Proposing a "Roadmap to the Canada We Want" The Task Force for a Resilient
Recovery has been publishing a series of "Corporate Knights" articles
and holding online roundtables to explore "how to make the coming
economic recovery one that leapfrogs us forward in the quest for a
calmer, cooler climate and peace with nature." "Building
Back Better: A roadmap to the Canada we want," is an article by Ralph
Torrie, Céline Bak and Toby Heaps, published on June 3,
2020. It
provides the following scarily incoherent spin: By 2030, Canada
could create more than five million quality job-years of employment by
greening the power grid, electrifying transport and upgrading our homes
and workplaces to be more comfortable and flood resilient. This
wouldn't just be good for jobs -- it's a pocketbook issue that would
save Canadians a lot of money: $39 billion per year at the pumps and on
heating and power bills by 2030 (in today's dollars).
Note:
Investment is Millions of $ total to 2030, and Person-years of
employment is total to 2030. We could also help to protect
more than a million jobs that are at risk by: - offering rebates for low-carbon
cement, steel and mass timber, - supporting farmers to adopt
practices and technologies for restoring the soil while paying them
fairly for the ecosystem services they provide, - paying young people to plant an
extra 800 million trees per year and supporting Indigenous communities
to be forest guardians, and -
providing seed investment with a Natural Resources and EV Innovation
Fund (which could be administered by existing institutions) to catalyze
Canadian champions in fast-growing industries of the future where we
have competitive advantages (lightweight bitumen-based carbon fibres,
renewable jet fuels, green hydrogen, batteries and electric vehicles).
In the wake of the COVID
crisis, in which more than three million Canadians have lost their
jobs, this is all within reach if we choose to build back better by
making these job-rich themes a priority in the federal government's
stimulus and recovery packages. Making this happen would require
a federal investment of $10 billion per year (0.4% of GDP) on average
over the next decade. Forty percent of this total would be front-loaded
in the first two years as part of the stimulus/recovery package, with
strings attached to ensure essential complementary policies in other
jurisdictions, including net-zero building codes for new and existing
buildings by 2022, fair power-grid access for storage and renewables,
and an electric vehicle mandate for Canada. To keep the momentum going,
additional non-grant federal financial support would be offered,
including in the form of low-cost loans and guarantees. Underpinning all of this would be
investment in skills training so that Canadians learn while they are
working in these new jobs. We have done this before. When teachers were
urgently needed for the new public education system early in the 20th
century, they were given intensive training for one year followed by
years of in-service training during their early careers. These teachers
were a vital part of Canada's nation building as we recovered from the
ravages of war and a pandemic. Over a decade, the federal investment in the
programs we have proposed would total $106 billion, crowding in an
additional $681 billion in private and other sector investment,
creating 6.7 million [job-]years of employment -- more than twice the
jobs that have been lost due to COVID-19. These
investments would reduce greenhouse gas emissions by an estimated 237
million tonnes from 2018 levels. That would meet our Paris Climate
Agreement commitments and put us on a path to a carbon-free economy
within a generation. These
investments are of the same order of magnitude as those being made in
Canada today. Case in point: the deep retrofits to homes required to
make them more comfortable, cheaper to heat and cool, and better
prepared to withstand floods and extreme weather works out to about $20
billion per year. That's just one-third the $60 billion Canadians spend
on home renovations each year. Similarly, the investments to
decarbonize Canada's transmission grid are on par with
business-as-usual investments happening today. Support for a
green recovery is mounting. Some
of the world's leading economists recently completed an analysis of
possible COVID-19 economic recovery packages. They concluded that green
projects create more jobs, deliver higher short-term economic returns
per dollar spent and lead to increased long-term cost savings, compared
to traditional fiscal stimulus. This finding is also supported by
McKinsey's research, which found a low-carbon recovery could not only
initiate the significant emissions reductions needed to halt climate
change but also create more jobs and economic growth than a high-carbon
recovery would. Our proposals are very much in line with this research.
Canadians
want to do this. In
an Ipsos global poll, 61 per cent of Canadians said they agree or tend
to agree that "in the economic recovery after COVID-19, it's important
that government actions prioritize climate change." And that was
without being given information about the jobs-rich nature of a green
recovery. Other
countries are reaching the same conclusions we have: - On May 27, the European
Commission proposed a €750 billion ($1.137 trillion) recovery
fund to steer the continent toward carbon neutrality by 2050, with a
quarter of the plan earmarked for climate action. - On May 26, France announced an
€8 billion ($12 billion) plan to accelerate the transition to
electric cars, which will include increasing the amount buyers can
receive as a state incentive toward the purchase of an electric car.
- German Chancellor Angela
Merkel has indicated that her government aims to implement a stimulus
package that "helps the economy's move toward climate neutrality,"
saying "it will be all the more important that if we set up economic
stimulus programs, we must always keep a close eye on climate
protection." -
Denmark has allocated 30 billion kroner ($6 billion) for green building
renovations, estimated to help upgrade 72,000 homes. How to pay for
it? The federal
investment component of this could be financed via green bonds, but we
don't need to take on additional debt to do this. We can find the money
for the public investments needed to seize this opportunity by making
minor and long-overdue changes to Canada's tax code. According to Finance Canada,
there are more than 170 corporate tax giveaways that add up to more
than $156 billion per year. While some have public benefit (such as
small business supports, charitable deductions for corporations,
R&D tax credits and regional assistance funds), there are at
least five naked examples of corporate welfare that sap more than $40
billion dollars from the public purse every single year with little to
show for it -- and that's not even counting the billions of dollars
siphoned off each year via elaborate corporate tax-avoidance schemes.
In addition, the Canada
Revenue Agency estimates that tax avoidance by roughly 15,000 large
corporations is costing Canada $6.7 to $7.9 billion per year, but
that's a low-ball estimate. A six-month investigative analysis by the Toronto Star,
Corporate Knights and Paul Rhodes, an International Financial Reporting
Standards (IFRS) expert, found that the 100 largest companies in Canada
avoided $62.9 billion in taxes over a six-year period, for an average
of $10.5 billion per year. That's
the same amount of public investment that's needed to catalyze the
Building Back Better program to crowd in $730 billion in private
investment, create 6.7 million years of employment and deliver $39
billion annually in savings to Canadians, all the while putting us well
on the path to net-zero emissions by 2050. Why don't we plug those holes and
invest a fraction of the money on a temporary basis to build back
better and catalyze the industries of the future that preserve rather
than plunder our planet, while creating 6.3 million quality jobs?
If timing and political
constraints don't allow for the tax reform measures, with its AAA
sovereign bond rating Canada could issue a green bond with proceeds
ring-fenced for green recovery purposes and regular reporting on the
use of proceeds. It would send a signal to global investors that Canada
is serious about reaching net-zero emissions by 2050 and halving its
emissions by 2030. The
institutions that will enable the investments in the Building Back
Better program are ready and capable of doing this today. After the
Second World War, the CMHC (then known as the Central Mortgage and
Housing Corporation), in partnership with Canadian chartered banks, led
the way in helping to house Canadians. Now the CMHC can lead in
transforming Canadian homes and workplaces into more valuable,
functional and comfortable buildings that have been deeply retrofitted.
Similarly, the Canada
Infrastructure Bank is ready to invest in transmission infrastructure
that will underpin a $100 billion investment in Canada's sun and wind
belt in Alberta and Saskatchewan that would put Canada at the forefront
of 21st century grid technology. Canada also has strong
institutions for energy innovation and economic diversification. Over
the past century, Natural Resources Canada has successfully funded
energy research, development and demonstration, as has Innovation,
Science and Economic Development Canada in economic diversification.
And Export Development Canada has the mechanisms in place to assure
multi-year commitments, including through loan programs to corporations
of all sizes (and a new program of guaranteed loans to support oil and
gas companies that could be extended to the green industries of the
future). The Invest in Canada program, set up to support economic
prosperity and stimulate innovation in Canada, can also play a role in
attracting investment in the fast-growing industries of the future that
play to Canada's natural advantages. And there are many capable
provincial agencies with strong technical capacity that can act as
vehicles to carry out the R&D and pilots we have proposed,
including Alberta Innovates, Emissions Reduction Alberta and the
Saskatchewan Research Council, to name a few. We should point out, though, that
not everyone thinks public investment and involvement to spark a green
recovery is a good idea. Chris
Ragan, chair of the Ecofiscal Commission, recently warned that
"engineering a 'green recovery' is a terrible idea." He suggested that
it's better to just raise the carbon price two- or threefold and let
the magic of the invisible hand do its work. While a carbon tax is part of the
policy toolkit, it won't be sufficient to propel a green recovery at
the speed needed. Raising the carbon tax from a dime per litre of gas
to 25 cents a litre certainly doesn't hurt the economics for getting an
electric car (EV), but it's unlikely to be a material inducement, given
that EVs already save the average driver more than $1,000 per year on
the differential between what it costs to fill up at the pump versus by
the plug. A hiked carbon tax would make this a little sweeter, but just
by a few hundred dollars. Raising
the carbon tax won't address the real barriers to EV adoption, which
include a lack of charging infrastructure, the need for a national Zero
Emissions Vehicle (ZEV) mandate that requires automakers to supply more
EVs (a six-month wait is standard for many EV models) and quirks in the
auto-leasing market, which discriminate against new EV models by making
maximum depreciation assumptions -- even though EVs have proven to hold
their value just as well as their internal combustion counterparts.
We know that public
investment kick-starts markets. In the case of deep retrofits and to
get homes off fossil fuel heating, public investment would catalyze a
new deep-retrofit renovation industry. Today, it costs more than
$40,000 to retrofit a home and make it flood resilient. Research shows
that when retrofits are delivered at scale, where work is coordinated
over multiple homes in a neighbourhood, these costs can be reduced by
half. Once that happens, retrofits become affordable for homeowners.
Markets can then take over and public funds are no longer needed.
Information is key to
kick-starting all this. That's why we suggest that first grants and
then retrofit mortgage insurance for deep retrofits be delivered by the
CMHC in conjunction with chartered banks -- so that information
promoting retrofits can be integrated into national conversations about
the value of Canadian homes. As awareness grows around Canada's
progress toward achieving net-zero emissions by 2050, home buyers will
place more value on net-zero homes. Local utilities can be pressed into
service to deliver these programs too. The lion's share of work to fire
up the low-carbon, high-productivity economy comes down to smart
regulation (ZEV mandates, building codes and procurement pull
policies), along with industrial policy (of the sort that unlocked
billions of dollars in the oil sands). The Business Council of Canada
recently issued a statement saying that "for Canada's recovery plan to
succeed, policy makers will need a growth mindset, a singular focus on
economic fundamentals and evidence-based approaches to stimulating
economic activity." We
would tend to agree. But let us not lose sight of the most fundamental
of the "economic fundamentals:" our economy exists entirely within and
is completely dependent on the natural ecosystems in which it is
embedded. As go the ecosystems, so goes the economy. Thanks to innovations that have
made low-carbon options the better buy in most cases, the market jury
has already issued its verdict: those who have the low-carbon solutions
will have the high-performance economies. The question is this: do we want
to be buyers or suppliers for the green economy goods and services that
will drive the wealth of nations this century? If we want to be suppliers, now
is the time to pony up.
It ends with this cautionary note: "[I]t
is unlikely there will be a green recovery unless there is a big-tent
coalition that is bold and creative enough to dislodge the forces of
inertia. The best chance we have for the green economy to prevail is by
marrying the green economy movement with social justice movements,
which on a practical level means Building Back Better with vastly
enhanced supports for eldercare, childcare and living wages,
and ... by supporting thriving Indigenous communities."
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