Opinion: Ottawa is getting closer to a vision for Canada's green-economy future, but the budget shows it still lacks conviction - The Globe and Mail | Canada News Media
At least Ottawa has placed a bet, about how it thinks the oil and gas sector can and should change, and has put its money where its mouth is through the generous new tax credit, Adam Radwanski writes.Todd Korol/Reuters
Hanging over the budget delivered by Finance Minister Chrystia Freeland this week were a pair of fundamental, vexing questions about Canada’s place in a global economy that will be reshaped by the fight against climate change.
On one of them – the question of what will become of existing Canadian industries, especially the oil and gas sector – the federal government has emerged from the budget having more confidently picked a lane than at any point since Justin Trudeau’s Liberals took office more than six years ago.
On the other – the matter of what new industries Canada will count on to compete in a decarbonizing world as demand for its traditional products wanes – both clarity and decisiveness remain more elusive.
The combined effect is a sense of progress toward meeting climate targets and transitioning the national economy that is significant but still too tentative to match the moment.
Both time and resources are running short – as underscored by the budget’s assessment that more than $125-billion in annual climate-related investment is needed between now and 2050 to transition to a net-zero economy, which is so far above the current rate that government alone can’t close the gap. Yet many strategies to use public dollars to leverage the necessary private capital are being pursued with something less than full conviction.
Where we now know a lot more about Ottawa’s preferred road – involving the future of the country’s fossil-fuel sector – the budget was a culmination of a series of illuminating recent events.
At the end of March, the government predicated much of its new plan for hitting Canada’s climate targets on the premise that the sector can reduce its emissions more than 40 per cent this decade by cleaning up its production, rather than through forced cuts to how much it produces.
Earlier this week, it green-lit the proposed Bay du Nord oil project off the coast of Newfoundland and Labrador, largely on the basis that it will have low per-barrel production emissions relative to most Canadian oil extraction. Almost simultaneously, Environment Minister Steven Guilbeault sent a letter to Suncor Energy Inc., advising that its planned expansion of its Base Mine in Alberta’s oil sands is currently on pace to be rejected because of its relatively high emissions intensity.
Annual investment to attain net-zero
emissions in Canada by 2050
Total private and government investment,
in billions of dollars
$15B to $25B
Current
annual
investment
$125B to $140B
Required
annual
investment
THE GLOBE AND MAIL, SOURCE:
2022 FEDERAL BUDGET
Annual investment to attain net-zero
emissions in Canada by 2050
Total private and government investment,
in billions of dollars
$15B to $25B
Current annual
investment
$125B to $140B
Required annual
investment
THE GLOBE AND MAIL, SOURCE: 2022 FEDERAL BUDGET
Annual investment to attain net-zero emissions in Canada by 2050
Total private and government investment, in billions of dollars
$15B to $25B
Current annual
investment
$125B to $140B
Required annual
investment
THE GLOBE AND MAIL, SOURCE: 2022 FEDERAL BUDGET
And then, in the budget, Ms. Freeland confirmed what the government will offer oil and gas producers (along with other large-emitting industries) to help decarbonize their existing operations. It’s a large subsidy, in the form of a refundable investment tax credit worth 50 per cent in most cases, for carbon capture – the nascent technology on which the sector is placing its hopes for making its operations more sustainable.
That all adds up to Ottawa embracing the argument, made by domestic producers and their allies, that Canada should compete to produce oil as sustainably as possible, as long as there is global demand. This hinges on the assumption that such demand will be met by other countries if we choose not to meet it.
So through a combination of subsidies like those in the budget, permitting decisions like the ones this week, and coming caps on total sectoral emissions, the government will try to transform the industry rather than quickly transition away from it.
It’s not an approach that will please everyone, to say the least.
Environmental groups will contend that sustained or increased oil production is immoral. That’s because even if production emissions are minimalized, additional global supply could slow the reduction of fossil-fuel consumption, which leads to more emissions than the production itself.
The oil-sector’s boosters, such as the Alberta government, will question whether the new carbon-capture subsidy will be enough to allow it to meet expectations for reducing production emissions. And they’ll warn that the coming emissions caps will force production cuts despite Ottawa insisting otherwise.
Really, the federal government’s purported faith in massive reductions in per-barrel emissions this decade is so optimistic that it should cause both those sides of the debate some anxiety.
But at least Ottawa has placed a bet, about how it thinks the oil and gas sector can and should change, and has put its money where its mouth is through the generous new tax credit.
At first glance, it has done the same with industries that could help meet the world’s growing need and demand for non-emitting energy sources.
After all, the budget contains an array of supports – direct subsidies, tax credits, new agencies – to try to boost almost every form of clean-technology development possible.
But in a fiscal plan that is relatively low-spending overall by recent standards, constrained by concern about charting a path out of large deficits and commitments to other social investments, trying to cover all the clean-growth bases adds up to dabbling.
The one emerging area of potential competitive advantage that it comes closest to attacking with gusto is critical minerals, for which it promises a strategy worth up to $3.8-billion over eight years. That includes an exploration tax credit and accompanying flow-through shares, and infrastructure investments to make mining projects viable.
It’s a sensible and promising area of focus, particularly given Ottawa’s recent success in pairing with provincial governments in Ontario and Quebec to attract electric-vehicle manufacturing commitments. That could help provide customers for domestically produced component minerals such as lithium, cobalt and nickel. And Canada’s ample mineral reserves also have considerable export potential as production of not just EVs but renewable electricity and other green technologies accelerates globally.
But Canada needs to somehow demonstrate that it can move more expediently on these opportunities than it has historically, without compromising the environmental and ethical standards that should give it an edge over international competitors.
And to look at a map in the budget showing multiple mining and refining opportunities in nearly every province, largely in remote areas, is to get the impression that the scale of investment needed from government may need to be more robust than the few hundred million dollars it has promised on average annually.
Otherwise, Mr. Trudeau’s Liberals seem mostly agnostic as to where exactly their spending on emergent low-carbon industries will go – including in the Canada Growth Fund, the budget’s biggest new vehicle for that sort of investment.
Although the government has committed to capitalizing the program at $15-billion over five years, through reallocation of existing government funds not yet spent, its actual design is still pending. The early indications, though, are that the aim of the fund – which is to function at arm’s length from the government – will be to use public dollars to attract private investment in pretty much any form of clean technology.
While the design will be different, there are some echoes here of the existing $8-billion Net Zero Accelerator, under the Strategic Innovation Fund overseen by the Industry ministry. That’s the program that the government has recently drawn on to partly subsidize EV-manufacturing commitments, among other things, so it has had its wins.
But it’s also a grab bag that has no inherent sectoral strategy or prioritization built into it, with a risk of inefficiency as the government dips into it to shore up investments that in some cases might happen anyway. A duplicate of that seems best avoided.
The budget has other new broad-based measures to spur green investment, too, including an expansion of the Canada Infrastructure Bank’s clean-technology mandate, and a details-to-come 30-per-cent tax credit “focused on net-zero technologies, battery storage and clean hydrogen.”
It might be folly to pick only a couple of those potential growth areas – hydrogen, for instance, is currently extremely buzzy because of a global race to supply it for hard-to-decarbonize industries – and home in on them to the exclusion of everything else.
But some degree of risk, in trying to carve out particular areas of the global energy shift where Canada can lead, would be healthy at this stage.
That’s because there is danger, too, in hedging bets across the clean-technology spectrum. While keeping every door open, Canada could wind up trailing more focused international competitors through each one of them.
Despite the government embracing greater interventionism in the name of attracting private capital, there is a passivity in how it is setting itself up to see what sort of investment that brings. And that could mean a failure to get maximum bang for buck, as it allocates scarce public dollars toward a massively expensive transition.
It took Ottawa a long time to land on where it sees existing, high-emissions industries going in a low-carbon world; even now, it could be communicating that more clearly.
It doesn’t have nearly as long to bring more focus to its vision for the industries of the future, if Canada is to avoid being left behind.
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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.
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