Budget 2024

April 16 budget must prioritize growth 

The Business Council of Canada has prepared this submission in the hopes of catalyzing significant early progress toward meeting Canada’s ambitious GHG reduction goal for 2030. In a follow-up report, we will outline a more comprehensive set of policies and actions that we believe are necessary to ensure a successful long-term transition to a low-carbon economy.

This submission was produced in consultation with the Business Council’s Working Group on Climate Change and Energy Transition. Co-chaired by Susannah Pierce (Shell Canada) and Charles Brindamour (Intact Financial), this group is made up of 20 leading CEOs from across the country and representing a range of sectors.

Canada’s business leaders recognize the need to address climate change. We support the federal government’s goal of significantly reducing greenhouse gas (GHG) emissions by 2030 and achieving net zero emissions by 2050. We know that doing so will require a radical transformation in the way Canadians produce, transport and consume energy. RBC recently estimated the cost for Canada of transitioning to a net-zero future at $2 trillion . A great deal of work lies ahead if Canada is to reach net zero while ensuring stable, reliable and affordable supplies of cleaner energy to power our economy and enhance Canadians’ standard of living.

In our view, Canada’s 2030 emissions reduction plan should:

Build on Canada’s comparative advantage in key resources and technologies. The plan should position our country as a global supplier of climate solutions and ensure that Canadians benefit economically from the coming energy transition.

Provide policy clarity. Governments must provide a clear and stable policy framework that extends beyond election cycles and will incentivize significant new private sector investment in emissions-reduction activities and technologies.

Ensure regulatory coherence. Companies and investors must be able to rely on regulatory approval processes that are clear, effectively coordinated across jurisdictions, impose reasonable costs and result in timely, final decisions.

Engage the Canadian public. All Canadians must do their part to reduce GHG emissions. For this to happen, governments must greatly improve national climate literacy and ensure high levels of public support for the significant actions that will be needed and the costs they will impose.

Chart an orderly long-term transition. The plan must minimize economic and regional dislocation. This includes strengthening climate resiliency and enhancing the country’s ability to adapt to a changing climate.

Given the scale of the transformation and the short time to 2030, the Government of Canada must move quickly. Shaping a path to net zero that benefits Canadians both economically and environmentally will require immediate decisions about how and where to invest public and private dollars. Many of Canada’s leading companies are proposing large-scale projects that would dramatically reduce emissions and create new market opportunities for Canadian-made technologies and products. Some of these projects would entail significant financial risk; all would take several years to develop and gain regulatory approval.

On the following pages, we outline four immediate and high-impact priorities that would build on the country’s existing strengths – in resource endowments, capital availability, infrastructure, and skills – and maximize Canadians’ chances of achieving our climate objectives. By no means are they the only steps that will be required to meet Canada’s international commitments. But in our view, these recommendations offer the greatest potential to unlock large pools of private capital in support of Canada’s low-carbon future.

Recommendation #1: Aggressively pursue carbon capture opportunities, including industrial carbon capture, utilization, and storage (CCUS), and nature-based solutions.

The International Energy Agency and the Intergovernmental Panel on Climate Change have declared CCUS an essential tool in fighting climate change. It is the most readily available tool to achieve the scale of reductions needed to put the country firmly on a path to the 2030 target. Canada is home to several world-class CCUS projects that sequester five million tonnes of CO2 annually. As a country we have the capacity to increase that number substantially, positioning Canada as both a leader in CCUS and a significant exporter of CCUS technology and expertise. CCUS is also fundamental to realizing Canada’s potential as a major producer of clean-burning hydrogen.

Several Canadian resource companies have announced plans to invest in CCUS to capture existing emissions and to create lower carbon fuels. Companies representing 95 per cent of the oil sands industry have publicly committed themselves to the goal of net-zero emissions from oil sands production, with CCUS as a key enabling technology. The federal government has set a target of capturing 15 Mts of CO2 annually by 2030. Given a supportive policy framework, we believe it is possible to achieve at least twice that level.

Canada’s rich endowment of natural spaces – including forests, grasslands, wetlands, and soils – are important stores of carbon. There are significant opportunities to deploy nature-based climate solutions through protecting and enhancing forests, grasslands, and wetlands. Improving carbon retention in soils will not only fight climate change but also improve soil and plant health and increase agricultural yields. As well, there also are significant opportunities to develop regenerative agricultural practices and technologies that we can export around the world.

What Canada must do:

  • The federal government must ensure that Canada’s CCUS policy is competitive with that of other countries, in particular the United States. As a first step, Budget 2022 should introduce a significant investment tax credit for CCUS.
  • The government should also help offset the financial risk of CCUS investments by providing low-cost financing, longer-term carbon price certainty, and access to carbon credits. We note that in the United Kingdom, Norway and the Netherlands, significant public funding was key to the development of CCUS projects.
  • In partnership with farmers and agricultural technology firms, the government should support the adoption of regenerative agricultural technologies and practices. There is substantial scope to improve agricultural practices, in Canada and around the world, in ways that would significantly reduce atmospheric CO2.
  • The federal government should work with provincial and municipal governments, Indigenous communities, and landowners to catalyze early action under the proposed Natural Climate Solutions Fund.
  • The federal government should work with the provinces and the private sector to further develop carbon offset protocols that would incent companies to invest in nature-based solutions.

Recommendation #2: Significantly expand Canada’s low-carbon electricity grid.

Currently 82 per cent of Canada’s electricity is produced from non-GHG-emitting sources. This represents a potential competitive advantage in a world in which companies are increasingly seeking to de-carbonize the production of manufactured goods. But to achieve our climate objectives, Canada needs to at least double its generating capacity and the infrastructure to deliver it. The challenge is to ensure that new supplies of electricity are both reliable and affordable. Failing that, governments risk public backlash. Higher energy prices would also weaken the competitiveness of the very industries we are trying to de-carbonize.

The federal and provincial governments must work together to modernize and expand Canada’s electricity grid. Doing so would contribute significantly to achieving our climate goals, while also providing affordable, reliable and competitively priced power to citizens and businesses. Attaining the federal goal of 90-per-cent emissions-free electricity in 2030 could save 47 Mts of CO2 annually. But despite decades of talk, little progress has been made in linking provinces that have surplus clean electricity capacity with those that still depend on coal-fired electricity. Canadians cannot afford to wait any longer. At the same time, we should be working to expand cross-border infrastructure so as to strengthen the North American partnership and assist the United States in meeting its own clean electricity goals.

What Canada must do:

  • It is time to break down the silos and ensure that the federal and provincial governments are working hand in hand to accelerate development and regulatory approval of new clean electricity capacity and transmission systems.
  • Kickstart the Canada Infrastructure Bank’s $5 billion clean power plan and seek to leverage significant private investment in clean electricity transmission and storage.
  • Push for the creation of a Canada-U.S. high-level dialogue on accelerating cross-border clean electricity transmission.
  • Enhance research partnerships to improve the efficacy and lower the cost of key technologies, including micro grids, small modular reactors, hydrogen, and utility-scale battery storage.

Recommendation #3: Enhance Canada’s role in the North American supply chain of zero-emissions vehicles.

The transportation sector contributes 25 per cent of Canada’s GHG emissions. More than half of that comes from passenger vehicles and light-duty trucks. Across North America and around the world, auto manufacturers are investing heavily in the production of new zero-emission vehicles (ZEVs), for which consumer demand is growing rapidly.

Canada has considerable potential in this area given our history in auto assembly, our established strength in auto parts production, and our relatively clean electricity grid. Moreover, our country has rich reserves of many of the critical minerals needed for electric vehicle batteries. As a country we can either seize the opportunity now to encourage investment in the transportation technologies of the future, or watch as our advantage slips away to more nimble competitors.

What Canada must do:

  • Create a strategy that supports continued investment in vehicle assembly and parts production, fosters research into advanced battery technologies, and ramps up investment in ZEV charging and re-fueling infrastructure.
  • Work with the United States and Mexico to develop a North American ZEV and battery supply chain that is second to none in the world.
  • Take advantage of Canada’s low-emissions electricity grid and its sustainable and responsible minerals industry to position the country as a preferred supplier of critical minerals, in part by reducing regulatory barriers to investment in new mineral supply and processing.
  • Accelerate consumer adoption of ZEVs through expanded purchase incentives for vehicles and charging systems, as well as measures to enhance public understanding of the advantages of such vehicles.

Recommendation #4: Foster public-private partnerships in industrial R&D to drive innovation and breakthrough technologies.

Governments and policymakers around the world have recognized that technological change is the key to addressing climate change without compromising economic growth and living standards. As noted above, Canada has significant potential as an exporter of innovative, climate-friendly products and services. However, catalyzing breakthrough ideas and technologies and then bridging them across the innovation process to commercialization requires a shift in policy focus. Canada must become better at transforming its knowledge and intellectual capital into commercial products and services.

What Canada must do:

  • Dramatically increase our investments in research and development. As a percentage of GDP, Canada’s combined public and private expenditures on R&D have been declining since 2001. The United States currently invests 2.9 per cent of its GDP in R&D. Canada is at 1.57 per cent, significantly less than the OECD average. Both public and private R&D investments must increase.
  • To ensure better technology transfers, strengthen the connections between publicly funded research and the Canadian companies that have the ability to commercialize those ideas. The proposed new Canada Advanced Research Projects Agency could play a major role in commercializing new technologies provided it has a clear mandate and the tools it would need to achieve success.
  • Ensure that federal and provincial regulatory regimes are conducive to capital formation and business investments.

In closing

Addressing climate change is a societal responsibility. Governments will have to do a lot of the heavy lifting to reach Canada’s ambitious climate goals, but we all must do our part to sustain the country’s economic prosperity and reduce the environmental burden on our children and grandchildren.

As business leaders, we will:

  • Set ambitious climate change goals for our companies.
  • Devote a greater share of our capital spending to productive investments that can mitigate the impact of climate change.
  • Communicate transparently to shareholders and the public about the risks and opportunities that climate change presents for the future of our businesses.
  • Work collaboratively with customers and suppliers, taking action together to shrink the carbon footprint of our supply chains.
  • Follow the lead of Canada’s energy and resource sectors by ensuring that development takes due consideration of the potential impact on local Indigenous communities, and by looking for ways to share economic benefits with Indigenous-owned businesses, including through equity partnerships.

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