Gattinger: Federal Budget The Final Piece Of Ottawa’s Climate Policy

Many would say a global health pandemic is a terrible time for big policy changes to transform the economy. Job number one should be the crisis at hand — big changes can wait. And yet, the federal government has released a flurry of climate commitments since the pandemic gripped the nation.

Despite the economic, social and public health calamity of Covid-19, it is clear the Trudeau government remains committed to climate action. The pandemic may even have emboldened Ottawa by opening a once in a generation policy window for massive government spending.

Yesterday’s budget was the final big piece of the government’s climate policy. The only major news yet to come is a more stringent emissions target for 2030, which Ottawa has committed to announcing at U.S. President Joe Biden’s climate summit later this week.

The federal budget contains a staggering $100 billion of new stimulus money over the next three years, including $17.6 billion for a ‘green recovery’ to create jobs, develop a ‘clean economy’ and address climate change. There is very little that’s new here: the budget puts Ottawa’s money where its mouth is. Once the budget passes – which it surely will as no party wants to bring down the government — all the big pieces of federal climate policy will be in place.

Things really got moving last September, when the speech from the throne announced that Ottawa would legislate the government’s goal of net zero emissions by 2050 and bring forward a plan to exceed Canada’s 2030 emissions targets. Net zero legislation, including legal requirements to set five-year emissions reduction goals, followed in November.

The Fall Economic Statement also followed in November. It contained a number of climate measures, including planting two billion trees, $2.6 billion in grants for home energy retrofits and expanded funding for zero-emissions vehicles.

December saw multiple climate announcements. The most important was the new climate plan, A Healthy Environment and A Healthy Economy, with its flagship commitment to ramp up the federal carbon price to $170 per tonne by 2030. The plan also committed to creating the Clean Fuel Standard, finalizing methane emissions regulations for the oil and gas sector, achieving 90 per cent non-emitting electricity generation by 2030, positioning Canada as a global leader in the production of batteries and accelerating decarbonization solutions in Canadian industry through the Strategic Innovation Fund’s Net Zero Accelerator.

In December, Ottawa also released an action plan for small modular nuclear reactors and a national strategy for hydrogen. And in February, the government announced $15 billion in spending over eight years on public transit.

Budget 2021, for its part, provides $5 billion over seven years to the Net Zero Accelerator (on top of $3 billion announced in the climate plan), $4.4 billion on a cash basis for home retrofits, $1.5 billion over five years to establish a Clean Fuels Fund (previously announced in the climate plan) and $1 billion to help attract private sector investment for large clean technology projects. Other expenditures target smaller-scale efforts to reduce emissions and a range of climate adaptation measures.

The budget estimates that all of the climate measures announced since last fall will reduce GHG emissions by 36 per cent below 2005 levels by 2030. This would exceed the government’s current target of a 30 per cent reduction of 2005 levels by 2030.

Of course, as with many policy programs, the devil will be in the details. And in the implementation.

Canada’s stubbornly high emissions levels — the latest figures show them trending up, not down — make it difficult to imagine how the country will meet its existing 2030 targets, much less exceed them. The real worlds of politics, energy, community support and technology deployment can all challenge the best laid plans.

So can economic and fiscal realities. Ottawa’s deficit has ballooned with the pandemic, and the federal debt to GDP ratio has climbed rapidly along with it. Will the government have the fiscal fire power to support Canadians through an increasingly lengthy health crisis while ensuring it can pay down the resulting debt?

Crucially, what role does it see for the oil and gas sector in the country’s fiscal and economic future? The budget includes some $320 million for research development and deployment of carbon capture, utilization and sequestration over the next seven years. This seems like a drop in the bucket for a technology that will be pivotal to fostering carbon competitiveness and emissions reductions, not only for oil and gas production and exports, but also for new energy sources like hydrogen and hard to abate sectors like cement, steel and chemicals manufacturing.

What other emissions reductions funding opportunities for oil and gas will be available through the Net Zero Accelerator or clean technology project funding? Interestingly, the budget proposes to exclude certain fossil-fuelled electrical generation equipment from eligibility for tax incentives for clean energy generation. Will the government likewise narrow eligibility for emissions reductions funding programs to exclude the production or use of oil and gas?

These questions and more will emerge in the days and months to come. For now, it is clear the Trudeau government has put in place the key planks of its climate policy — even in the middle of a global pandemic. The budget is the last big piece of the plan.

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