New Tesla electric vehicles are seen in a lot at Tesla's primary vehicle factory in Fremont, Calif. on May 11, 2020.Stephen Lam/Reuters
Justin Trudeau consistently presents the fight against climate change as an economic opportunity. But rarely is the Prime Minister as brash about making sure the benefits flow to Canadian businesses as the new President of the United States is already proving to be when it comes to American ones.
Among the many things to digest in Wednesday’s announcement of Joe Biden’s latest sweeping executive order on climate matters – including a moratorium on new permits for oil drilling on federal lands, and a commitment to environmental-justice measures for disadvantaged communities – it’s the section on government procurement that should most capture the attention of Canadian policy makers.
Directing U.S. federal agencies to procure carbon-free electricity and zero-emissions vehicles, the order specifically requires those purchases to be “Made in America” to “create good-paying, union jobs and stimulate industries.”
Coming just a couple of days after Mr. Biden’s announcement of strengthened “Buy American” provisions for how Washington generally wields its purchasing power, it leaves little doubt that his administration will make every effort to use coming climate investments to give American clean-technology companies fresh competitive advantage.
That shouldn’t come as a huge surprise, since Mr. Biden telegraphed as much during last year’s presidential campaign, and protectionism is one of the few things that currently enjoys a degree of cross-partisan U.S. consensus.
But it still stands to test the nimbleness of a Canadian government whose emissions-reduction plan is supposed to be helping this country’s clean-tech sector grab a bigger share of the rapidly mounting global investment in decarbonization. Mr. Trudeau’s Liberals need to quickly figure out two separate components of a response: how to minimize the impact of Mr. Biden’s directive on Canadian bidders for U.S. contracts and whether there are ways to respond in kind through their own procurement policies.
The first is relatively straightforward, and there is some cause for optimism. Ottawa is well practised in lobbying Washington for exemptions from broadsides aimed at foreign companies. Considering Mr. Biden’s Made in America plans are clearly not being written with Canada in mind – China, increasingly dominating clean-tech exports, is the most obvious target – it should be possible for Mr. Trudeau’s government to win some concessions.
At the same time, the need for Canada to avoid suffering collateral damage in U.S. competition with overseas powers strengthens the case for trying to go in with the United States on nascent plans toward carbon border adjustments – a form of tariff, on high-carbon imports, in which both Mr. Biden and Mr. Trudeau’s government have shown interest. If established through a continental pact, they could help strengthen cross-border industrial integration and make it less likely that Canadian producers would be discriminated against.
The other half of the equation – using Canadian government purchases to support the growth of domestic clean tech – is less obvious, and there is less record of doing it. There has been a reluctance, more so than among many trading partners, to allow either environmental or industrial considerations to trump getting the lowest sticker price. But Ottawa’s hand may now be forced.
Even before Mr. Biden took office, there was a common complaint among clean-tech advocates that early stage Canadian companies here were at a competitive disadvantage, because of a government less inclined to send positive signals to other would-be purchasers by being an early adopter. That’s seen to contribute to a broader low-risk Canadian investment culture, in which purveyors of promising technologies crash into the so-called valley of death after the startup phase.
There have recently been some signs of that mentality shifting a bit. The Greening Government Strategy, introduced in the Liberals’ first term and updated this past fall, is aimed at getting environmental considerations better factored into all operational decisions, including each department’s purchases.
But there are still plenty of ways that Canada could be more aggressive about it. That could mean, for instance, setting aside a share of government purchasing for small businesses, which is already common practice in the U.S. and Europe and tends to benefit upstart domestic companies. Or, as much as possible, gearing spending on emissions-reduction toward investments for which Canadian companies are well positioned to compete.
And since Canada’s federal government does not directly spend as much on goods as the U.S. counterpart does, even adjusting for population, Ottawa also has to consider how much it could or should link infrastructure funding deals with provinces and municipalities to their support for low-emissions Canadian products. (One apparent example of that currently is federal investment in electric buses, which four domestic manufacturers are now making, to be used by cities.)
Some of these ways of giving climate-friendly Canadian companies a leg up may have more downside than they’re worth, and there are plenty of other ways of doing so – tax incentives, subsidies, regulatory changes. Some of that could involve worrying less about government purchases, and more about incentivizing larger domestic companies to buy clean products from emerging ones.
But these are the sorts of long-gestating strategic discussions that Canada now needs to be having in a hurry, as Mr. Biden rapidly implements his America-centric vision for clean-economy transition.
The economic opportunity that Mr. Trudeau likes to talk about is still very much there, but his government might have to get its elbows out to take full advantage of it.
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