On the world stage at Davos 2024, Canada’s minister of finance, Chrystia Freeland, declared that “right now we’re living through a moment which is comparable only to the Industrial Revolution.” She was referring to the green transition, and the opportunities and challenges that lay before us as world leaders race to decarbonize their economies.
In a pitch to convince foreign investors to put their money in Canadian industries, Freeland said the federal government has “a suite of policies for the industrial transformation” worth around $120 billion. She pointed to federal climate initiatives such as the $15-billion Canada Growth Fund and more than $80 billion being rolled out in clean investment tax credits.
But there’s a major caveat to all of this: no one is tracking actual investments in the green technologies and infrastructure we need.
At least no one was tracking them until now.
Analysis from a new report from Corporate Knights’ Climate Dollars initiative shows that the federal government is at least $14 billion behind on rolling out the climate funding it had committed to spending by now. And since 2015, there has been a 30% shortfall between what the government has committed to spending on climate and what it has actually invested. It’s critical to close this climate-investment gap in order to close the emission-reduction gap.
By properly tallying up climate investments, starting with the federal government and large corporations, Climate Dollars aims to establish an accurate baseline of where we are at now versus what is required to ensure that Canada meets its 2030 emission-reduction commitments.
Climate spending: funding shortfall FY2015/16–2023/24
“With this report, Corporate Knights has given us a valuable and readable scorecard that highlights federal government initiatives to address climate change across departments and policy instruments. What was promised? What has been delivered?” writes Kevin Page, the president of the Institute of Fiscal Studies and Democracy and former parliamentary budget officer, in the inaugural Climate Dollars report, Committed and Actual Federal Government Climate Spending. “We need this information to assess, debate and adjust our collective plans to reduce carbon emissions.”
Not all countries making significant climate transition investments have had this lack of public accounting on their progress. To document the impact of the Inflation Reduction Act (IRA) – the single largest investment in climate and energy in U.S. history – the White House has published an interactive map that illustrates the levels of investment in the climate transition across the country. In addition, a research team from Rhodium Group and the Massachusetts Institute of Technology has created the Clean Investment Monitor, which provides real-time tracking of all public and private investments in emission-reducing technologies in the United States.
Without this same level of public reporting and research, the knowledge gap in Canada looms large.
The Corporate Knights research team accepts this challenge. Our Climate Dollars initiative is tracking investments in climate solutions year-over-year and compares them against what needs to be spent to reach the country’s climate goals.
Our past research has shown that it will require about $126 billion per year in Canada, including public and private investment, to meet the country’s 2030 greenhouse gas emission target.
While Freeland’s $120-billion tally is a useful starting point, quantifying how much the Canadian government has already spent, going back to 2015, on climate solutions is a harder nut to crack. It requires reviewing budget documents, fiscal updates, economic statements, departmental reports and emission-reduction plans to create an inventory. The Climate Dollars inventory looks across departments, agencies, sectors and types of investments to track the climate-investment announcements, re-announcements and actual expenditures the federal government has made since 2015.
The inaugural report tells a story of the Canadian government’s efforts to both lead the economy through the green transition and position itself as a supplier to the global market. Our research shows that direct federal spending has thus far been the largest source of the government’s funding for climate solutions, followed by loans and equity investments, and then tax expenditures and refundable tax credits.
Going forward, tax expenditures and credits are set to become the largest form of public climate spending. Budget 2023 took an approach geared to compete with the IRA’s investment package and outlined five major investment tax credits: hydrogen; carbon capture, utilization and storage; clean technology; clean technology manufacturing; and clean electricity.
There are risks to climate policy initiatives that rely on the private sector, namely that public–private partnerships tend to be slow or continue to benefit the fossil fuel industry. However, as most capital expenditures in Canada are borne by the private sector, we need Canadian business leaders to rise to the challenge.
To confront the climate threat, we will require a mobilization of capital the likes of which has not been seen since the Second World War.
Tracking climate investments is key to understanding what we should be asking for, and where more funding is needed. It also bolsters accountability by measuring how much progress is made or not made, and why.
An economy in which investment is driven toward the right mix of climate solutions will help achieve an equitable transition to a net-zero economy. Climate Dollars takes the first step toward closing the “say–do” gap for climate investments in Canada, democratizing access to information on the severity of this complex issue and driving changes in policy and behaviour.
Jessica Carradine is project lead on Corporate Knights’ Climate Dollars initiative.
