacus Data poll on Wednesday. Ford’s Progressive Conservatives(PC) trailed the opposition provincial Liberals by one point in the same poll, ahead of a June 2022 provincial election.
“Mr. Ford’s real mistake has been repeatedly ignoring the deep bench of scientists who are there to advise him, impulsively imposing himself as the province’s Fearless Decider,” an editorial in the national Globe and Mail newspaper said this week.
The premier ruled out resigning on Thursday, almost a week after issuing unpopular orders to close playgrounds and allow police to randomly stop people, both of which were abandoned within 48 hours.
Multiple police departments refused to enforce Ford’s orders while Toronto-area health units unilaterally ordered businesses that experience outbreaks to close.
“I’m not one to walk away from anything,” an emotional Ford told reporters on Thursday. “I know we got it wrong and we made a mistake, and for that I’m sorry.”
Ford said he was apologizing for acting “too quick”. Critics said the problem was that he opened the economy up too fast after the second wave, and then moved too slowly when it was obvious that cases were spiking.
Had Ontario kept stay-at-home measures in place longer in February, the case-count “would not have been nearly as bad as what we’re seeing now,” said Dr. Isaac Bogoch, an infectious diseases specialist at Toronto General Hospital.
“We saw case numbers rising for a month … and they were never really acted on,” said Bogoch, who is a member of the Ontario government’s vaccination task force.
Ford extended stay-at-home measures until mid-May last week and on Thursday said his government would provide paid sick leave to workers who need to isolate, a measure many say would have helped prevent the third wave.
On Thursday, Ford said 40% of the province would have at least one vaccine shot by the end of the month.
But the political damage could be lasting.
“It’s going to be a pretty hard hole to climb out of,” said Frank Graves, president of polling company EKOS Research.
Ford, the brother of Toronto’s late mayor Rob Ford who once admitted to smoking crack, has been in power since 2018, sweeping to an unlikely victory after the PC’s former leader was forced to resign in the midst of the election campaign.
During the 2019 federal election campaign, Prime Minister Justin Trudeau capitalized on Ford’s unpopular cost cuts, attacking him repeatedly while touring Ontario, a crucial battleground province that is home to almost 40% of Canada‘s population.
“This does remind me of 2019 where absolutely the best asset in Ontario for the federal Liberal Party was Doug Ford,” a well-placed Liberal source said.
(Reporting by Steve Scherer; additional reporting by David Ljunggren; editing by Diane Craft)
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