The federal government has committed $8 billion to reduce carbon emissions by large industrial emitters in its spring budget.ADRIAN WYLD/The Canadian Press
The federal government is really, really eager to give money to large companies to help them decarbonize.
In December, as part of their new climate plan, Prime Minister Justin Trudeau’s Liberals announced a $3-billion “Net Zero Accelerator” to subsidize clean-technology investments by large industry. The response, from some of the sectors that stood to benefit, was that it was a nice start but more was needed. So in this spring’s budget, before the program had started operating, its size ballooned to $8-billion.
Now, despite details of how exactly the money will be awarded remaining fuzzy to everyone outside government, Industry Minister François-Philippe Champagne is promising to announce funding commitments for specific projects within months. He’s reaching out to CEOs to encourage them to get their bids in, he said in an interview, with a message to “think big and think fast.”
The urgency is warranted. For Canada to meet its new goal of reducing national emissions at least 40 per cent by 2030, it’s going to have to swiftly decarbonize heavy industry – manufacturing, natural resources – where the costs of doing so may be prohibitive without public support. That support is probably also needed as part of a “global competition,” as Mr. Champagne put it, since trading partners are already moving more quickly with interventionist clean-economy policies. And as he said, the economic recovery from COVID-19 is an ideal time for this sort of spending.
But this would be a good time for the Liberals to (quickly) take a deep breath, because it appears there is still some work to be done to figure out what exactly this program is supposed to achieve: which sectors and technologies should be prioritized, as a matter of both emissions-reductions and economic value, and how to go about doing so.
While the NZA is billed as a strategic fund for industry, it’s not yet a targeted industrial strategy of the sort other countries are pursuing. As of now, it looks more like an envelope for all manner of climate-related investments, so long as they involve big businesses, without great clarity on how proposals will be judged against each other.
That means there is a risk of squandering possibly the biggest total investment by Ottawa this decade to transition Canadian manufacturing and natural resources toward a more sustainable future. There is also some danger of it turning into the sort of slush fund that leads to political scandals, which in this case could discredit much-needed green spending in general.
The program’s broadness is reflected by the fact that, based on explanations from Mr. Champagne and others in government, it’s supposed to serve two worthy but rather different purposes.
The first of those is to help lower emissions from hard-to-decarbonize sectors, through investments in emerging technologies – improving energy efficiency of industrial processes, capturing and storing or utilizing carbon – not yet economical on their own. Common examples of qualifying companies are manufacturers of building materials such as cement, steel and aluminum. Mr. Champagne also highlighted the resource sector, including mining, which could prove contentious with applications from oil and gas producers.
From these potential beneficiaries, the response to the Liberals’ plans seems very enthusiastic. In an interview, Cement Association of Canada president Michael McSweeney said he was among those who advised the government after the initial $3-billion commitment that it wouldn’t meet demand; he described himself as “delighted” by the increase to $8-billion, and said he was encouraged by the speed with which the government was starting to accept applications. Canadian Steel Producers Association president Catherine Cobden struck a similarly positive note.
The second category involves sectors aiming not so much to reduce emissions during production, as to make low-emissions products. At the top of this list is electric vehicles, from mining and refining key component minerals through to assembly. Mr. Champagne also repeatedly invoked the aerospace industry, where clean technologies are at earlier stages.
From that side, the plan has been met with more skepticism. This week, a report by Clean Energy Canada, providing consensus recommendations from auto-sector executives and experts about how to build a domestic EV battery supply-chain, described the NZA as “not the right funding mechanism.”
Their basic criticism is that such an all-purpose program won’t allow Canada to keep pace with other countries that have funds tailored specifically to battery and EV production. (A related complaint is that the Liberals are planning to use the NZA only for grants of at least $10-million, which precludes a holistic sectoral strategy because many smaller companies along the supply chain are excluded.)
While it might be expected that one sector would prefer not to compete with others for public dollars, there is concern even among less vested interests about spending money so widely that it fails to transform much of anything.
“I’m worried about spreading the peanut butter too thin,” is how Robert Asselin, vice-president for policy at the Business Council of Canada, put it.
Mr. Asselin also noted the worry that having so many different types of businesses jockeying for funds, which he called a potential “lobbyist’s dream,” could be “very subject to political capture.”
While the NZA does seem inspired by policy need, the process around it hardly offers airtight protection against partisan considerations taking hold, particularly as it starts rolling out during what could be an election year.
Using the umbrella of the Strategic Innovation Fund (a heretofore much smaller pre-existing program subsidizing all manner of technology investment), a group of bureaucrats within Mr. Champagne’s ministry are to make recommendations for which bids to accept, with projected emissions reduction and job creation among the considerations. But it will then be up to the minister – or, with the largest applications, cabinet’s Treasury Board – to make final decisions on each expenditure.
Short of creating a new arm’s length agency (which would come with its own drawbacks, including a lack of the urgency the Liberals want to show), there is no realistic way to make this sort of program completely apolitical.
But that underscores the need for the Liberals to be as explicit as possible in advance – with industry, the general public and themselves – about what they’re trying to build here.
They could still choose to prioritize more explicitly certain sectors where they see the most potential for environmental and economic gains.
They could also still adjust the program to enable more nimble strategies for those sectors, including by dropping the $10-million minimum for grants.
At the moment, the Liberals are probably feeling little pressure to tweak anything. Coming when all eyes are on pandemic response, in a budget with more attention-grabbing commitments such as a national daycare program, the accelerator has gotten minimal public scrutiny for a spending commitment of its size.
But eventually, there will be accountability for how much clean-economy transition all that money buys us.
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