"Building the Clean Economy of the 21st Century": Canada's Chrystia Freeland
(Deputy Prime Minister and Minister of Finance: Chrystia Freeland)
Budget 2023
As the Canadian federal budget for 2023 is close to being announced, the federal government is looking towards investing in green technologies and bolstering the transition into a green economy.
If Canada is to be a leader in green technology development and investment, the country must compete against the U.S.'s recently passed $300 billion IRA climate bill and $1 trillion bipartisan infrastructure bill.
Canada must have its allocation of government funds to make the country more economically competitive in green tech development and to lower its emissions as proof of its climate commitments. The federal government has made similar historic investments in infrastructure since 2016 through the nearly $200 billion ‘Invest in Canada Plan. However, Canada has yet to make equivalent investments in green energy infrastructure.
Budget 2023 is looking to do just that. According to Minister Freeland, responding to the U.S.'s recent legislation will be a top priority.
That means making historic investments in green energy through business and household retrofitting policies, tax credits for green energy technology transition, and subsidies for green-oriented infrastructure development such as E.V. charging infrastructure, public transit, battery production, and increasing capacity of the Canadian electricity grid through renewables for future demand.
These policies, in combination, should revolutionize Canada’s commitments to lowering emissions, transitioning to a green tech economy, and promoting renewable energy generation.
Forcing Emmisions to go down from Oil and Gas Producers
At a time when advocates call for a reduction in the production of oil and gas, there are record windfalls of oil and gas revenue in Alberta. As a result of high prices, the Alberta government has raised a record amount of tax revenue and is looking to spend over $60 billion to bolster the economy and public services.
However, the federal government has clarified that oil and gas profits and revenues are rising at historic rates during such a time. As a result, the federal government is looking to implement measures to force the oil and gas industry to lower carbon dioxide and methane emissions. The federal government points out that everyday Canadians have reduced their emissions substantially compared to 2005. However, the oil and gas industry has yet to make that same effort, with emissions significantly up (67%) compared to 2005. In total, the sector accounts for 15% of all emissions.
“They will start doing their part,” said Steven Guilbeault, Canada’s Environment Minister, in a Toronto Star article. “That’s what I tell Canadians. And the reason it hasn’t happened yet is that we haven’t asked them to do it. We haven’t forced them to do it, and we’re going to force them to do it.”
Industry reaction has been mixed. The oil and gas industry argues that it is already making the necessary investments in carbon capture technologies to reduce emissions. They tout a $16.5 billion plan for such initiatives.
Guilbeault argues that the rest of the economy has shown tangible results in lowering emissions by significant margins including from local businesses and Canadians themselves. The oil and gas industry is one of the only industries where emissions have increased substantially.
“They’re responsible for most of the growth in emissions we’ve seen in Canada,” said Guilbeault in the same article. “So they have the responsibility and the means” to lower their emissions,” he said. “They need to do more.”
Competing Against the United States
The US, Canada's biggest trade partner and competitor, is looking to bolster its core infrastructure and the transition to a clean economy with nearly $550 billion of new spending through numerous provisions in the Bipartisan Infrastructure Law. Moreover, the Inflation Reduction Act contains more climate provisions containing $69 billion in new spending.
Here is a breakdown of the Inflation Reduction Act
- $9 billion in consumer home energy rebate programs, focused on low-income consumers, to electrify home appliances and for energy-efficient Retrofits.
- Ten years of consumer tax credits to make homes energy efficient and run on clean energy, making heat pumps, rooftop solar, electric HVAC, and water heaters more affordable.
- Production tax credits to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing, are estimated to invest $30 billion.
- $10 billion investment tax credit to build clean technology manufacturing facilities, like facilities that make electric vehicles, wind turbines, and solar panels.
- $2 billion in grants to retool existing auto manufacturing facilities to manufacture clean vehicles will ensure that auto manufacturing jobs stay in the communities that depend on them.
- There will be up to $20 billion in loans to build new clean vehicle manufacturing facilities nationwide.
- The Environmental and Climate Justice Block Grants, funded at $3 billion, invest in community-led projects in disadvantaged communities and community capacity-building centers to address disproportionate environmental and public health harm.
- Grants to Reduce Air Pollution at Ports, funded at $3 billion, support purchasing and installing zero-emission equipment and technology at ports.
- More than $20 billion to support climate-smart agriculture practices
- Tax credits and grants to support the domestic production of biofuels and to build the infrastructure needed for sustainable aviation fuel and other biofuels.
Here is a breakdown of the Bipartisan Infrastructure Law
- Rebates for E.V. purchases.
- They are reducing methane gas emissions by taxing a specific level of methane emissions per metric ton.
- There will be $60 billion for clean energy manufacturing, which includes $30 billion for production tax credits to accelerate domestic manufacturing of solar panels, wind turbines, batteries, and critical minerals processing. There will also be a $10 billion investment tax credit to manufacturing facilities building EVs and clean energy technology.
- “There’s also $27 billion going toward a green bank called the Greenhouse Gas Reduction Fund, which will provide funding to deploy clean energy across the country, particularly in overburdened communities. And the bill has a hydrogen production tax credit, which provides hydrogen producers with a credit based on the climate attributes of their production methods.”
- The legislation invests more than $60 billion to address the unequal effects of pollution and climate change on low-income communities and communities of color grants for zero-emissions technology and vehicles. In addition, it will help clean up Superfund sites, improve air quality monitoring capacity, and fund community-led initiatives through Environmental and Climate Justice block grants.
- According to EPA estimates, the deal includes $20 billion for programs to slash emissions from the agriculture sector, which accounts for more than 10% of U.S. emissions.
For Canada to be competitive in attracting investment in clean energy, Canada must provide similar subsidies, uncapped tax credits, and rebates for Canadians looking to transition their energy sources and companies looking to manufacture green technologies. This will mean $10s of billion of economic investment for reducing emissions and supporting green tech manufacturers.
Canada’s Role and Provincial Partnership
Deputy Prime Minister Freeland argues that she needs collaboration from provinces to make Canada competitive. According to the Minister, the federal and provincial governments require a joint effort.
In the same CBC article, a senior government official stated, “this is not a space where the federal government can act alone. There are no guarantees of success, and as a country, we will need to up our game."
The federal government argues that the provinces will have to offer their tax incentives on top of the ones the federal government is looking to implement.
“One big challenge facing Canada is the sheer scale and scope of the U.S. incentives in the Inflation Reduction Act — incentives that government sources have admitted Canada can't match,” according to the CBC article. “As a result, those sources say, Canada needs a policy response that is more targeted than the U.S. incentives.”
For Canada's governments, targeted investments and incentives in promising technologies will likely be used to compete against the strategy of broad-scale investments as done in the U.S.
Business Urgency on Green tech Investment
Moreover, businesses have made it clear that such investments are needed to compete with the U.S. In particular, E.V. manufacturers - who have received considerable investment from the government in the past few years - urge Minister Freeland to align E.V. incentives with those of the U.S.
Just Transition Jobs Plan
As part of the Liberal Party’s reelection campaign, the party promised a policy to support oil and gas workers to transition their jobs into a greener economy. According to Minister Freeland, Budget 2023 will commit to long-term funding for a jobs transition plan for these workers.
As reassurance to the industry, the federal government has planned to invest $250 million to help 15,000 mid-career workers to transition into new positions in “clean tech, cybersecurity, and biomanufacturing.” Federal Industry Minister Francois Phillipe Champagne further stated that “tectonic shifts” are occurring worldwide to a more green and digital economy.
“Canada has what the economy of the 21st century needs”, the Minister said.
This jobs plan comes after the country has announced numerous investments in critical areas such as battery storage and production, hydrogen plant production, renewable energy generation, E.V. production, and lowering subsidies for oil and gas.
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