The plan, put forward by the Council for Clean Capitalism, calls for the federal government to invest $50 billion per year over six years in key sectors: buildings, transportation, electricity, heavy industry, and oil and gas.

It came in the waning days of a federal election campaign in which the climate crisis has been a central issue, and in which all leading parties have pledged to take action to reduce emissions, though with vast difference in terms of policy ambition.

The Capital Plan for Clean Prosperity represents the kind of government efforts that are typically employed only in time of a major war or economic crisis, and its proponents argue that such an economy-wide intervention is precisely what is required to prepare Canada for the rapid transition to a low-carbon economy that will be essential to avert the worst impacts of climate change.

Under the council’s proposal, grants would be made available to oil and gas and heavy industry companies that could guarantee that the investments would result in a 50% reduction in either greenhouse gas emissions or energy use in the targeted operations. Similarly, developers and contractors would receive grants for zero-carbon-ready buildings, whether through new construction or retrofits, while fleet operators, including transit authorities, would receive grants to cover the incremental costs of upgrading new vehicle purchases to be zero-emissions vehicles (ZEV). Funds would also be made available to cover the full cost of interprovincial high-voltage, direct-current (HVDC) power lines.

The council argues that the increased debt incurred by Ottawa would be offset by massive job creation and higher tax revenues that would result from the increased business activity.

All told, the investment effort would reduce greenhouse gas emissions (GHGs) by 139 megatonnes annually by 2025, taking Canada 70% of the way to its Paris treaty commitment, according to modelling done by Corporate Knights, an affiliate of the Council for Clean Capitalism. Under the Paris Agreement, Canada committed to reduce emissions to 30% below 2005 levels by 2030 and is now being urged by the Intergovernmental Panel on Climate Change to be even more ambitious.

The GHG reductions would be in addition to the impact of measures adopted by federal and provincial governments over the past four years, which Environment Canada has projected would leave Canada some 78 megatonnes above its target of 513 megatonnes in 2030.

“The Capital Plan for Clean Prosperity demonstrates that transitioning to a low-carbon economy is less about ‘shutting down’ than it is about retooling, diversifying and growing,” said council coordinator Toby Heaps, who is also the publisher of Corporate Knights magazine. He added that the investment benefits are especially significant in the oil sector, “which offers the biggest carbon savings bang for buck, and where production costs per barrel will be critical to remaining competitive.” The plan estimates that an investment of $21 billion over six years would reduce GHGs by 30 megatonnes per year by 2025, saving the sector $10 billion in energy costs over the same time frame.

The members of the Council for Clean Capitalism include Teck Resources, HP Canada, Sun Life Financial Canada, BGIS (formerly Brookfield’s real estate management arm) and BASF Canada. Corporate Knights did the economic modelling for the capital plan.

Any effort to implement such a plan would run into significant challenges. It would add $300 billion to the federal debt over six years, represent a massive government intervention in the economy, and effectively subsidize the country’s oil and gas producers despite calls from clean energy advocates to eliminate fossil fuel subsidies.

However, when outlining the plan for the council, Heaps said that the urgent nature of the climate crisis justifies an unprecedented response from government.

“Stimulus of this scale would be justified by the economic benefits that accrue from a once-in-a-generation energy transition and by the need to respond to the climate emergency,” he said.

The plan would add $50 billion annually to the federal deficit for six years – roughly 2% of gross domestic product (GDP) – and drive the federal debt-to-GDP ratio up by 10 percentage points, to 44%. The Conservative government under Stephen Harper posted a deficit of $55.6 billion in the depths of the Great Recession in 2009/10, or 3.4% of GDP, but cut the shortfall in half within two years.

“Stimulus of this scale would be justified by the economic benefits that accrue from a once-in-a-generation energy transition and by the need to respond to the climate emergency.”

A recent Scotiabank report suggested that the federal government should be prepared to inject as much as $100 billion of stimulus, or 4% of GDP, into the economy if the global economy stalls as expected.

Heaps acknowledges that it would be challenging to justify a plan that essentially pays corporate Canada to make the reductions that climate crisis advocates argue companies should be doing on their own. However, such investments would pay enormous dividends by preparing the Canadian economy for a low-carbon future, boosting economic activity and jobs, and achieving dramatic reductions in GHG emissions, he said in an interview.

Canada’s response to the looming climate emergency has been a key issue in the election campaign that resulted in a Liberal minority government.

The Conservatives have campaigned against a carbon tax and have offered only modest alternatives, including a two-year subsidy for home renovations, to reduce emissions.

The Green Party occupies the other end of the spectrum from the Conservatives, with ambitious plans for retrofitting buildings, prohibiting the sale of gasoline- or diesel-powered automobiles by 2030 and stopping approvals for new oil and gas projects and slowly decreasing existing operations.

Liberal leader Justin Trudeau has promised to exceed Canada’s 2030 emissions target, but the party has not laid out a clear path to do so. The Liberals point to existing commitments that include major multiyear spending for green infrastructure such as public transit while offering, for example, a new policy of home energy retrofit loans to be financed by the Canada Mortgage and Housing Corporation.

The New Democrats – who may hold a balance of power in a minority government after the election – and the Green Party have both campaigned on a pledge to end subsidies and tax breaks for the oil and gas sector. The plan by the Council for Clean Capitalism would, in contrast, provide the industry – and the oil sands sector in particular – with annual multibillion-dollar subsidies over the next six years.

The Council for Clean Capitalism plan would allocate $21 billion to oil and gas companies to invest in technology that reduces their emissions. Heaps said that the oil industry offers the biggest GHG reductions per dollar invested of any sector and must be part of the solution if Canada is to have a shot at meeting its 2030 emission reduction goals.

The industry, which accounted for 27% of Canada’s emissions in 2017, is already spending more than $1 billion annually on efforts that reduce GHGs. However, it is typically only pursuing operational changes that improve energy efficiency and yield attractive rates of return due to lower operating costs. Suncor Energy, for example, announced last month that it will invest $1.4 billion to replace two coke-fired boilers with natural-gas-fired co-generation units that will produce steam for its oil sands operations near Fort McMurray and provide 800 megawatts of power for the grid. The system will reduce GHGs from steam production at the site by 25% (or 2.5 megatonnes per year) while providing a “robust” rate of return to be a “significant contributor to the company’s goal of growing incremental free funds flow by $2 billion by 2023,” the company said.

Oil industry veteran Gord Lambert said there are significant opportunities to reduce emissions throughout the industry, from the extraction of bitumen to the refining of crude into petroleum products, but companies need to see reasonable payback before making the spending commitments. “Lots of ideas are available to the sector, but the [lengthy] time-to-payout is making investment difficult,” said Lambert, a Suncor retiree who now serves as CEO of Alberta’s energy regulator and as a board member at Alberta Innovates, a provincial agency that provides financial support for innovation.

The province helps finance technological innovation with revenues generated by a provincial carbon levy that was first put in place by a Conservative government and was increased by the New Democrats after they took power in 2015. However, environmental campaigners argue the federal government should not be subsidizing the oil industry, even if such spending reduces emissions per barrel. “We need to get off oil, not reduce upstream emissions per barrel,” Greenpeace campaigner Keith Stewart said. “Public funds should be focused on a wholesale transition off fossil fuels.”

Perhaps a less politically divisive area of focus in the capital plan is its call for investment in energy efficiency and electrification in the buildings and transport sectors, which together account for over a third of the country’s emissions.

Each of the national parties has some form of energy retrofit policy in their platform, ranging from a refundable tax credit worth up to $3,800 offered by the Conservatives to an ambitious plan to retrofit every building in the country by 2030 put forward by the Greens.

The Capital Plan for Clean Prosperity urges Ottawa to allocate $78 billion over six years to cover the incremental costs of making new buildings zero-carbon ready and to retrofit buildings in Canada. It estimates that the industry is prepared to invest $795 billion between 2020 and 2025, and the incremental 10% provided by Ottawa to cover costs of upgrades to new buildings and retrofits would be enough to bring a quarter of all commercial and residential buildings to a zero-carbon-ready standard by the end of 2025. (Zero-carbon ready suggests a property owner can reduce a building’s energy consumption to the point that any emissions from fossil fuels are offset by onsite renewable energy.)

The investment in the building sector would provide the largest boost to economic growth, the council said. The investment program would also lower costs for building owners, whether commercial developers or homeowners, and generate tax revenues for government to help offset the spending.

The targets for building retrofits (3% of total building stock per year) are consistent with the most aggressive plans seen in Europe and in U.S. states like New York and Connecticut, said Brendan Haley, policy director for Ottawa-based advocacy group Efficiency Canada.

However, there is a stubborn resistance among builders and owners to adopt the off-the-shelf technology available to dramatically reduce energy consumption in buildings. Energy efficiency technologies can require significant upfront costs that are only recouped over time. There are also barriers such as the need for management time and attention to decide what technologies to embrace, the reluctance of building operators to incorporate new systems, and the tendency of business executives to want to invest in revenue-generating assets rather than cost-saving operational changes. Those hurdles could be effectively overcome through the provision of “free money” from the federal government that would generate broad economic and environmental benefits for the country, Haley said.

The Capital Plan for Clean Prosperity represents a radical departure for a country that has long struggled to meet its climate commitments and has battled over carbon taxes and the fate of oil pipelines. It also represents an opportunity for whatever party is in power after the Oct. 21 election to demonstrate a vision on the climate crisis that goes beyond “business as usual.”

Shawn McCarthy is an independent writer and senior counsel with Sussex Strategy Group.

The post Council urges new Parliament to take on massive climate investment plan appeared first on Corporate Knights.

The world is at a turning point. Will we address the climate crisis in a timely and adequate manner and create a low-carbon economy, or will we fail to see the benefits of the transition and instead face the catastrophic impacts of global heating ill-prepared? With Canada’s energy-intensive economy, there are market opportunities in climate adaptation and mitigation. Now is the perfect time to recalibrate Canada’s economy to thrive in a low-carbon world. The prize includes stronger GDP growth, hundreds of thousands of new jobs and billions of dollars of savings. What’s missing to get us there is an aggressive clean stimulus package to turbocharge the transition, one that would require an investment of slightly under 2% of the national GDP over six years.

To illustrate the economic prospects of various sector-specific climate policies, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The Plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. In 2017, heavy industry was responsible for approximately 10% of Canada’s total emissions.^[1]

What are the federal party positions on heavy industry?

With the federal election intensifying, parties are making an effort to highlight their policies around reducing emissions while simultaneously supporting Canadian industry and Canadian jobs.

• The Conservative Party promises to fight carbon leakage^[2] by ensuring the competitiveness of Canadian industry when designing environmental policies. Emissions standards would be set for major emitters. Those that would emit more than allowed would be required to adopt emissions-reducing technology and invest in R&D by a set amount for every tonne of greenhouse gas (GHG) they emit above the limit. The party strongly opposes carbon pricing.^[3]
• The Liberals have committed to establishing a $5 billion Clean Power Fund which would support the electrification of Canadian industry, including resource and manufacturing sectors. They will also maintain carbon pricing as part of their environmental plan, albeit with some carve outs for trade-exposed heavy industries.^[4]
• The NDP plans to develop a national industrial strategy to ‘build an advanced low-carbon manufacturing economy in Canada,’ but offers no further details. The party supports carbon pricing, and will implement more stringent pricing regulations for big industry. ^[5]
• The Green Party has committed to setting a decreasing emissions cap for industry, with penalties for companies that exceed said limits. The party would also maintain a revenue-neutral carbon price. ^[6]

While clearly intent on engaging industry in decision-making, all of these commitments fall short of providing the required financial firepower to ignite energy efficiency and decarbonization investments on a scale commensurate with the challenge and opportunity of climate action. Under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program to cover the cost of improving energy efficiency and reducing emissions in the Canadian heavy industry sector.

We conducted extensive calculations based on data from sources such as Statistics Canada and Natural Resources Canada. By implementing an active clean stimulus program in the heavy industry sector, Canada could:

• raise GDP by $13 billion
• add 19,500 full-time jobs
• drive savings of $16 billion
• increase tax revenues by $4.3 billion from 2020 to 2025
• reduce the sector’s emissions from 75 megatonnes (mt) of CO₂ equivalent (CO₂e)^[7] in 2016 to 53 mt of greenhouse gases (GHG) by 2025 (equivalent to taking 4.6 million cars off the road for a year)

The policy that would bring us these numbers: A $16.8 billion clean public stimulus fund for investments that can reduce either heavy industry’s energy use or greenhouse gas (GHG) emissions by 50% by 2025.

Public investment needs

Implementing the heavy industry clean stimulus program would require public financing of $16.8 billion over the next six years (2020 to 2025, inclusive). The goal is to ‘green’ 50% of Canadian heavy industry by halving either a company’s emissions or energy usage. The choice between emissions or energy reductions would be under the company’s discretion. The companies would be provided with grants from the federal government to achieve these reductions. If the companies fail to reach these goals, the grants would need to be repaid. The grants would be financed through the creation of a federal fund, the Low-Carbon Industry Fund, which would be financed through governmental green bond issuances to raise the required $16.8 billion.

It’s imperative for heavy industry to implement and develop energy and emission-saving technologies as soon as possible. To stay on track for a global temperature increase of 1.5 to 2C, low-carbon technologies should become standard by the early 2030s. There are many off-the-shelf technologies to do this as well a number of game changers in the realm of low-carbon cement, steel and aluminum. For example, in 2018, Alcoa and Rio Tinto unveiled a technology in Quebec that they described as “the world’s first carbon-free aluminum smelting process.” The pilot is supported by various companies as well as federal and provincial governments. The technology could reduce emissions in aluminum smelters and decrease operating costs by around 15%.^[8] The Russian aluminum company Rusal is also working on its own line of carbon-free aluminum, showing that the global race is on. Another company from Quebec, Carbicrete, is developing a carbon-negative concrete alternative which sequesters carbon dioxide from the atmosphere and uses it to produce the sturdy material. In the steel industry, a partnership of Swedish firms is developing a fossil-free steelmaking technology with 20–30% lower production costs compared to traditional technology.

From 1990 to 2015, Canada’s industrial sector’s energy use increased 31%; it would have increased by 42% without energy efficiency improvements. Consequently, the sector saved $3.2 billion in energy costs in 2015.^[9] The business case for investing in technology and reducing emissions or energy use is not hard to spot.

Despite all of these exciting technological developments, it will still be several years before some of these technologies are ready for commercial use. Before zero-carbon or even carbon negative manufacturing technologies are ready to be implemented in heavy industry, cutting emissions and energy use in the short term is vital. This can be both done by incremental changes and/or developing completely new, groundbreaking technologies. Grants such as the one proposed in our Capital Plan can push the needle for both small, cumulative improvements and more impactful technological breakthroughs.

Economic and environmental benefits

Job creation: 19,500 jobs

The new jobs that would be created with the energy efficiency stimulus would amount, based on our calculations, to 19,500 new, full-time jobs. This includes direct, indirect and induced jobs.

Increase in GDP: $13 billion

The GDP increase between 2020 and 2025 could reach $13.2 billion with this stimulus project. With stronger economic growth through increased GDP, average income levels would go up and unemployment numbers would drop for mostly blue-collar workers in the construction and trades industry.

Increased tax revenues: $4 billion

the realization of these energy efficiency projects, federal and provincial Canadian governments could benefit from additional tax revenues of $4.3 billion dollars. These tax revenues could offset approximately one-third of the cost of the program.

Direct savings: $16 billion

Companies could generate savings of close to $16 billion from 2020 to 2025 (inclusive) through reduced energy costs.

Emissions: 30% reduction in heavy industry

In 2017, heavy industry was responsible for approximately 10% of Canada’s GHG emissions. The absolute amount of GHGs emitted in heavy industry has gone down by 29% after peaking in 1996–1997. It’s notable that the federal government predicts that emissions from heavy industry will increase by 19% in the next six years over 2016 levels. This underlines the necessity of a clean stimulus program for the sector as soon as possible. The recommended clean stimulus program could reduce the sector’s emissions by 22 mt CO₂e by 2025, or a nearly 30% reduction from 2016 levels. This would be the equivalent of taking 4.6 million cars off the road for a year.^[10] The recommended stimulus program would achieve approximately 12% of the emissions reductions required to fulfill Canada’s commitments to the 2015 Paris Agreement.

These numbers show that engaging and supporting heavy industry to reduce emissions and/or its energy use is mutually beneficial both for industry and Canadians. With the importance of heavy industry to the Canadian economy and the unavoidable emergence of the low-carbon economy, this mechanism would undoubtedly bring Canada further down the path to a cleaner manufacturing sector and a cleaner environment.

We are, indeed, at a turning point. How we act in the next decade will determine the climate conditions of dozens of future generations. Transitioning into a low-carbon economy is not an alternative course of action, but a necessity to ensure a stable future for Canada. Due to the fact that governments set the framework for how corporations and individuals operate in the economy, the onus on climate action largely lies with federal and provincial governments. Regardless which party is elected October 21, the Capital Plan for Clean Prosperity offers Canada the opportunity to pivot towards a low-carbon economy at this critical time. Adopting the Plan would bring economic prosperity to Canadians through new jobs, higher GDP, and savings for individuals, corporations and governments. The window of opportunity for economic, social and environmental prosperity for generations to come is still open. The question remains, will Canada’s incoming government seize it?

Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing buildings, transport, electricity, and oil and gas  on our website. You can find an overview of the plan here.

^[1] https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html

^[2] Carbon leakage refers to a situation that may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries with laxer emission constraints, leading to an increase in total emissions. (European Commission)

^[3]

^[4] https://2019.liberal.ca/wp-content/uploads/sites/292/2019/09/Forward-A-real-plan-for-the-middle-class.pdf

^[5] https://action.ndp.ca/page/-/2019/Q2/2019-06-19_Commitments-Doc_EN.pdf

^[6] https://www.greenparty.ca/sites/default/files/platform_2019_web_update_oct_6.pdf

^[7] “Carbon dioxide equivalent” or “CO2e” is a term for describing different greenhouse gases in a common unit.  For any quantity and type of greenhouse gas, CO2e signifies the amount of CO2 which would have the equivalent global warming impact.

^[8] https://corporateknights.com/voices/brenda-bouw/greening-concrete-jungle-15604200/

^[9] https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/pdf/energy-factbook-oct2-2018%20(1).pdf

^[10] https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

The post Capital Plan for Clean Prosperity: Steeling heavy industry for a low-carbon future appeared first on Corporate Knights.

The urgent need to transition into a low-carbon economy is becoming increasingly clear. Abnormally violent natural disasters are ravaging countless parts of the world and various intergovernmental reports have warned that the window is closing to avoid the worst of climate change. As fossil fuels are a central climate culprit, industries based on these energy sources are trying to find ways to adapt to a changing world where investors are increasingly wary about the industry’s future. In Canada, the stakes are high to ensure a more efficient cost structure for oil and gas extraction while kickstarting the industry’s diversification into renewable fuels and valuable materials.

Tapping into the low-carbon market is a significant opportunity for Canada to boost the national economy while simultaneously reducing greenhouse gas emissions. This could be done through an aggressive clean stimulus package that would bring Canadians hundreds of thousands of new jobs and increase national GDP substantially. The economy-wide program would require an investment of under 2% of the national GDP over six years to create the aforementioned economic and environmental benefits. 

To illustrate the economic prospects of various sector-specific climate policies, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. In 2017, the oil and gas industry was responsible for approximately 27% of Canada’s total emissions.^[1] Oil and gas and other resource-heavy industries are a significant part of the Canadian economy, and the industry drives many of the country’s economic, social and environmental conditions.

With just days to go until the federal election, parties are searching for ways to reconcile the importance of the oil and gas sector to the Canadian economy, and the jobs associated with it, with the need to eliminate all greenhouse gas emissions in the next thirty years.

What are the party stances on the oil and gas sector?

• The Conservative Party says that it is not realistic nor in the interest of Canadians to reduce the size of the oil and gas sector. Instead, the party wants to make Canadian oil and gas ‘the cleanest in the world’ to improve the attractiveness of Canada as a global supplier. The party relies on the idea that exporting cleaner Canadian oil and gas can help wean other countries off higher carbon alternatives, which in turn will contribute to increased demand for Canadian oil and gas. ^[2]
• The Liberals did not outline a clear policy for the oil and gas sector in their election platform. However, it’s clear from their Trans Mountain pipeline purchase that they’re not abandoning the industry altogether. The party has committed to introducing a Just Transition Act, which would give workers in the fossil fuel industry access to training and new opportunities to succeed in the clean economy. The party also pledges to ensure that Indigenous communities can benefit from major resource projects more than before.^[3]
• The NDP has pledged to eliminate federal oil and gas subsidies and redirect them to low-carbon projects. The party is hoping to transform the process of reviewing major energy projects to better engage Indigenous communities and ensure that the projects align with Canada’s emission reduction targets. ^[4]
• The Green Party has proposed to stop approving new pipelines and oil and gas projects. Existing oil and gas operations would continue, but in a declining manner. Bitumen production would be phased out between 2030 and 2035. The Trans Mountain pipeline would be cancelled along with federal fossil fuel subsidies, and this money would be redirected to renewable energy projects. The Greens would ensure that orphaned oil and gas wells would be examined to determine if they are suitable to produce geothermal energy. The party commits to executing a ‘just transition’ to help workers from the fossil fuel industry move into new, low-carbon industries with the help of job guarantees, retraining, and income protection. ^[5]

While some of these polices offer a departure from business-as-usual, the lack of detail and sufficient funding hinder the opportunity to ensure that Canada’s oil and gas sector can compete in a low-carbon world. None of the party platforms propose measures to make the industry more cost-efficient and less environmentally harmful, which is imperative to cutting Canada’s emissions in half in the next ten years.

Capital Plan for a Clean Economy: oil & gas

Under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program to cover the cost of improving the energy efficiency of the Canadian oil and gas industry.

We conducted extensive calculations based on data from sources such as Statistics Canada and Natural Resources Canada. These calculations demonstrate that by implementing an active clean stimulus program in the oil and gas sector over the next six years, Canada could:

• raise GDP between $21 billion and $21.5 billion
• add 16,000 to 35,000 full-time jobs
• drive savings of $10 billion
• increase tax revenues by $6.8 to $7 billion from 2020 to 2025
• reduce the sector’s emissions from 183 megatonnes (mt) of CO₂ equivalent (CO₂e)^[6] in 2016 to 153 mt of greenhouse gases (GHG) by 2025 (equivalent to taking 6.4 million cars off the road for a year)

        The range in the figures is due to the use of different multipliers from different data sources.^[7]

A single policy could bring us these numbers: Clean public stimulus to make 30% of oil and gas operations 50% more energy efficient by 2025; total cost: $21B.

Public investment needs

Executing our proposed clean stimulus program would require public financing of $21 billion over the next six years. According to research and development organization Alberta Innovates, there are numerous off-the-shelf ways to improve the energy efficiency of the oil and gas sector by as much as 40% to 80% in terms of a well-to-refinery GHG emission lifecycle analysis. These include, for example, carbon capture and utilization, electromagnetic or electric heating with renewable energy sources, pure solvent extraction, renewable energy-based recovery technologies to replace steam development in oil sands and renewable energy for transmission and transportation. These technologies don’t only reduce emissions, they also reduce costs by $5 per barrel on average. This is critical as investors shift their focus from production growth to operating margins.

The program would be executed through grants offered to industry entities to implement select technologies to improve their energy efficiency. If sufficient energy efficiency improvements were not achieved, the companies would need to repay the grants. The grants would be financed through the creation of a federal fund, the Low-Carbon Energy Fund, which would be financed through governmental green bond issuances to raise the required funds.

Economic and environmental benefits

Job creation: 16,000 to 35,000 jobs

Based on our calculations, the energy efficiency stimulus would create 16,000 to 35,000 new jobs. These jobs would be created in the oil and gas industry and more specifically in trades, construction, and engineering services.

Increase in GDP: $21 billion to $21.5 billion

The GDP increase from 2020 through 2025 could range from $21 billion to $21.5 billion with this stimulus project. With stronger economic growth through increased GDP, average income levels would go up and unemployment numbers would drop for mostly blue-collar workers in the construction and trades industry.

Increased tax revenues: $6.8 billion to $7 billion

By realizing the aforementioned energy efficiency project, the Canadian government could benefit from additional tax revenues of $6.8 to $7 billion dollars. These tax revenues could offset nearly a third of the cost of the program.

Direct savings: $10.1 billion

Companies could generate savings of $10.1 billion from 2020 to 2025 (inclusive) through reduced energy costs.

Emissions: 16% reduction in the oil and gas sector

In 2017, the oil and gas industry was responsible for approximately 27% of Canada’s GHG emissions. Emissions intensity per barrel has decreased by 28% from 2000 to 2017.^[9] However, the sector’s overall emissions have increased 84% since 1990, mostly due to the increased production of crude oil and oil sands expansion.^[10] The recommended stimulus program could reduce the sector’s emissions by 30 mt CO₂e by 2025, or a 16% reduction from 2016 levels. This would be the equivalent of taking 6.4 million cars off the road for a year.^[11] Furthermore, the federal government is predicting that total emissions from the sector will increase by 15 mt CO₂e by 2025 without the aforementioned policy action. This points to the fact that significant emissions reductions are not currently projected in the industry, which means that taking action with a clean stimulus package is imperative. The recommended stimulus package would achieve approximately 16% of the emissions reductions required to fulfill Canada’s commitments to the 2015 Paris Agreement.

These figures show that despite the contentiousness around the viability of the oil and gas sector, there are benefits to investing in energy efficiency measures in the sector. A relevant and recent example is Suncor, which announced in September 2019 that it is planning on investing $1.4 billion to replace its coke-fired boilers with two cogeneration units at its oil sands base plant. The project will deliver a “high teens” return and have a material impact on Suncor’s GHG goal; it’s both economically and environmentally beneficial.^[12] It’s also important to note that bitumen can be used in the manufacturing of low-carbon products such as carbon fibres, which is currently growing into a multibillion-dollar market.^[13] Carbon fibre can be used in electric vehicles, for example, to reduce the weight of the vehicle. These alternative uses of bitumen show that the future of the industry includes numerous new economic opportunities that lean more into a low-carbon world than the industry’s traditional operations.

Several Canadian organisations, including the Government of Canada, Clean Energy Canada, Energy Efficiency Canada, Pembina Institute and Smart Prosperity Institute, have explored the economic implications of investing in the low-carbon economy. Similarly, they found sizeable economic benefits (job creation, GDP growth, energy savings etc.) associated with a similar scale of investment across the sectors included in the Capital Plan for Clean Prosperity.

Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing buildings, transport, electricity, and heavy industry on ourwebsite. You can find an overview of the plan here.

Oil and gas energy efficiency 2020-2025

*Driven by defined de-carbonization policies.

**The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism.

^[1] https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html

^[2]

^[3] https://2019.liberal.ca/wp-content/uploads/sites/292/2019/09/Forward-A-real-plan-for-the-middle-class.pdf

^[4] https://action.ndp.ca/page/-/2019/Q2/2019-06-19_Commitments-Doc_EN.pdf

^[5] https://www.greenparty.ca/sites/default/files/platform_2019_web_update_oct_6.pdf

^[6] “Carbon dioxide equivalent” or “CO2e” is a term for describing different greenhouse gases in a common unit.  For any quantity and type of greenhouse gas, CO2e signifies the amount of CO2 which would have the equivalent global warming impact.

^[7] These calculations are based on best available models and are meant to be suggestive. The differences between multipliers depend on, for example, the state of the economy, the location of the manufacturing (in Canada or in a foreign country), interaction with demand for other sectors and exchange rates.

^[9] https://www.nrcan.gc.ca/energy-and-greenhouse-gas-emissions-ghgs/20063#L2

^[10] https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html

^[11] https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

^[12] https://www.suncor.com/en-CA/newsroom/news-releases/1913104

^[13] https://www.marketsandmarkets.com/PressReleases/carbon-fiber.asp

https://www.canada.ca/en/environment-climate-change/services/climate-change/low-carbon-economy-fund.html

The post Capital Plan for Clean Prosperity: Pumping energy efficiency into oil and gas appeared first on Corporate Knights.

With files from Toby Heaps and Aleena Naseem.

Transitioning to a low-carbon economy is no longer solely an environmental necessity, it’s a substantial but largely untapped economic opportunity. The Global Commission on the Economy and Climate estimates that low-carbon growth fuelled by climate action could present economic opportunities of at least $26 trillion through 2030.^[1] There’s no reason for Canada not to aggressively tap into this market to deliver emissions reductions, strengthen national and provincial economies and meet our international climate commitments under the Paris Agreement. An aggressive clean stimulus program could bring Canadians hundreds of thousands of new jobs and increase the national GDP by several hundred billion dollars. The entire program would require investing approximately 2% of GDP over the next six years into decarbonization projects that would bring the aforementioned economic benefits.

To illustrate the economic prospects of various sector-specific climate policies, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The Plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. Based on our calculations, greening the electricity sector could generate as many as 400,000 new full-time jobs and increase cumulative GDP by up to $264 billion from 2020 to 2025 (inclusive). In 2017, the electricity sector was responsible for approximately 10% of Canada’s total emissions.^[2] The figure is higher in other countries such as the United States, where it produces 28% of all emissions.^[3] However, there are still significant prospects in Canada to reduce the sector’s emissions, the majority of which come from burning coal or gas.

What are the federal party stances on greening Canada’s electricity sector?

With the federal election just around the corner, political parties are presenting plans on how to green Canada’s electricity sector.

• The Conservatives want to connect communities that rely on diesel generators to clean power with the help of smart grid implementation, among other measures. They plan to support the strategic interconnection of electricity grids to create a national power corridor to improve access to clear energy sources. ^[4]
• The Liberal party has committed to creating a $5 billion Clean Power Fund which would support the electrification of Canadian industry including the resource and manufacturing sectors. The fund would also support transitioning all First Nations and Inuit communities from diesel to renewable energy by 2030. The revenue from the Trans Mountain Pipeline expansion (approx. $500 million annually) will go to natural climate solutions and clean energy projects.
• The NDP would set a goal for Canada to run on net carbon-free energy by 2030 and move completely to zero-emission energy by 2050. This would be funded by establishing a Canadian Climate Bank, which would boost investment in low-carbon technologies across the country and provide support for provinces for the construction of inter-connected smart power grids to distribute clean power across the country. Community-owned renewable energy projects would also receive federal support, as would weaning First Nations communities off diesel generators. The NDP has also committed to eliminating federal fossil fuel subsidies completely.^[5]
• The Green party has proposed that no new coal, oil, gas or mining projects be approved. All fossil fuel subsidies would be redirected to the Canadian Grid Strategy and renewable energy projects. The Strategy would involve building and upgrading connections between provinces, financed by cancelling the Trans Mountain pipeline. The party promises that Canada would run completely on renewable energy by 2030, including Indigenous and Northern communities. ^[6]

While ambitious, these commitments nevertheless are not backed by sufficient financial firepower to satisfy the large investment requirements of laying down the requisite interprovincial power lines to knit Canada’s renewable electricity generation with the demand centres where it is consumed.

Our Capital Plan for Clean Prosperity on greening electricity

Instead, under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program to significantly  expand the network of interprovincial high-voltage direct current (HVDC) power lines that would significantly  reduce the cost of decarbonizing the Canadian electricity supply and would bring Canada to the forefront of global smart grid and network markets.

We conducted extensive calculations based on data from sources such as Natural Resources Canada, Statistics Canada, Clean Energy Canada, and the Political Economy Research Institute at the University of Massachusetts Amherst . These calculations demonstrate that by implementing an active clean stimulus program in the electricity sector, between 2020 and 2025 Canada could:

• raise GDP between $145 billion and $264 billion
• add 122,000 to 395,500 full-time jobs
• increase tax revenues by $47 billion to $86 billion
• and reduce the sector’s emissions from 78 megatonnes (mt) of carbon dioxide equivalent (CO₂e)^[7] in 2016 to 30 mt of CO₂e in 2025 (equivalent to taking 10 million cars off the road for a year).^[8]

       The range in the figures is due to the use of different multipliers from different data sources. ^[9]

What policies that would bring us these numbers? Only two would be needed:

• Moving coal phase-out to 2025 from the current timeline of 2030.
• Public clean stimulus to finance interprovincial HVDC power lines; total cost: $131.8 billion.

Public investment needs

Implementing the aforementioned project would require public financing of $131.8 billion over the next six years. The logic behind the decarbonizing effect of interprovincial power lines is the fact that provinces have different electricity generation profiles. While many provinces such as British Columbia, Quebec and Manitoba rely heavily on hydropower, fossil fuels still power provinces such as Nova Scotia, Alberta and Saskatchewan. Geographically speaking, each fossil fuel powered province is adjacent to a hydropower powered province. This is a significant opportunity to transmit clean electricity to fossil fuel-reliant provinces. As wind power generation takes off in provinces such as Alberta, an interprovincial grid system also offers more attractive market prices to sell excess wind power at non-peak times to be stored through pump hydro with their neighbours.

However, the current infrastructure is limited. Modelling done by Natural Resources Canada has come to the conclusion that there is value in building new interprovincial transmission lines in terms of emissions reductions and cost savings. The Canadian Academy of Engineers has expressed that the main obstacle for the implementation of a project like this is not technological, but instead the lack of political will to commit to such a comprehensive project and the challenge of finding a way to build a successful financial framework that benefits all stakeholders. ^[10]

The financing of the interprovincial grids would be executed by establishing a federal fund, which could be called the Zero-Carbon Electricity Fund, which would be financed by government-issued green bonds to raise the required $131.8 billion.

Economic and environmental benefits

Job creation: 122,000 to 395,500 jobs

The jobs that would be created with the expansion of the power lines would be new, full-time jobs. Based on our calculations, 122,000 to 395,500 new jobs would be created under these policies. Jobs would be created both in the construction and trades industry and in engineering services.

Increase in GDP: $145 billion to $264 billion

The GDP increase between 2020 and 2025 could range from $145 billion to $264 billion. With stronger economic growth through increased GDP, average income levels would go up and unemployment numbers would drop for mostly blue-collar workers in the construction and trades industry.

Increased tax revenues: $47 billion to $86 billion

By implementing the infrastructure project mentioned above, Canadian governments could benefit from additional tax revenues of $47 to $86 billion dollars. These tax revenues could offset nearly half of the cost of the program.

Direct savings: $25.2 billion

According to an analysis by Natural Resources Canada, new interprovincial transmission lines would reduce the cost of decarbonizing Canada’s electricity system by $4.2 billion per year, amounting to $25.2 billion dollars over six years.^[11]

Emissions: 61% reduction in the electricity sector

In 2017, electricity generation was responsible for approximately 10% of Canada’s GHG emissions. The aforementioned clean stimulus could reduce the sector’s annual emissions by 48 mt CO₂e by 2025, or a 61% reduction from 2016 levels (78 mt). This would be the equivalent of taking 10 million cars off the road.^[12] This clean stimulus would achieve a notable 16% of the emissions reductions required from Canada to fulfill Canada’s 2015 Paris Agreement commitments.^[13]

These figures show that implementing the policy of extending and expanding interprovincial grids to deliver clean energy across the country could lead Canada forward on its path to a low-carbon economy with both economic and environmental benefits for Canadians.

Several Canadian organisations, including the Government of Canada, Clean Energy Canada, Energy Efficiency Canada, Pembina Institute and Smart Prosperity Institute, have explored the economic implications of investing in the low-carbon economy. Similarly, they found sizeable economic benefits (job creation, GDP growth, energy savings etc.) associated with a similar scale of investment across the sectors included in the Capital Plan for Clean Prosperity

Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing buildings, transport, oil and gas , and heavy industry on our website. You can find an overview of the plan here.

Clean electricity 2020–2025

*Driven by defined decarbonization policies.

**The GDP estimate’s wide range results from the application of multipliers with varying degrees of conservatism.

^[1]

^[2] https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas-emissions.html

^[3] https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions

^[4]

^[5] https://action.ndp.ca/page/-/2019/Q2/2019-06-19_Commitments-Doc_EN.pdf

^[6] https://www.greenparty.ca/sites/default/files/platform_2019_web_update_oct_6.pdf

^[7] Carbon dioxide equivalent or CO2e is a term for describing different greenhouse gases in a common unit. For any quantity and type of greenhouse gas, CO2e signifies the amount of CO2 that would have the equivalent global warming impact.

^[8] https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

^[9] These calculations are based on best available models and are meant to be suggestive. The differences between multipliers depend on, for example, the state of the economy, the location of the manufacturing (in Canada or in a foreign country), interaction with demand for other sectors and exchange rates.

^[10] https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/energy-resources/The_Cost_of_Decarbonizing_the_Canadian_Electricity_System_Manuscript_with_images_Sept_25_2017.pdf

^[11] https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/energy-resources/The_Cost_of_Decarbonizing_the_Canadian_Electricity_System_Manuscript_with_images_Sept_25_2017.pdf

^[12] https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

^[13] https://www.pbo-dpb.gc.ca/en/blog/news/closing-gap-carbon-pricing-paris-target

https://www.peri.umass.edu/

The post Capital Plan for Clean Prosperity: Green electricity stimulus would spark jobs, GDP appeared first on Corporate Knights.

 With files from Aleena Naseem and Toby Heaps

The urgency of transitioning to a low-carbon economy is becoming clearer by the day with the best science calling for increasingly drastic emissions reductions to help head off catastrophic climate change impacts. While a daunting task, the economic, social and environmental opportunities of transitioning into a low-carbon economy are significant.

An aggressive clean stimulus program to implement decarbonizing technologies at scale could bring Canadians substantial economic benefits, including GDP growth and hundreds of thousands of new jobs. The entire program would require investing a little less than 2% of GDP over the next six years. It would also enable Canada to emerge as a serious actor in the growing low-carbon technology market.

To demonstrate the economic prospects of various sector-specific targeted clean stimulus measures, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. Based on our calculations, “greening” the transportation sector could generate up to 257,000 new jobs and increase cumulative GDP by up to $56 billion from 2020 to 2025 (inclusive). In this analysis, transportation includes personal transit, public transit and freight. The transportation sector produces approximately 23% of Canada’s greenhouse gas emissions. Investing in reducing the sector’s emissions can make a significant environmental impact and help move more freely and safe lot of money at the pumps.[1]

With the federal election rapidly approaching, parties are introducing various pathways to reduce emissions from the transportation sector:

• The Conservatives are proposing to introduce a Green Patent Credit that would encourage the industry to develop, for example, more efficient electric vehicle (EV) batteries. The party also suggests regulatory changes for freight vehicles passing over the Canadian border to improve efficiencies.[2]
• The Liberal Party has committed to investing $51 million to expand their current zero-emission vehicles (ZEV) rebate to include used ZEVs.[3] They have also proposed earmarking $700 million to electrify transit and transportation and installing 5,000 EV charging stations. The party would require that new federal investment in public transit be used to support zero-emission buses and rail systems. The Liberals also promise an additional $3 billion per year in funding for urban transit in addition to enhancing Canada-wide transit networks.[4]
• The NDP calls for a large portion of federal transportation funds to be directed towards low-carbon transit projects. The party’s goal is to electrify all transit and municipal fleets by 2030 and have all new car sales be ZEVs by 2040. The federal ZEV incentive would be expanded, and the sales tax for ZEVs would be waived. EV charging networks would be expanded. The party also wants to start building a path to fare-free transit and expand rail and bus services into rural regions.[5]
• The Green Party would ban the sale of internal combustion engine vehicles by 2030, and ZEVs would become exempt from the federal sales tax. The party aims for all public transit to be zero-carbon across Canada by 2040. Public transportation connections would be extended into rural and remote communities. The EV-charging infrastructure would be expanded. A Green Freight Transport program would fund rerouting tracks for freight and rail yards away from populated areas.[6]

While commendable, these policies lack ambition, detail or firepower.

We conducted extensive calculations based on data from sources such as Statistics Canada, the International Council on Clean Transportation and the Insurance Bureau of Canada. These calculations point to a higher level of ambition, one that could be realized with a mix of policy, charging infrastructure and, most critically, a large chunk of change ($40 billion over six years) paid out from the public purse. Our calculations project that a clean stimulus of this scale could produce the following benefits:

• raise GDP between $47 and $87 billion,
• add 82,000 to 257,000 full-time jobs,
• increase tax revenues by $15 to $28 billion,
• drive direct monetary savings of $64 billion from 2020 through 2025,
• and reduce emissions from 168 megatonnes (mt) CO₂ equivalent (CO₂ e) in 2016 to 146 mt of greenhouse gases (GHGs) by 2025 (equivalent to taking 4.6 million cars off the road for a year).

The range in the figures is due to the use of different multipliers from different data sources.[7]

The policies that would bring us these numbers are the following[8]:

• Implementing a Quebec-style zero-emissions vehicle sales quota, rising to 15.5% by 2025 for passenger vehicles; total cost: $4.6B
• Closing the public transit funding gap; total cost: $22.5B
• Ensuring that all new public transit buses are ZEV starting in 2020; total cost: $2.5B
• Developing a nation-wide EV-charging infrastructure; total cost: $0.5B
• Establishing a federal grant system to allow for 50% of new freight trucks to be ZEV; total cost: $14.4B

Public investment needs

Implementing the aforementioned policies would require public financing of close to $40 billion over the next six years, of which $25.5 billion would be invested in public transit and $14.4 billion to cover the incremental costs of making half of new freight trucks zero emission. The first policy, ZEV quotas, mimics the policy in Quebec, which mandates that ZEVs need to be a certain percentage of all new vehicle sales. In our calculations, we scaled Quebec’s target (15.5% of all vehicle sales to be ZEVs by 2025) to be Canada-wide. The second policy, closing the public transit funding gap, would mean a total investment of $22.5 billion dollars over six years to improve public transit networks across Canada. The third policy would ensure that all new public-transportation bus investments are zero-emission, the incremental cost of which would total $2.5 billion. The fourth policy is to develop a sophisticated and extensive EV-charging infrastructure with a total investment cost of $500 million. This is an important way to increase EV adoption by limiting, for example, range anxiety. The fifth policy would be to establish a federal grant system to enable freight truck fleet operators to cover the incremental cost of making new vehicle purchases zero-emission.

The financing of these policies (excluding passenger vehicles) would be executed by establishing a federal fund, the Zero-Carbon Vehicle Fund. The fund would be financed by federal green bond issuances to raise the required $40 billion.

Economic and environmental benefits

Job creation: 82,000 to 257,000 jobs

The jobs created with these policies would be new, full-time jobs. Based on our calculations, 11,600 to 16,100 new jobs would be created in the personal transport sector, 46,100 to 191,000 new jobs in the public transit sector, and 24,800 to 50,000 new jobs in the freight industry, in sectors such as manufacturing, travel and tourism, and professional services.[9]

Increase in GDP: $47 to $87 billion

If the suggested policies were implemented, the GDP increase from 2020 through 2025 could range from $4.9 to $12 billion in personal transport, from $27.1 to $38.2 billion in public transportation and $15.3 billion to $37.3 in the freight industry. For the average Canadian, an increase in GDP could mean higher average income levels and lower unemployment numbers nationwide, including in well-paying blue collar factory and public transit jobs

Fuel and maintenance cost savings: $64 billion

Lower fuel costs and lower lifetime maintenance costs for EVs could save car owners $9 billion in total from 2020 through 2025. The public transport sector would save $1.3 billion also in fuel and maintenance costs, opening up the possibility to redirect these funds to finance a more extensive and reliable transportation network. The freight industry would save $53.8 billion in fuel and maintenance costs.

Increased tax revenues: $15 to $28 billion

By implementing the policies mentioned above, Canadian governments could receive $15.4 to $28.4 billion more revenue in taxes from 2020 to 2025. These increased tax revenues could offset at least a third of the cost of the programs.

Emissions: 13% reduction in the transportation sector

Currently, transportation represents approximately 24% of Canada’s total greenhouse gas emissions. When examining the sector’s emissions today, our recommended policies could reduce emissions by 22 mt CO₂e by 2025, or a 13% reduction from 2016 levels. As a total, these policies would achieve nearly 12% of the emission reductions needed to fulfill Canada’s commitments to the Paris Agreement.[10] This would be equivalent to taking 4.6 million cars off the road for a year.

These figures show that implementing these five policies could push Canada along its path to a low-carbon economy and bring substantial benefits for the Canadian economy in addition to environmental gains. The policies also could have indirect social benefits, for example a revived vehicle manufacturing sector and providing Canadians in rural areas and Northern Canada with more affordable transportation options.

Several Canadian organisations, including the Government of Canada, Clean Energy Canada, Energy Efficiency Canada, Pembina Institute and Smart Prosperity Institute, have explored the economic implications of investing in the low-carbon economy. Similarly, they found sizeable economic benefits (job creation, GDP growth, energy savings etc.) associated with a similar scale of investment across the sectors included in the Capital Plan for Clean Prosperity.

Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing buildings, electricity, oil and gas , and heavy industry on our website. You can find an overview of the plan here.

Clean transportation 2020–2025

*Driven by defined decarbonization policies.

** The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism.

*** Resulting from reduced energy costs.

[1] https://www.tc.gc.ca/eng/policy/transportation-canada-2018.html

[2]

[3][3] ZEVs produce no tailpipe emissions. Transport Canada considers the following vehicles to be ZEVs: battery-electric, plug-in hybrid electric, hydrogen fuel cell https://www.tc.gc.ca/en/services/road/innovative-technologies/zero-emission-vehicles.html?wbdisable=true&wbdisable=true

[4] https://2019.liberal.ca/wp-content/uploads/sites/292/2019/09/Forward-A-real-plan-for-the-middle-class.pdf

[5] https://action.ndp.ca/page/-/2019/Q2/2019-06-19_Commitments-Doc_EN.pdf

[6] https://www.greenparty.ca/sites/default/files/platform_2019_web_update_oct_6.pdf

[7] These calculations are based on best available models and are meant to be suggestive. The differences between multipliers depend on, for example, the state of the economy, the location of the manufacturing (in Canada or in a foreign country), interaction with demand for other sectors and exchange rates.

[8] We recognize that there are barriers to implementing some of these policies. For example, lack of charging infrastructure and dealer preference for selling higher maintenance internal combustion cars can be solved by charging infrastructure investments and quotas.Leasing rates require readjustment so that they do not penalize EVs and fuel cell vehicles.

[9] The jobs mentioned include direct, indirect and induced jobs. These numbers are not “net jobs,” and the creation of these jobs could be at the expense of other industries, depending on a host of factors.

[10] https://www.pbo-dpb.gc.ca/en/blog/news/closing-gap-carbon-pricing-paris-target

The post Capital Plan for Clean Prosperity: How greening transport can boost economy and curb GHGs appeared first on Corporate Knights.

Most Canadians, we believe, are approaching their ballot choice with an understanding that climate action and economic prosperity aren’t a zero-sum or either/or proposition. But the scope of the economic opportunity that’s embedded in climate action is still widely under-estimated.

So this week, Corporate Knights is beginning to attach dollar values to that opportunity, based on an assessment of five major sectors: buildings, transportation, electricity, heavy industry, and oil and gas.

In each, we quantified the likely level of business-as-usual capital investment in the six-year period from 2020 to 2025. We then quantified the incremental clean investment (ICI) that would be required to turbocharge demand for viable decarbonization options in sectors with the greatest greenhouse gas emissions.

Under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program to cover the lion’s share of the incremental clean investment, estimated at 2% of GDP per year. The war chest to provide the clean stimulus could be most logically financed via a Canada green bond borrowing program averaging just under $50 billion per year over the next six years. To put this number in context, Scotiabank’s economists are calling on the federal government to undertake up to a $100 billion per year stimulus program to counteract the coming economic contraction. Directing half this amount toward a clean stimulus is ambitious and aspirational yet realistic.

We would expect a modest increase in Canada’s debt-to-GDP ratio, which could be mitigated from incremental tax revenues resulting from additional GDP growth that the stimulus would spur. This stimulus package would drive demand at scale to deploy a host of decarbonization technologies economy-wide, with significant knock-on effects including hundreds of billion of dollars of GDP growth and hundreds of thousands of new jobs, not to mention getting us 70% of the way to our 2030 Paris carbon reduction targets by the end of 2025. It would also place Canadian industry at the forefront of a large growing global market for low-carbon solutions.

The Capital Plan for Clean Prosperity demonstrates that transitioning to a low-carbon economy is less about “shutting down” than it is about retooling, diversifying and growing, especially in the oil sector, which offers the biggest carbon savings bang for buck, and where production costs per barrel will be critical to remaining competitive. The benefits of doing so can be remarkable. You can read a summary below, and you’ll find more details on the Corporate Knights website.

Regardless of which party is elected later this month, the time for baby steps has passed. A targeted clean stimulus of this magnitude will bring about rapid economic growth and realistic greenhouse gas reductions that Canadians of all political stripes can get behind.

The Biggest Opportunity: A Carbon-Lite Built Environment 

Of the five sectors assessed by Corporate Knights, building construction and retrofitting – both residential and commercial – represents the biggest GDP growth opportunity.

Business-as-usual investment in the building sector will top out at more than $795 billion from 2020 through 2025. We estimate that an incremental investment of 10% on top of this targeted at developers for new builds and contractors for retrofits would be sufficient to bring a quarter of Canada’s commercial and residential buildings to a zero-carbon ready standard by the end of 2025.

This incremental investment of $78 billion over the next six years could be part of a clean stimulus administered under a Zero-Carbon Building Fund targeting:

• Public financing to cover the incremental cost to build 50% of new buildings to a zero-carbon energy efficiency standard over the next six years. Total cost: $18 B
• Public financing for basic flood-protection measures to floodproof 3% of homes with basements in high-risk flood zones every year between 2020 and 2025. Total cost: $11B
• Public financing for energy retrofitting 3% of the existing building stock every year between 2020 and 2025. Total cost: $23B
• Public financing for electrification of 1.5% of the existing building stock annually from 2020 to 2025. Total cost: $26B

The combined GDP impact of this ICI could be as high as $314 billion, while job growth would be roughly in the range of 154,600–183,400 over the period. Notably, about half of the ICI would be directly offset by savings from reduced energy costs. Governments would also benefit from increased tax revenues in the range of $26 to $102 billion over the six years.

You can read a more detailed overview of the building-sector impacts and outlook in this article. See also: comparable assessments of the transportation, electricity, heavy industry, and oil and gas sectors.

Building Construction, 2020–2025 incl.

* Driven by Clean Stimulus Plan.

** The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism. Results should be interpreted as indicative. Actual results will vary depending on slack in the economy, interplay with demand in other sectors, exchange rates and the degree to which machinery and equipment are sourced from Canada.

*** Resulting from reduced energy costs.

Rounding Out the Rest: Jobs and GDP Growth in Four Other Sectors

The building sector is a standout in terms of the positive impact on GDP growth that an ambitious but realistic stimulus program would drive. But the economic potential is significant across all the sectors Corporate Knights assessed, as summarized below.

Our detailed building sector analysis has already been released, with analysis for the rest of the sectors to be rolled out over the course of this week.

Potential Incremental Clean Investment and Benefits by Sector, 2020–2025 incl.

^⌂ Residential and commercial buildings combined.

* Driven by clean stimulus program.

** The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism. Results should be interpreted as indicative. Actual results will vary depending on slack in the economy, interplay with demand in other sectors, exchange rates and the degree to which machinery and equipment are sourced from Canada.

***Resulting from reduced energy costs.

Note: Numbers may not add up exactly due to rounding.

Decarbonization Policies on Which Potential Incremental Green Investment (IGI) Is Based (2020-2025 inclusive)

^⌂ Residential and commercial buildings combined.

* Additional to Government of Canada Projections (Reference Case)

The post The 2% solution: Our stimulus plan for clean prosperity appeared first on Corporate Knights.

Time is running out. According to the UN Intergovernmental Panel on Climate Change (IPCC), we must halve our global emissions in the next 10 years and reach net zero emissions by 2050 to avoid widespread catastrophe and human misery. Yet governments and businesses are not keeping up, with many arguing that fighting climate change with sufficient vigour would be detrimental to Canada’s economy and economies around the world. After crunching the numbers, however, it’s clear that there’s significant economic upside to ambitiously transitioning to a low-carbon economy. A bold clean stimulus program would drive demand at scale to deploy a host of decarbonization technologies economy-wide, with significant ripple effects including hundreds of billions of dollars of GDP growth and hundreds of thousands of new jobs, while placing Canadian industry at the forefront of a large growing global market for low-carbon solutions. How much would this cost? A little under 2% of GDP for the next six years.

To illustrate the economic opportunities of various sector-specific climate policies, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. According to our assessment, greening Canada’s buildings offers the potential for the greatest GDP and job increases. Buildings are also responsible for roughly 12% of Canada’s greenhouse gas emissions (not including their electricity use).

With the federal election underway, a number of parties are suggesting various efforts to green the building sector.

• The Liberal Party is proposing the creation of four funds of $100 million each to attract private capital to retrofit large buildings. The party also wants to help retrofit 1.5 million homes by introducing interest-free loans and providing $5,000 grants for purchases of new zero-carbon homes.[1]
• The NDP has a target to retrofit all housing stock in Canada by 2050 by providing low-interest loans that are repayable through energy savings.[2]
• The Green Party as well promises a massive energy-efficiency retrofit for buildings, financed by a mix of grants and zero-interest loans that can be repaid based on energy savings.[3]
• The Conservatives have presented a Green Homes Tax Credit for homeowners that would incentivize Canadians to renovate their homes with energy-saving products and technologies. This would be a 20% refundable credit on their income tax to finance renovations up to $3,800 per year. The party also says it will establish a retrofit code and a voluntary net-zero building standard.[4]

However, our research shows that these policies, mostly focused on small grants or interest-free loans, are unlikely to drive large-scale adoption.

Instead, under the logic of “what gets funded gets done,” we propose a six-year time-bound clean stimulus program targeted at developers and contractors to fully cover the costs for flood protection (for up to 3% of the existing building stock/year), deep energy retrofits (up to 3% of the existing building stock/year) and electrification (up to 1.5% of the existing stock/year), plus up to 4.5% of overall construction costs for new buildings built to a zero-carbon-ready standard This program would place Canadian industry at the forefront of a large growing global market for low-carbon building solutions.

We conducted extensive calculations based on data from sources including Statistics Canada, the Pembina Institute, the Political Economy Research Institute at the University of Massachusetts and Clean Energy Canada. These calculations demonstrate that with an ambitious clean stimulus program targeting building construction and retrofitting, Canada could:

• raise its GDP between $81 and $314 billion,
• add 154,600 to 183,400 full-time jobs,
• increase tax revenues by $26 to $102 billion,
• drive direct monetary savings of $36 billion from 2020 to 2025,
• and reduce the sector’s emissions from 82 megatonnes (mt) in 2016 to 66 megatonnes (MT) of carbon dioxide equivalent (CO₂e) by 2025 (equivalent to taking 3.6 million cars off the road).

The range in the figures is due to the use of different multipliers from different data sources.

These impressive job and GDP increases would require a significant up-front public investment totalling $78.4 billion over the next six years, which could be administered under a Zero-Carbon Building Fund targeting:

• Public financing to cover the incremental cost of building 50% of new buildings to a zero-carbon energy efficiency standard over the next six years. Total cost: $17.9B
• Public financing for basic flood-protection measures to floodproof 3% of homes with basements in high-risk flood zones every year between 2020 and 2025. Total cost: $11.0B
• Public financing for energy retrofitting 3% of the existing building stock every year between 2020 and 2025. Total cost: $23.4B
• Public financing for electrification of 1.5% of the existing building stock annually from 2020 to 2025. Total cost: $26.1B

Public investment needs

Implementing these four policies would require public financing of $78.4 billion over six years, of which $44.7 billion would be delegated to the residential building sector and $33.7 billion to the commercial building sector. We recommend that the federal government build a Zero-Carbon Building Fund, which would be financed through green bond issuances. The fund would annually allocate funds to eligible contractors and builders to retrofit Canadian homes on a first-come, first-serve basis, with funds disbursed up-front with random audits and minimal bureaucracy. In doing so, the fund would help spur immediate adoption of large-scale retrofits and zero-carbon building construction before new, more stringent building codes kick in in the coming decades. A thriving green building sector in Canada would be created through the clean stimulus. The mid-range of economic growth spurred by this stimulus would generate additional tax revenues that would make it mostly cost-neutral over time for the federal government, while the early-adopter residential and commercial building owners would get a free lunch on energy savings.

Economic and environmental benefits

Job creation: 154,600–183,400

The jobs created with these policies would be new, full-time jobs. Based on our calculations, under these policies 92,000 to 105,000 new jobs would be created in the residential building sector, and 63,000 to 78,000 new jobs would be created in the commercial building sector.

Increase in GDP: $81–$314 billion

The GDP increase between 2020 and 2025 resulting from this clean stimulus could range from $46 to $179 billion for residential buildings and from $35 to $135 billion for commercial buildings. With stronger economic growth through increased GDP, average income levels would go up and unemployment numbers would drop for mostly blue-collar workers in the construction and trades industry.

Energy & heating cost savings: $36 billion

The program of retrofits and greening of new buildings would mean that over a quarter of Canada’s building stock would be zero-carbon ready by the close of 2025. Along the way, this would put a total of $36 billion back in the pockets of homeowners and renters that would otherwise be spent on heating and cooling leaky buildings, not to mention savings from avoided basement flooding from the 1.1 million homes that would have been flood-proofed by then. Home retrofits and higher environmental standards for new buildings will also improve comfort levels so that homes are less prone to overheating in summer and cold drafts in winter. These energy and heating cost savings would offset nearly half of the $78 billion incremental green investment.

Increased tax revenues: $26–$102 billion

 With the implementation of this clean stimulus for buildings, all levels of government combined could increase their tax revenues by $15 to $58 billion as a result of incremental growth spurred by the residential buildings sector stimulus and $11 to $44 billion in the commercial buildings sector. Increased tax revenues at the mid-range of expected GDP growth spurred by the clean stimulus would mean that this program would mostly pay for itself over time.

Emissions: 20% reduction in the building sector 

Currently, buildings represent 12% of Canada’s total greenhouse gas emissions (not counting the GHGs associated with electricity consumption). When examining the sector’s emissions today, the clean stimulus targeting the four recommended areas could reduce emissions from 82 mt of CO₂e emissions[5] today to 66 mt of CO₂e in 2025. This would be the equivalent of taking 3.6 million cars off the road for a year. Together, these policies would achieve nearly 10% of the emission reductions needed to fulfill Canada’s 2030 commitments under the Paris Agreement by 2025.[6]

It’s clear that this clean stimulus for the building sector could bring significant economic, social and environmental benefits for hundreds of thousands of Canadians while helping the country adhere to our international climate pledges that are designed to safeguard the planet for future generations.

Several Canadian organizations, including the Government of Canada, Clean Energy Canada, Energy Efficiency Canada, Pembina Institute and Smart Prosperity Institute, have explored the economic implications of investing in the low-carbon economy. Similarly, they found sizeable economic benefits (job creation, GDP growth, energy savings etc.) associated with a similar scale of investment across the sectors included in the Capital Plan for Clean Prosperity

Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing transport, electricity, oil and gas , and heavy industry on our website. You can find an overview of the plan here.

* Driven by clean stimulus.

** The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism.

*** Resulting from reduced energy costs.

“Carbon dioxide equivalent” or “CO2e” is a term for describing different greenhouse gases in a common unit. For any quantity and type of greenhouse gas, CO2e signifies the amount of CO2 which would have the equivalent global warming impact.

[1] https://2019.liberal.ca/wp-content/uploads/sites/292/2019/09/Forward-A-real-plan-for-the-middle-class.pdf

[2] https://action.ndp.ca/page/-/2019/Q2/2019-06-19_Commitments-Doc_EN.pdf

[3] https://www.greenparty.ca/sites/default/files/platform_2019_web_update_oct_6.pdf

[4] https://www.conservative.ca/cpc/andrew-scheers-climate-plan/

[6] https://www.pbo-dpb.gc.ca/en/blog/news/closing-gap-carbon-pricing-paris-target

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