In the 2021 federal budget released last week, the Liberals pledged $17.6 billion to promote a “green recovery” after the COVID-19 pandemic.
However, experts are critical of the tax credits geared toward the oil and gas industry. They also say while the federal spending is a good start, the effort to combat climate change can’t stop here.
Here’s a closer look at what’s going on.
What has the government said?
In the budget, the federal Liberals have focused largely on pushing the private sector to develop clean technology and incentivizing heavy-emitting companies to embrace it.
The government says it will spend $5 billion over seven years on the Net Zero Accelerator, a fund that helps high-emitting companies reduce their greenhouse gas emissions.
The government says that will be spread out over seven years and is on top of the $3 billion announced last year when the Liberals unveiled their plan to reach net zero emissions by 2050.
During her speech in the House of Commons on Monday, Finance Minister Chrystia Freeland said Canada is at a “pivotal moment in the green transformation.”
“We can lead, or we can be left behind,” she said. “Our government knows that the only choice for Canada is to be in the vanguard.
Included in the over 700-page budget is also a tax credit for companies that choose to invest in technology that works to capture carbon dioxide and store it in the ground before it is emitted into the earth’s atmosphere.
“By providing incentives to adopt CCUS technologies, the proposed measure will be an important element in Canada’s plan to achieve net-zero emissions by 2050,” the budget reads.
The government said it aims to reduce emissions “by at least 15 megatonnes of CO2 annually,” with this tax credit.
The government said a 90-day consultation period will be held to determine the rate of the incentive for investments in the practice called carbon capture, utilization and storage (CCUS).
The feds have also pledged $319 million over seven years for the research and development of carbon capture.
Howver, Kathryn Harrison, a political science professor at the University of British Columbia, said these are just ‘subsidies with strings attached’ for the fossil fuel industry.
She said while that money is geared toward delivering a “certain magnitude of emissions reductions,” it is “questionable whether government should be subsidizing the fossil fuel industry at a time when we need to recuse our economic reliance on fossil fuel production and phase out our consumption of fossil fuels.”
“And also at a time when Canada has committed to phasing our inefficient fossil fuel subsidies.”
Harrison said the federal government has not done that. Instead, she said they have “increased the rate.”
Angela Carter, a political science professor at the University of Waterloo, echoed Harrison’s remarks, saying Canada is “spending a lot to help the oil sector green its production,” pointing specifically the plans in the budget to promote carbon capture and storage.
“I think all the energy and the money that we’re spending on helping the fossil fuel sector do better, maybe some or all of that should be going towards decarbonizing and moving from oil and gas, period,” she said.
Carter said Canada needs to cancel the subsidies for the oil and gas sector, enact the Just Transition plan to help train workers in the oil and gas industry to pivot to other jobs, and “get those emissions reductions where they need to be.”
In the budget, the government said it will also spend $4.4 billion in the form of interest-free loans to retrofit residential buildings to make them more energy efficient.
The loans of up to $40,000 will be administered via the Canada Mortgage and Housing Corporation.
While these loans are good, Harrison said Canada is going to need to take larger-scale of action to retrofit more homes and buildings.
She conceded, though that this won’t “all be done overnight, or in one budget.”
However, Harrison said it does worry her that investments in high-efficiency, natural gas furnaces will also be covered by the loans as detailed in the budget.
While these are better than other furnaces, Harrison said the government is still facilitating homeowners’ decisions to invest in equipment which run on fossil fuels.
She noted that these units are likely to run for at least ten years.
“One of the challenges when you need to make really deep reductions is that locking in half-steps (by) investing in technology or equipment that’s going to last quite a long time — that prevents or delays the next step by a long time. ”
More ambitious emissions target?
On Monday, Freeland said the government’s green recovery plan would help reduce Canada’s greenhouse gas emissions by 36 per cent from 2005 levels by 2030, and put Canada on a path for net-zero emissions by 2050.
However, just days later, speaking virtually at a global climate summit Thursday, Prime Minister Justin Trudeau announced Canada would slash its greenhouse gas emissions by 40 to 45 per cent compared to 2005 levels, by 2030.
However, Carter said while we’re getting closer, it still isn’t enough.
“The floor has to be at least 50 percent below 2005 levels by 2030,” she said. “That’s, in my mind, is the floor of credibility — anything less would indicate that Canada isn’t taking the climate crisis seriously.
So we’ve got a ways to go.”
Harrison said the United States is now showing “significant ambition” in combatting climate change, which will ultimately make it easier for Canada.
She said the U.S. will likely act “aggressively” on methane regulations and vehicle emissions.
“And I would expect Canada will simply adopt the U.S. standards wholesale and both of those areas,” she said.
What’s more, Harrison said America’s climate ambitions will also “put pressure” on Canada and the country’s other trading partners to “get moving as well.”
“They’re worried that they’ll be undercut by us and by other countries if they move aggressively forward and their trading partners don’t,” she explained. “So it’s not just that it’s easier, there’s (also) pressure on Canada to do more.”
Can’t spend our way out of climate crisis
Ultimately, Carter said the federal government having earmarked more than $17 billion for a green recovery is “good.”
“But it’s just part of what needs to be done and we need to keep going with this,” she said.
“This can’t be an end point, and if you look at the U.S. and other economies, they’re doing more and they’re doing it faster, so let’s keep going.”
Harrison, too said the investment into a green recovery is a positive, but added that ultimately, “we’re not going to spend our way out of this problem.”
“I think we tend to overestimate and emphasize the importance of public spending in the transition to a low and eventually zero-carbon economy,” she said. “Most of that transition is going to be driven by regulation and a carbon price.”
“That’s going to do the work.”
Harrison said, though, that if government is going to use deficit spending to stimulate the economy, it’s “important to stimulate the econmy you want to create (instead) of the one you want to leave behind.”
“And I do think there’s a number of things in (this budget) — direct investments, the tax cuts for investing in production of zero carbon goods and services, the Net Zero Accelerator — which I think is a is a good move,” she said.
-With files from The Canadian Press