Deputy Prime Minister and Minister of Finance Chrystia Freeland takes part in a press conference before delivering the fall economic update in Ottawa, on Nov. 21.BLAIR GABLE/Reuters
Ottawa’s shift toward implementing its existing promises of policies to attract low-carbon investment, rather than announcing new ones, is drawing mixed reviews after being laid out in Tuesday’s fall economic statement.
Sector leaders and environmental advocates mostly did not object to the absence of new climate and clean-technology policies, which was expected because of budgetary constraints and a focus on affordability.
In fact, many welcomed the focus instead on putting in place promised green policies – including tax credits and financing programs – that the government layered on in each of its fiscal plans over the past several years.
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There has been mounting frustration with the logjam of yet-to-be-implemented measures, partly intended to help compete for low-carbon investments with the United States, where comparable policies are already in place.
But while some details of the follow-through road map laid out by Finance Minister Chrystia Freeland have eased complaints about a lack of urgency and clarity, others appear to have exacerbated those concerns.
The general tone of the response was encapsulated by a statement from the Canadian Climate Institute, which called it “the right clean economy plan at the wrong pace.”
The mixed reviews particularly apply to plans around a suite of investment tax credits (ITCs), projected to add up to as much as $80-billion over a decade.
The most well-received news was that Ottawa is ready to introduce legislation for a pair of those tax measures.
One of them is a credit for up to 50 per cent of the capital costs of carbon capture, storage and utilization (CCUS) projects, intended to help reduce emissions from oil and gas production and some forms of heavy manufacturing, which was first promised in 2021. The other would reward companies for capital investments in renewable electricity generation, energy storage, heat pumps and other technologies.
Relief at those measures coming into place was counterbalanced by disappointment that Ms. Freeland intends to more gradually phase in a handful of other ITCs, announced last spring or earlier, over the course of next year. That includes credits for manufacturing clean-tech products, hydrogen production, and investment in clean-electricity generation by public utilities.
While Ottawa has said those credits will be introduced retroactively, companies could hold off on related investments while they wait for key details.
“It’s great, but man, it’s taking a long time,” Dennis Darby, the president of the industry group Canadian Manufacturers & Exporters, said of the ITC package. While stressing that he appreciates that Ottawa hasn’t backed away from the commitments despite fiscal pressures, Mr. Darby suggested that “the process could be accelerated if they wanted.”
On another key policy measure – carbon contracts for differences (CCfDs), meant to guarantee heavy-emitting industries a minimum value for each avoided tonne of emissions through investments in carbon capture or other technologies – matters are now somewhat clearer than before Tuesday.
Until then, the government had confusingly said that CCfDs would initially be modestly offered through the Canada Growth Fund, a new $15-billion financing agency, but that a more expansive program for them could then be offered some other way.
The economic update signalled that, instead, the Growth Fund will be the lone delivery vehicle for CCfDs, but that they will occupy “up to $7-billion” of its budget – a greater share than previously indicated.
That signal, though, has introduced its own set of questions, not least because the Growth Fund has been billed as an arm’s-length entity deciding independently how to allocate its budget toward various financing tools at its disposal. The use of “up to” leaves it open to interpretation how directly it’s being instructed to devote nearly half toward CCfDs.
A third policy on which the update sent mixed signals of progress was a long-awaited rulebook, known as a taxonomy, spelling out investments that can be labelled as green or as supporting transition to low-carbon activities. It’s supposed to help attract private capital to make up for a $115-billion annual shortfall needed to help Canada get to net-zero emissions by 2050.
Members of the government-appointed Sustainable Finance Action Council (SFAC), which completed a proposed taxonomy framework more than a year ago, have previously expressed frustration with its slow advancement.
The economic statement did not commit to its implementation, but said the government would provide $1.5-million for the council to take the next step of consulting with regulators, financial players, industry officials and independent experts to help finalize it.
SFAC’s top officials, Kathy Bardswick and Barb Zvan, said in a statement that they’re pleased with the taxonomy progress as well as a suggestion that corporate climate-related disclosure could be made mandatory, calling them “key infrastructure pillars required to create a competitive investment environment.”
Julie Segal, the senior manager of climate finance at the advocacy organization Environmental Defence, also said moving the taxonomy to the next stage is positive. The outreach to independent experts, she said, is important to avoid the taxonomy being a “green light for greenwashing” by including fossil fuels in the document.
Ryan Riordan, the director of research for the Institute of Sustainable Finance at Queen’s University – which has provided support to SFAC – was less cheered by the development. He said there has already been plenty of consultation to get to the current stage, so the effort could still drag on.
Such concerns about the balance between ensuring sufficient process around policy tools that are new to Canada, and timely implementation, extend beyond the policies highlighted in the economic update.
Among other long-promised policies that Ottawa is aiming to put in place are regulations requiring provinces to move toward net-zero-emissions electrical grids, and a cap on emissions from oil and gas production.
A common assessment among climate-policy advocates was that the timelines and details offered on Tuesday were only a start, toward the acceleration required for Ottawa to get its agenda in place fast enough to achieve its economic competitiveness and emissions-reduction goals.
Editor’s note: The amount provided to the Sustainable Finance Action Council for next steps has been corrected in the online version of this story.