Fiscal Update Delivers ‘Downpayment’, Falls Short of Full Funding for Green Recovery

Primary Author: Mitchell Beer
Chrystia Freeland

Dec. 2, 2020

Finance Minister and Deputy Prime Minister Chrystia Freeland is receiving mixed reviews for the green components of a Fall Economic Statement that includes $5,000 grants to help households fund energy retrofits, a $150-million boost for zero-emission vehicle infrastructure, nearly $4 billion over 10 years for a list of nature-based climate solutions, and a promise of permanent funding for public transit systems.

The fiscal update also points to $2.5 billion the Canada Infrastructure Bank has promised for new grid infrastructure, stresses private investment in the transition to a low-carbon economy, pledges to work with “like-minded economies” in North America and Europe on a possible border carbon adjustment strategy, and identifies small modular nuclear reactors (SMRs) as one of the “innovative new ideas” Canadians are coming up with to “lead the development and deployment of new zero-emission technologies.”

“We know that Canada’s future competitiveness depends on our ability to take advantage of the net-zero green economy,” Freeland said Monday afternoon, in a House of Commons statement that cast the fiscal update as a “downpayment” on the million jobs the government promised in its Speech from the Throne in late September. “Our growth plan must continue to advance our progress on climate action and promote a clean economy.”

To that end, she said, “we will plant two billion trees over the next ten years, provide 700,000 grants to help homeowners make energy-efficient retrofits, and build zero-emission vehicle charging stations across the country. These measures will encourage consumer spending and investment while greening our economy and creating well-paying jobs.”

Finance Canada’s Building Back Better page says the government is “putting climate action at the centre of its plan to create a million jobs.”

Specific funding commitments included:

• $2.6 billion over seven years for home energy retrofit grants;

• $150 million over three years for ZEV charging and fuelling infrastructure;

• $3.16 billion over 10 years to fulfill Prime Minister Justin Trudeau’s tree-planting pledge;

• $631 million over 10 years to restore degraded ecosystems, protect wildlife, and improve land and resource management;

• $98.4 million 10 years for carbon sequestration and other farm management practices;

• $2.5 billion from the Canada Infrastructure Bank for new electricity transmission infrastructure, including the Atlantic Loop;

• $7.3 million over three years for a new Sustainable Finance Action Council.

In laying out an economic statement that rolled green investments into a single subsection—without even a link from the online table of contents—Freeland maintained the country’s record, $381.6-billion deficit this year is affordable in an era of low interest rates and cautioned against scaling back economic stimulus too quickly, The Canadian Press writes. “As we have learned from previous recessions, the risk of providing too little support now outweighs that of providing too much,” she said. “We will not repeat the mistakes of the years following the Great Recession of 2008.”

She added that the “fiscal guardrails” many pundits and analysts have been asking for will show up when the country’s employment numbers rebound. “These data-driven triggers will tell us when the job of building back from the COVID-19 recession is accomplished, and we can bring one-off stimulus spending to an end.”

Globe and Mail climate columnist Adam Radwanski says the fiscal update takes some initial steps toward a green recovery, while postponing much of the harder work. Anyone following the green recovery conversation in recent months could have predicted the energy retrofit, ZEV infrastructure, and tree-planting announcements as “low-hanging fruit” to which “relatively short-term job creation numbers can easily be attached alongside emissions reduction ones,” he writes. But his column lists several wider, deeper, longer-term steps that will be needed to uphold the government’s commitments to a green recovery and a net-zero transition.

Corporate Knights has this analysis by Sussex Strategy Group Senior Counsel Shawn McCarthy.

The shorter-term political focus in the update “makes sense for a government justifiably concerned about being seen to take its eye off Canadians’ immediate needs before the pandemic is over,” Radwanski writes. “It also reflects that the Liberals, in this chaotic year, haven’t had the bandwidth to also work their way through the more complex and ambiguous aspects of clean economy transition.”

But “that means most of the major financial commitments are still yet to come, if the Liberals are to make good on their promises to put Canada on the path to a net-zero economy and enhance its competitiveness in a decarbonizing world. And the mini-budget hints at some of the heavy lifting pushed to another day.”

Leading into the fiscal update, climate economist Mark Jaccard said the COVID-19 pandemic has taken all the oxygen out of a focus on climate action and a green economy. “For two months or even three, people like me were shut right out because ministers were dealing with aspects of COVID in cabinet,” he told CBC business columnist Don Pittis.

“While other issues have occasionally nudged the pandemic and its economic impact off centre stage, it is hard to think of many subjects that have so consistently hogged the limelight for so many months in a row,” Pittis writes. And according to Jaccard, “that single-minded focus has both diverted and delayed attention on a subject that he expected in 2020 would finally get its moment in the sun: climate change.”

But in his own curtain-raiser for Freeland’s speech, Globe senior editor Ryan MacDonald said it needn’t be that way, arguing that “climate change merits a fiscal response, too.”

Leading into the update, the Trudeau government downplayed expectations for serious investment in a “greener and more just Canada,” MacDonald writes. But “other countries have delivered budgets and other countries have committed huge stimulus packages to climate goals, recognizing that the pandemic represents a once-in-generation opportunity to embrace the challenges and the opportunities around climate change.”

While “certainly, near-term spending needs to focus on the pandemic,” he added, “governments should be able to walk and chew gum at the same time.”

Climate Action Network-Canada said the fiscal update contained “many encouraging signals,” along with “a few areas we will watch with close scrutiny”, in a statement that acknowledged the “exceptionally difficult COVID-19 pandemic year” the country has faced.

“Today’s statement reflects the need to protect people, communities, and workers as we strive to build back better. In doing so, it affirms the calls from hundreds of civil society organizations earlier this year, including Climate Action Network-Canada and many of its members and allies, for governments to support a just recovery for all,” CAN-Rac said in a release. It applauded Freeland for positioning climate action “at the heart of the federal plan to create a million jobs,” adding that “green job creation through post-pandemic recovery goes far beyond specific climate policies.”

Environmental Defence Climate and Energy Program Manager Julia Levin acknowledged the green economy commitments in the update as an “important step in the right direction”, but stressed that “far greater investments are necessary to truly tackle the scale of the climate crisis.” After months of civil society advocacy for a just, green recovery, she said groups are “glad to see important commitments to tackle the social injustices people in Canada endure every day, which are critical to ensuring a healthy and safe society for all.”

But Levin raised flags about language in the plan endorsing SMR development, and called for robust “green strings” for any upcoming financial support for carbon-intensive industries like airlines. “We also need a plan to rapidly wind down production of fossil fuels in order to limit catastrophic levels of warming,” she said, a step that “will require courage and leadership from our elected leaders.”

Efficiency Canada Executive Director Corey Diamond said the update sent “a strong signal that energy efficiency is a core part of Canada’s recovery.” But in counterpoint to the $2.6 billion over seven years Freeland announced for home energy retrofits, he called for a total of $26.9 billion over five years, in line with the mid-September recommendations of the Task Force for a Resilient Recovery.

“The most important aspect of the Fall Economic Statement is that it enables those individuals and organizations who deliver energy efficiency to Canadians to get started, and to hopefully look ahead towards achieving deeper energy savings and a transformative approach to delivering zero-carbon and better performing buildings,” Diamond said.

John Gorman, President and CEO of the Canadian Nuclear Association, took a victory lap for the SMR reference in the economic statement. “This is a good day for those who want to see the decarbonization of our economy,” he said. “The government has recognized that if we are going to meet net-zero 2050, everyone needs to play a part: hydro, wind, solar, nuclear, tidal power, and clean fuels like hydrogen.”

[Top photo: Hildenbrand/MSC wikimedia commons]