Budget 2024

April 16 budget must prioritize growth 

As published in the Toronto Star

In a train rushing from Ottawa to Toronto last Monday morning were all number of environmentalists, government officials, civic-minded analysts and lobbyists, all with emissions on their minds.

They were armed with good ideas and ambition, and they were on their way to meet money — the corporations that will, in theory, invest in those ideas to the tune of hundreds of billions and make them a reality.

But only if the conditions are right.

And there’s the conundrum of climate change, the challenge of our times. Corporations alone — no matter what their environmental, social, and governance (ESG) commitments are, no matter what their shareholders and markets nudge them to do — are unlikely to do enough on their own to crush emissions.

And policymakers certainly can’t come up with enough money to do it themselves, especially as the amounts of investment needed to compete with the United States and the European Union are giant.

Over the coming month, we as a country will be hashing out how we will not just cut emissions as required, but also how we could pay for that effort, make some money and set ourselves up for profitability over the longer term.

Attracting much-needed investment

In the next few weeks, Prime Minister Justin Trudeau will meet with the presidents of both the European Union and the United States, in part to assess where their well-funded incentives on climate will leave Canada and its ability to attract much-needed investment.

And then comes the federal budget, with its measures and spending to ensure Canadian business can keep up with the American and European Joneses.

“The government’s job is to listen to the private sector on what the best market signals are to mobilize private capital toward meeting our climate change objectives,” Environment Minister Steven Guilbeault told those train-riders and their colleagues at the downtown Toronto conference that pulled them all together.

His comments were clearly meant to signal to Bay Street that his government is all in.

This kind of talk could cost us a tremendous amount of money in the next budget and afterwards, if the government is not strategic in how it uses its fiscal power. But there are some smart things government and business could do fairly quickly that wouldn’t break the bank, and they seem to be coming together.

Sustainable finance

For one, we seem to be closer to defining how sustainable finance can work.

After years of discussion and half-hearted voluntary measures, public and private-sector players have finally reached a common understanding on what should qualify as a full-blown green investment, what should be considered useful for the energy transition, and what should be excluded altogether.

Definitions are just concepts, of course, and they won’t solve every problem around unlocking private-sector investment.

But they do set a standard for what counts and what doesn’t. And that should help everyone better understand whether companies and investors are actually cutting emissions or whether they’re just engaged in greenwashing.

Better yet, definitions don’t increase the federal deficit. They add clarity, they instill confidence, and they don’t really cost taxpayers anything.

Guaranteed price on carbon

Similarly, hopes are high that the federal government’s talk of issuing “contracts for difference” will soon be a reality. These contracts guarantee investors a price on carbon over time, carbon politics be damned.

The federal Liberals promised as much last spring, and committed in the Fall Economic Statement to embed them into the Canada Growth Fund when it finally launches — likely soon.

They’re useful because Canada has a tumultuous history of carbon policy, with radical changes coming with new political configuration at the federal level. Why would anyone invest on the basis of carbon eventually trading at $170 a tonne when they suspect the next iteration of government may well dismantle that price? Or if they suspect the market for trading carbon won’t actually work properly?

Designed properly, contracts for difference could inject some confidence into the marketplace and unleash some of those billions low-carbon advocates are so desperately seeking.

A boost to Indigenous interests

Financing instruments aside, we can also hope the federal budget gives a boost to Indigenous interests who want to buy equity stakes in energy and natural resource projects.

Obviously, basic respect as well as numerous court rulings have made clear to anyone hoping to develop projects in Canada that they absolutely must fully involve Indigenous Peoples whose interests are in play. Taking an ownership stake is one enticing way to do this, but access to capital is not a given, mainly because collateral is hard to come by.

But if the federal government were to step in with federal loan guarantees, that equation looks a lot more promising — again at no immediate hit to the federal deficit.

Which brings us to the touchy subject of government approvals for resource projects. Canada’s reputation is of a country where approval to get things done takes way too long. The regime changes with every passing government — kind of like climate policy.

And now, our American and European allies want us to think in terms of working with them on energy security. Could we not find a way to fast-track projects that meet those expectations?

For sure, the federal budget will contain money and measures that will aim at igniting the clean economy, pulling in great ideas and big investment. And if those policies are designed to enhance rather than simply subsidize, they should deliver returns in the form of growth, jobs, trade and lower emissions.

But certainty and clarity are just as important, and they don’t cost nearly as much.