As published in Policy Magazine
Climate change is a challenge that we are all facing together, in Canada and around the world. Progress can only be achieved through action, bringing together diverse and innovative technology solutions and a policy, regulatory, and investment framework that accelerates progress. This is our “Team Canada” approach, and it is essential to our success as we strive to be a leader in the global energy transition and achieve results that are both scalable and timely.
It has been six-and-a-half years since the historic Paris Climate Accords came into effect in November 2016. The agreement was a watershed moment for humanity, changing how we approach climate change globally and locking in Canada’s goal of reducing emissions by 40-45 percent below 2005 levels by 2030. And 2035, the date by which Canada wants to achieve a net zero grid, is only 11-and-a-half years away. If we do not start making the “Team Canada” approach a reality and moving the needle, we may never catch up.
Through Budget 2023, the federal government underscored that Canada’s climate goals and economic goals are intertwined. Released in March, it placed big bets on five sectors essential to Canada’s energy transition that will form the foundation for our economy of the future: clean electricity, critical minerals, zero-emissions transportation, carbon capture, and clean fuels (such as clean hydrogen).
Finance Canada, Natural Resources Canada, and Innovation, Science, and Economic Development Canada should be commended for establishing a sound fiscal framework to incentivize clean technology deployment through Budget 2023 that recognizes there is no one-size-fits-all solution to decarbonizing Canada’s economy.
The energy transition will look very different to Canadians depending on where they live, and it is imperative we neither expect nor prescribe any two provinces to reach net zero in the same way. The portfolio of technology solutions required in each province will look different and be determined by existing infrastructure, natural resource availability, and each policy and regulatory environment.
Although these diverse regional and provincial pathways can make it more difficult to achieve national goals, they may prove beneficial in the long run. If we can manage our own decarbonization journeys from coast to coast to coast, we can demonstrate global leadership across a variety of pathways that others can learn from, while also creating new economic opportunities domestically and internationally through technology and commodity exports to other markets.
For example, in recognition of the decarbonization diversity available for the power sector, the federal budget carves out roles for renewables, energy storage, large hydro, small modular reactors (SMRs), large nuclear, abated gas-fired generation, and inter-provincial transmission. Crucially, it also recognizes the role refurbishments can play in maximizing affordability and efficiency on the path to building a net-zero grid. We need to build out cleaner infrastructure, but we can also refurbish and repower what we have across technologies such as wind, hydro, and nuclear to extend asset life by 20-60 years and increase electricity production by up to 45 percent depending on the technology, all while reusing civil and electrical works. Taken together, these steps will maximize affordability and reliability, while helping Canada achieve a net-zero grid by 2035.
If climate change is our agreed upon national priority, we must look for areas of increased coordination and collaboration and each order of government must play its part to advance the necessary infrastructure projects required for a clean economy.
Despite these momentous positive steps, gaps remain. At the foundation of Canada’s Plan for a Clean Economy is a pollution pricing and regulatory framework. Budget 2023 provided additional detail on how the Canada Growth Fund would be operationalized under an accelerated timeline through the Public Sector Pension Investment Board.
Still, further clarity is needed on the specific financial mechanisms PSP investments will use as well as how the federal government’s intention to consult on developing an additional broad-based approach to carbon contracts for difference (CCfDs) that hedge against price volatility will complement the Canada Growth Fund. This will help unlock billions of dollars in private sector and major institutional investment across multiple technologies such as carbon capture, hydrogen, and offshore wind, which in turn will help us improve our lagging productivity performance versus our Organisation for Economic Cooperation and Development (OECD) peers.
In designing CCfDs, Canada should be actively engaging with other jurisdictions that have experience with this tool, such as the UK, which has successfully utilized it to establish a world-leading offshore wind industry.
From a tax policy perspective, the Clean Technology Manufacturing Investment Tax Credit and the expansion of eligible activities covered by the reduced tax rates for zero-emission technology manufacturers introduced in 2021, while expansive, omit a critical technology required for the energy transition: the power grid.
Electrification of transportation, buildings and industry will transform daily and seasonal electricity demand patterns, which will require flexible and dispatchable generating assets and modernized grid infrastructure to manage variability.
An aging power grid limits the penetration of renewable energy onto the grid and runs counter to net zero goals. As such, tax policy supporting clean manufacturing should be expanded to include the manufacturing of grid equipment.
Which brings us back to the Team Canada approach. Tackling climate change and building the clean economy of the future is not just the responsibility of the federal government. To achieve collective climate and economic goals and address gaps, coordinated prioritization will be required among the federal government, provincial and municipal partners, industry, and non-governmental organizations. The federal government’s plan to improve the effectiveness of major project reviews depends on alignment with sub-national partners.
Canada’s prosperity is built upon a legacy of national infrastructure projects, most notably the pan-Canadian railway or the Trans-Canada highway system. These examples highlight the power of building a world that works, together. If climate change is our agreed upon national priority, we must look for areas of increased coordination and collaboration and each order of government must play its part to advance the necessary infrastructure projects required for a clean economy.
Permitting should be streamlined and regulatory barriers should be reduced where reasonable for projects in strategic sectors. This does not mean, as an example, that project proponents can ignore or supersede the rights and interests of Indigenous communities. Building a clean economy must actively advance reconciliation with Indigenous peoples as equal partners as part of the Team Canada approach.
In the power sector, provincial electricity procurement processes need to align with the fiscal framework for clean electricity that was built upon during Budget 2023. Alignment will help minimize costs – the federal government can play a role through investment tax credits to defray capital costs, strategic finance and targeted programming while provinces can continue to play their critical role in managing provincial electricity systems.
A crucial area where provinces, regional governments and municipalities can have an outsized impact in shaping Canada’s clean economy is through workforce investment. People are our most important and sustainable competitive advantage.
In a net zero future, we will need to massively increase the amount of clean electricity generated from zero-emission vehicles, electric heat pumps and electrified industrial processes to meet growing demand.
Predictable, long-term procurement plans from provinces will enable supply chain partners to appropriately scale operations and manage grid affordability and reliability.
A Team Canada approach is also required for sectors where end-use electrification is not technologically or economically feasible. In these cases, governments must work together to advance clean fuels, carbon capture, utilization, and sequestration (CCUS) projects at scale through infrastructure clusters that bring together industry, governments, and other sectors to reduce barriers to technology deployment. In addition to reducing emissions from gas-fired power plants — pre-combustion through fuel switching or post-combustion through carbon capture — these technologies can be used to decarbonize hard-to-abate sectors such as steel and aluminum, cement, chemicals, oil and gas, and pulp and paper.
A crucial area where provinces, regional governments and municipalities can have an outsized impact in shaping Canada’s clean economy is through workforce investment. People are our most important and sustainable competitive advantage. Canada will not be successful unless we have the people needed to do the critical work – whether that is in the laboratory, on the factory floor, or at project sites across the country. Businesses, the labour community, provinces, universities, and school boards all have a role to play in ensuring that workers have the necessary skills to make an impact by collectively investing in training and development. We need our best and brightest minds, from all communities and backgrounds, to bring their perspectives, from different contexts, to unlock ideas that are truly collaborative and considerate of all.
There are many reasons why Canada can manage, and indeed, thrive amid the energy transition: we are blessed with rich and diverse natural resources, favourable geology, world-class research institutions, technical expertise, and global access through broad-based trade agreements. But the urgency to act is peaking. Canada has an opportunity to lead during this decade of action on climate change and sustainable development.
If we do not get this right, it is not just our economy that is at stake – we also must think about the future we leave behind for our children and subsequent generations. If we act now, we can address the climate crisis and provide more sustainable, affordable, and reliable energy for more people, at home and abroad.
A Team Canada approach requires us to return to our roots to advance large infrastructure projects in the national interest. We have done it before, and we can do it again. Together, we have the energy to change the world. Let’s get started.
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