News | Canada should build a greener economy

As published in the Hill Times.

Increasing support for green R&D is one of the most important investments Canadian governments, and businesses for that matter, can make in what has to be a “green-driven” economy of the future.

The long term costs to government of unmitigated climate change will be significantly larger than the costs of proactive investments now. Think, for instance, of the increased funding our armed forces will need to patrol an ice-free arctic or manage the threats from resource scarcity and environmental refugees; the cost to our health care system from a more volatile climate and increased pollution; support for farm regions devastated by drought; and the price of new infrastructure as our communities are forced to adapt in radically different climates. A fiscally responsible government would be making thoughtful and significant green investments now.

           
Green investment is also an engine of job creation. In Ontario alone, an estimated 50,000 jobs will be created from the province’s Green Energy Act. In 2008, HSBC estimated that the global ‘climate change sector’ had sales of $530 billion, and by 2020, it could top $2 trillion. Canada has shed over half a million jobs in the manufacturing sector over the course of this recession. A more significant part of the stimulus package could be directed at green technologies that would not only see direct investment now to stimulate the economy, but also create long-term green jobs that would feed into the international green economy.

Despite the pre-Copenhagen debate in the US, Americans will have an aggressive climate change policy. Whether we like it or not, Canada will need to integrate our climate change policy with that of the US.  They will have a cap and trade system or, if they cannot get that legislation, a regulatory regime from the Environmental Protection Agency (EPA). Either way we run the risk that our exports may face barriers if they don’t meet US emission standards, nor will we prepared to gain from green economic opportunities in the US.

Much of the US thinking on climate change and reducing emissions revolves around developing technology. Moderate Republicans, in fact, admit climate change is a problem but resist cap and trade by saying the answer lies in technology. The Americans are counting on a broad range of alternative energy initiatives like, wind, solar, tidal, biogas, and run-of-the river. They see carbon capture and storage as essential to success and they will build nuclear capacity. They are contemplating energy efficiency standards in construction and they have established low carbon fuel standards already.

For those who say there is no point in taking action until the Chinese do, the Chinese are changing their tune on climate change. They have an immense air pollution problem; they want international credibility, and they can see the manufacturing opportunities for their economy in new green technologies.          

It is very likely that the US will end up with a cap and trade system. Cap and trade creates a market price for carbon which drives emitters to find the least expensive green technologies in order to meet their cap. An offset and tradable allocations regime, the ‘trade’ part of cap and trade, will enable these markets to find their level. However the system is structured, it will create huge demand from emitters for ways to meet their caps and huge initiative to develop technologies to allow them to do it. Lots of jobs will be created and economies will increasingly be driven by green investment and manufacturing.

What do we need to do to facilitate Canada’s shift to a green-driven economy?

Clearly, a mechanism for pricing carbon is essential. The Conservative government has said that it will set up a cap and trade regime. Since the Americans are pushing for cap and trade, it would be very difficult for us to adopt a different system. While the Waxman-Markey and Boxer-Kerry bills are running into some resistance, the specter of proceeding with EPA regulation if other legislation fails has the most anti-climate change legislators in the US warming up to cap and trade. We need to be considering right now how we complement this cap and trade system so we can be ready.

The federal government should enhance its support carbon capture and storage (CCS) development.  There is real interest in the US, and probably in China, for cooperating on this technology. China has over 500 coal-fired electric plants and US coal-fired electric plants produce 50 times more GHG emissions than the oil sands. Imagine the breakthrough in emissions reductions we could achieve if we get a breakthrough CCS technology. And, it is more likely that we will do that faster, and less expensively, if we cooperate.

The federal government should continue with and enhance programs that support the development of alternative energies. The technology exists for Canada to generate much more than its current 1% of electricity from wind energy. We need, however, policy support to further develop transmission infrastructure and create an attractive investment climate for wind. The ecoEnergy program for renewable power, which established a one cent per kw/h production incentive, was a good start on mainstreaming wind power. The program however, has already entirely committed its funds, and the government, despite overwhelming demand, is not scheduled to renew it. Because the US production incentive is a full cent higher than what the exhausted Canadian program offers, we are losing out on jobs and investments to the US.

The level of Canadian policy support for green tech impacts our ability to attract new jobs and remain competitive in the global economy. There is a profound economic argument here.  Our neighbors and trading partners are investing in green technology in a much more significant way than Canada and we need to do the same or fall behind. As we speed toward the Copenhagen round of climate change talks, Canada needs to make some decisive commitments. If we continue with our half-hearted action on climate change and green tech we miss huge economic opportunity to create a leading 21^st century economy.