- The markets have started investing in the green economy and energy, and are taking climate risk into account when calculating financial risk.
- While Canada has a lot of initiatives supporting cleantech, it needs a cohesive strategy that links all of them so that we end up with more than the sum of the individual parts. Many successful models must be scaled up and urban innovation must be connected with other areas of the Canadian economy.
- Canada needs effective tools to measure the environmental progress of its various jurisdictions. This includes a measurement of environmental and social impacts, and progress on the achievement of the SDGs.
Canada must live up to the G20 commitment of 2009 and phase out fossil fuel subsidies – the low hanging fruit in climate mitigation.
What must the government, the private sector and civil society do to accelerate Canada’s transition to a green economy?
Global decisions, be it the Paris Agreement in 2015 or the Sustainable Development Goals (SDGs), have accelerated Canada’s transition to a green economy.
Firstly, market investment in renewable energy surpassed coal investment in 2017. The cost of renewables has reduced, and big producers and consumers of renewable energy – notably China – are moving systematically to green, low-carbon finance. Mark Carney’s report of the Task Force on Climate-related Financial Disclosures (TCFD) is important in pushing markets to consider climate risk to be a material risk. Last December’s One Planet Summit – hosted by President Macron – saw leading global investors announce that they would track annually the leading 100 companies responsible for greenhouse gas emissions. These two sides – an investment pull and disclosure push – will continue to grow.
“It is not just the big cities in like Toronto, Vancouver and Montreal but also the smaller ones such as Kitchener and Waterloo that are actively looking at clean innovation.”
On the other hand, governments can play a huge role in this transition, from how they treat fiscal policy to underlying regulations. They can also catalyze innovation. But every government is different and there is no clear leader in the pack as of now. It is important to note that a lot of these things matter at the local level, so innovation is stemming from the municipal level. It is not just the big cities in like Toronto, Vancouver and Montreal but also the smaller ones such as Kitchener and Waterloo that are actively looking at clean innovation. Many of these models can be scaled up and the challenge is to bridge urban innovation with other parts of the Canadian economy such as agriculture and energy.
Is Canada on track to meet its Paris Agreement goals? What more must we do in this regard?
Canada’s per capita GDP footprint for carbon, for waste, for food waste and for plastics is among the highest in the world. A recent poll revealed that 1/3 of Canadians do not believe in climate change, which means that 2/3 do and take it seriously. If you look at all the parts of the Pan-Canadian Climate Framework and our current emissions, we are not going to get to the 2030 targets based on the current set of pricing, regulations and other measures – but there is a strong foundation now in place to amplify action. On the other hand, it is a question of getting the different pieces of the architecture in place. The federal, provincial and municipal governments, as well as businesses, are clearly working towards the targets. But, we need something to get over the hump and reach the tipping point if we want to accelerate progress.
“If you look at all the parts of the Pan-Canadian Climate Framework and our current emissions, we are not going to get to the 2030 targets based on the current set of pricing, regulations and other measures.”
One issue is that we do not have a way of measuring and comparing actions taken by the Federal Government in addition to actions by the provinces or Toronto or Montreal. Part of the Paris Agreement was to contain temperature increases at a level well below 2 degrees and 1.5 degrees. So countries need to measure if they are on track or not. Right now, we do not have a clear way to do that.
What must Canada do to redefine its energy sector in line with this ongoing transition and our climate commitments?
Over the past decade, governments globally have put about $4 trillion into subsidising fossil fuels. Energy markets have always been notorious for price distortions, but the subsidies further magnified them. We know how to define subsidies and if governments are serious about climate mitigation, they should move immediately on the low hanging fruit – that is, on taking those subsidies out of the system. In 2009, Canada was one of the G20 countries that promised to identify and eliminate fossil fuel subsidies. However, over the past 10 years, subsidies have amounted to between $400 billion and $500 billion a year. In Canada, subsidies are primarily administered through tax breaks to the fossil fuel sector both during the exploration phase as well as during production. Let us create a timetable to end these subsidies. They cannot all be removed overnight, but 10 years is not overnight. We think 2020 is an appropriate time to put in place flanking measures for when governments withdraw fossil fuel subsidies.
Many industries in Canada have enjoyed a much lower prevailing tax rate than those in our largest trading partner, the United States. With the Trump administration, there has been a single, dramatic decrease in the average U.S. corporate tax. So, the Canadian Government and Canadian businesses are concerned with what this US corporate tax cuts mean for Canadian competitiveness. But I don’t think that should hinder progress in climate pricing or climate pricing; but we need to be strategic about next steps.
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How can we improve the way Canada supports innovation in the cleantech sector?
For me, the goal is to get all the different cleantech initiatives – including the different funding sources – lined up into a coherent approach, so that we end up with more than the sum of the individual parts. These incentives need to work together with different tax incentives for a suite of objectives, such as clean buildings and electric vehicles. What you want to do is to map out how the whole system looks.
“The goal is to get all the different cleantech initiatives – including the different funding sources – lined up into a coherent approach, so that we end up with more than the sum of the individual parts.”
Secondly, we need to provide the right incentives to universities and businesses. According to a recent RBC report, Canada is losing jobs in innovation partly because the Canadian tax system is not proactively encouraging innovation.
How should we define and measure comprehensive wealth?
GDP is obviously the indicator for measuring economic progress. However, it was never meant to measure externalities like the environmental damages of pollution, future economic health, the inclusivity of our communities, gender equality in the workforce or indigenous participation.
“GDP was never meant to measure externalities like the environmental damages of pollution, future economic health, the inclusivity of our communities, gender equality in the workforce or indigenous participation.”
A 2016 report by IISD on comprehensive wealth is a part of an international body of work to examine progress beyond GDP. We are not advocating replacing GDP, but we know that GDP will not measure the hundreds of millions of dollars in costs to Canadians because of exposure to toxic chemicals or dirty water or dirty air. GDP will also not measure the economic cost to our economy induced by climate change in the future. Comprehensive wealth helps us take a more holistic look at Canada.
What is Canada’s role in international sustainable development and how can we cultivate symbiotic relationships with emerging economies?
Canada has been playing a more active role since the Trudeau Government took power. For instance, Canada, the European Commission and China announced the creation of a triangulation of the three countries or regions in order to backfill the exit of the Trump administration from the Paris Agreement. They hosted a ministerial meeting in Montreal last September. Moreover, Canada partnered with the UK on the Powering Past Coal Alliance and others. Canada’s Federal Minister for the Environment and Climate Change, Catherine McKenna, deserves a lot of credit. There are other leaders such as President Macron, who has been a tremendous example of leadership with many other European leaders.
“The SDGs are another global agenda apart from the Paris Agreement, but they are not as high profile an issue in Canada as they are in other countries.”
The SDGs are another global agenda apart from the Paris Agreement, but they are not as high profile an issue in Canada as they are in other countries. The SDGs are not only a priority in many European countries, but also in China, Colombia, Brazil, Ecuador, Peru and others. These goals are now entering the same level of awareness as climate change, and that is where Canada is yet to fully adopt a leadership role. Canada is already championing gender equality, which is certainly part of the SDGs. But, it has not embraced the SDGs as a package.
Scott Vaughan is IISD President and CEO, and Chair of the IISD Experimental Lakes Area Board. Previously, he was Canada’s Commissioner of the Environment and Sustainable Development. He has held positons as Visiting Scholar, Carnegie Endowment for International Peace; Head of Economics, NAFTA Environment Commission; and Counsellor, World Trade Organization (WTO).
The International Institute for Sustainable Development (IISD) undertakes policy analysis to help countries and institutions make tangible advances in sustainable development. It is based in Canada, with a global staff and offices located in Winnipeg, Ottawa and Geneva.