As published in the Toronto Star
In January, Prime Minister Justin Trudeau toured three communities to highlight Canada’s role in the energy transition. “The world wants clean technology,” he said, “and Canada has the resources, the expertise and the skilled workers to meet that demand.”
To that list we would add: Canada has a growing interest among First Nations to participate as owners of the projects that will help meet that demand.
Canada has many of the building blocks the world needs to achieve a net zero emissions future, including critical minerals and abundant clean energy — but we need to start moving now to develop and leverage those assets and get clean energy projects to market.
Time is not our friend. Canada must dramatically ramp up investment in clean technology today if we are to meet the federal government’s ambitious 2030 greenhouse gas reduction target of 40 per cent below 2005 levels. Further, unless we move quickly, we could lose out as capital gets drawn south, attracted by the generous incentives already in place under the United States’ Inflation Reduction Act.
Indigenous nations will play a key role in this investment effort. Increasingly, informed decisions are being made to become co-developers and co-owners with the private sector in new net-zero infrastructure, such as transmissions lines, clean energy generation and battery mineral supply.
First Nations need a place at the table
Engaging First Nations as partners in the planning and development of new projects is the best way to ensure that rights and interests are protected, that communities can benefit financially and that the project goes ahead in a timely way. Canada’s business leaders recognize this and are increasingly engaging in partnerships that meet everyone’s interests.
That’s easier said than done.
The scale of economic opportunity urgently waiting to be unlocked through Indigenous equity partnerships is significant.
However, a major deterrent to such partnerships is a lack of access to sufficient funding to enable equity ownership in natural resource projects.
The barrier is partly a legacy of the Indian Act and its antiquated notions of land ownership, which often boils down to First Nations being blocked from offering collateral on new project investment that satisfies traditional lenders. There are, however, some answers at hand.
Existing provincial Indigenous loan guarantee programs in Alberta and Ontario have illustrated how traditional constraints are being overcome. The private sector is taking action to co-create equity partnerships with Indigenous nations. An example is Hydro One’s recent offer to First Nations to purchase a 50 per cent equity stake in large scale transmission projects. It’s an important initiative that illustrates that sufficient access to capital is critical for those First Nations wanting to participate and for project proponents who want to make new projects happen soon. In concert, these examples point to the need for equitable Indigenous access to a similar program at the national level.
Indigenous loan guarantee program
Establishing a national Indigenous loan guarantee program is not a novel concept. The need to find a competitive source of capital was a key issue that catalyzed First Nations to establish the First Nations Major Projects Coalition. Its member First Nations are pursuing ownership in over $20 billion of existing or proposed natural resource projects in Canada. Most of these investments are tied to achieving Canada’s net zero targets.
A national Indigenous loan guarantee program would allow Indigenous nations to overcome the systemic barriers to investing in major projects. It would neither require Canada setting aside a large pool of capital on the federal books, nor would it entail significant risk: many of the natural resource projects would either involve rate-regulated energy commodities or would be backed by long-term supply contracts with willing buyers.
Backstopping loans through a national program would allow many more Indigenous investors to access funding on ordinary commercial terms through the traditional financial sector. Moreover, it would allow businesses and Indigenous nations to work better together and unlock projects that can create prosperity for all Canadians.
These Indigenous-industry partnerships are already advancing long overdue economic reconciliation in Canada and will continue to do so. These partnerships also represent the clearest path to Indigenous consent for such projects and the strongest case for expediting regulatory approvals.
The next federal budget provides the perfect opportunity to create a national approach to developing the Indigenous equity partnerships that can help Canada meet its clean energy objectives.
The faster projects get off the ground, the faster we can reach our net-zero targets.
February 20, 2024
February 5, 2024