Budget 2024

Tax and spend fiscal plan will inhibit growth

As published in the Financial Post

The “big picture” economy can seem overwhelmingly large and complex. It’s easier to watch it unfold, letting it happen to us, rather than taking action to shape it.

But that isn’t Canada’s story of Canada. Canada became a prosperous nation because people took action to make it that way: the Transcontinental railway; the St. Lawrence Seaway 75 years later; and just over 30 years ago, the establishment of the first Free Trade Agreement with the United States. These were nation-building moments where Canadians took control of our economic destiny. We are at a cross-roads in history today that is crying out for that same leadership. The decisions we make now will be critical for laying the economic foundation for the next 30 years or more. 

Climate change is accelerating, and having devastating impacts around the planet. We saw those impacts firsthand in British Columbia this past year. An unprecedented heat wave and wildfires that caused tragic loss of life and enormous damage and displacement, followed not long after by rains and flooding that shut down roads and rail lines, costing billions and causing damage that will take years to fully repair. Then, all-time record cold temperatures that yet again caused enormous disruption and damage.

Too often, people view the economy and climate as competing priorities, weighing one against the other. This is a false dichotomy. Canada’s climate plan must be its economic plan, and Canada’s economic plan must be its climate plan.

The ambition Canada has shown on the climate file is laudable and heading in the right direction – but there’s much more we can and should do. A low-carbon future won’t happen because you want it to. It has to be built, and that requires resources. The global net-zero transition is expected to trigger a “green-economy super cycle.” Electric vehicles and charging infrastructure; renewable power; low-carbon infrastructure such as rapid transit — all of these things will require significantly higher resource inputs than are consumed currently. For example, an electric car requires six times the mineral input of a gas-powered car, and a wind-power facility requires nine times more mineral resources than a typical gas-fired plant. 

But that’s only half the story. A growing population and increased urbanization will drive even more global demand. Projections show 2.5 billion people will join urban populations by 2050, with close to 90 per cent of the increase concentrated in Asia and Africa. That much urbanization is the equivalent of building a new city nearly the size of the Greater Toronto Area, every single month for the next 30 years. That is going to drive tremendous demand for resources. 

Canada has significant advantages in the race to supply the low-carbon transition. We have a robust regulatory regime to ensure resource development is responsible. We have the natural resources and raw materials needed to support a global transition. Canada’s clean-tech companies are world leading. Our steel, wood, fertilizer, cement, metals, and minerals are among the world’s cleanest thanks to an electricity grid that is 83-per-cent free of emissions. A 2019 report by the Business Council of British Columbia shows that B.C.’s energy and commodity exports contain half the carbon content of those of their global competitors. And Canadian governments and companies are working hard to build on that performance and drive down emissions even more. 

We need to lean into that potential because if we don’t, others will. Too often, the climate debate focuses too narrowly on the supply side of the equation. I get it — it’s a lot easier to focus on decarbonizing supply than it is to try and change demand. It’s not popular for political leaders to tell voters to drive less, or eat less meat, or order less from Amazon. But reducing supply doesn’t make demand go away. It just means that the supply will come from somewhere else. In this case, less environmentally responsible producers in jurisdictions with weaker climate and social policy and the world will be worse off. Sadly, in energy, if we continue to focus on decarbonizing supply without the equivalent decarbonization of demand, energy prices will skyrocket and literally billions of people in developing economies will be badly hurt.

If we fail to act on this opportunity to supply Canada’s responsible, low carbon resources to the world, then all we’ve done is ensure that bad actors will benefit, while we in Canada miss out on jobs and economic opportunities for Canadians. If Canada is not participating on the supply side, the world and the climate will be worse off, and we will be worse off economically.

The good news is we have all the competitive pieces to address climate change, stimulate economic growth and build a nation where our kids can thrive. But we will need to work closely with governments to help put all the pieces together.

First, we need a Canadian clean industrial strategy, underpinned by policies and investments that make us competitive in supplying those products to domestic and international markets, and that incentivizes and supports industries to further decarbonize and improve performance. 

Second, we need to be better at bringing responsible new supply online. Since 2006, Canada has fallen from fourth to 23rd place in the annual World Bank study that measures the regulatory burden on business. That is the biggest barrier for investors, not access to capital. We need predictable and timely regulatory processes that expedite projects that are clean, responsible and contribute to a zero-carbon world.

Third, we need to advance reconciliation and ensure that Indigenous Peoples share fully in the benefits of responsible growth.  Fourth, we need transformational investments in green infrastructure to build on our clean resource advantage. A recent report by Royal Bank of Canada estimated it will require an investment of $2 trillion in the next three decades to decarbonize Canada.

Investments in electrification, carbon capture utilization and storage, and other decarbonization technologies would be nation-building projects, like the Transcontinental railway and the St. Lawrence Seaway. It will be hard work. It will require every segment of society to pull together to make it happen. But the opportunity is enormous because the resources we produce are essential to the green transition, and demand is only going to increase. Every tonne of copper or steelmaking coal or liquefied natural gas; every board of lumber; every ounce of resource exported from Canada means the world is better off.

As a nation we need to recognize that fact, embrace it, and be proud of the role we can play on the world stage, while building our clean economy at home. The world needs more Canada because more Canada means more action on climate change, more sustainable resource development, more jobs, more prosperity, and a better world for everyone.