What do these stories have in common? They share an acute sense of climate urgency, but better yet, they share an informed belief that change is not just possible – it’s already happening. We just have to make sure to get it right.

Catch up now on our greatest hits:

1. Green 50: Top business moves that helped the planet 

Celebrating the 50th anniversary of the first Earth Day, CK highlighted 50 key business decisions that put planet before profit. Relive the moment when SC Johnson first stood up for the earth’s protective ozone layer by banning aerosol products containing chlorofluorocarbons (CFCs). Learn why Patagonia adopted its groundbreaking motto “Leave no trace.” Cheer on Adidas as it became the first shoe company to recycle ocean plastic at scale. Each entry also includes a “To Do” list of unfinished chores that reminds us that sustainability is a journey that never ends.

2. Canada’s oil sands are best positioned to lead the energy transformation 

Published June 1, this column reimagining our energy future was co-written by Mark Little, president and CEO of Calgary-based Suncor Energy Inc. With co-author Laura Kilcrease, CEO of Alberta Innovates, Little reviewed how the Canadian oil sands were developed by energy iconoclasts who disrupted the status quo. Today, they say, the same pioneering attitudes can ensure that Canada’s oil and gas industry leads the coming global energy transformation, where the opportunities range from biofuels to advanced manufacturing: “Those who can learn from the past are empowered to win the future.”

3. 2020’s class of Top 30 under 30 sustainability leaders shape #nextnormal 

If you need a dose of hope and inspiration, this is the feature for you. In November, Corporate Knights released its 2020 list of 30 outstanding young Canadians actively working to create a healthier world. “They’re taking to the streets and to the boardrooms calling for racial justice, they’re pushing their workplaces and businesses to embrace a higher purpose, they’re determined torchbearers of the UN’s 2030 Sustainable Development Goals (SDGs), and they’re making their voices heard, demanding a more equitable, caring and green economic recovery.” We bet you’ll agree with 20-year-old activist Kehkashan Basu, founder of the Green Hope Foundation, who told us, “Youth continue to be marginalized in all forms of decision-making. It is absolutely imperative that we have a seat at the table.”

4. Building Back Better: A roadmap to the Canada we want 

This may be the most ambitious article we’ve ever published. It summed up our seven-part Green Recovery roundtable series, to produce a daring omnibus plan for building a better, stronger Canada – and by extension, the world. Authors Ralph Torrie, Céline Bak and Toby Heaps said that a federal investment of $10 billion a year (just 0.4% of GDP) over the next decade would galvanize an additional $681 billion in other investment, creating 6.7 million years of employment and reducing greenhouse gas emissions by an estimated 237 million tonnes – enough to meet our Paris Agreement commitments. How to pay for it? Yes, we covered that too.

5. It’s time to start planting forests (not just trees) to grow Canada’s climate solutions

This article by Daimen Hardie, co-founder of Community Forests International, begins with a provocative premise: “I planted more than a million trees with my own hands and it didn’t really help the climate.” Taking aim at a federal $2-billion program to plant two billion trees, he argues that creating sustainable forests requires an ecosystem mindset and preserving existing forest lands – not just planting trees that will be harvested 40 years down the road. “The trees are good,” writes Hardie. “They’re just not enough. If we’re betting on natural climate solutions to secure a liveable future, we really need to get this right.”

Which features rounded out our Top Ten?
Read more illuminating and needle-moving stories from 2020: 

Top company profile: Denmark’s Ørsted is 2020’s most sustainable corporation

Bank report card: Three of Big Five banks fail to deliver ethical investment options

The EV revolution will take batteries, but are they ethical?

Hydrogen can make Canada an energy superpower again

Pandemic Portfolio: Two stocks to watch as COVID-19 drags on

The post Our top five sustainability stories of 2020 appeared first on Corporate Knights.

A decent roadmap

If we look at the speech using a clean economy and caring lens, there were four essential lines. The commitment that “climate action will be a cornerstone of our plan to support and create a million jobs across the country” is a game-changing update to the government’s narrative around climate change. The related promises to support energy-efficient building retrofits and to launch a new fund to attract investments in zero-emission product manufacturing suggest that Canada may be on the way to having a clean industrial strategy.

In stating that “the government will make a significant, long-term, sustained investment to create a Canada-wide early-learning and child-care system,” the feds recognized that the majority of job losses (63 percent) caused by the pandemic-induced economic crisis have affected women, many of whom may not be able to return to the workforce without better child-care options.

The government’s intent to wave off the fiscal hawks and continue to dig deep to help us build back better was made clear when it noted that “this is not the time for austerity.”

The government further signaled it is serious about building back better by saying it would work with the provinces and territories to “make the largest investment in Canadian history in training for workers,” with the first item listed as “supporting Canadians as they build new skills in growing [read ‘green’] sectors.”

What was missing from the throne speech?

On the green recovery side (a package of investments and regulatory reforms to relaunch the economy on the back of green industries), there was a fair bit of detail on the new investment fund meant to support zero-emission vehicles and batteries – which will largely benefit central Canada. But there was scant mention of how to rev up the low-carbon resource sector in the West. This includes (in order of technology readiness): sustainable biofuels, hydrogen, and the potential bonanza of extracting carbon fibres from bitumen.

The immense potential for the farming and forestry sectors to contribute to climate solutions was given just one line, referring to “farmers, foresters, and ranchers as key partners in the fight against climate change, supporting their efforts to reduce emissions and build resilience.”

There was no mention of how to ensure that Canadians reap our fair share of capital gains and intellectual property rights in return for the billions of dollars of public investment about to be directed at the recovery. It would have been nice to see some indication of how the government plans to ensure that our pension funds get the inside track on these growth investment opportunities in Canadian enterprises. There was also a missed opportunity to lay down markers for more democratic ownership models, including provisions to encourage employee-owned businesses and co-ops.

The next economic update and a nation building strategy

Now is the time for the federal government to go “all in” for a caring economy and a green recovery by using its fiscal power and monetary sovereignty to make the investments that will expand, mobilize and redeploy our productive capacity for building the Canada we want and the Canada we need for the 21st century.

On a long-term basis, we are going to invest an additional 0.5 percent of GDP into the caring economy to make affordable and quality child care and elder care a universal reality. And over the next five years, to ensure that Canada plays to its full potential in seizing clean-growth markets, we will invest an additional one percent of GDP per year to build up the clean economy.

How are we going to pay for it? We can issue bonds today that will be directed at investments in affordable child care, long-term care for seniors and a green recovery, and we can afford to do it without raising tax rates. We can do this because these programs stimulate economic activity that will generate future government tax revenue that will be greater than the interest on the bonds.

Here’s how it works: affordable child care creates jobs to deal with the “she-cession” and boosts labour force participation overall, which in turn fuels higher growth and tax revenues. A child care program (building on lessons learned from the Quebec model) would require additional federal investment of $80 billion over the next 10 years. On an annual basis, we estimate this investment would represent 0.35 percent of GDP (assuming 50-50 cost-sharing with provinces and territories). That expenditure in turn would be offset by higher economic growth – by reducing the gender workforce gap, GDP would go up a corresponding 2.4 percent by our estimates (based on an IMF paper extrapolating from the Quebec child care experience). This would represent an increase in federal revenues of $8.3 billion per year (or 0.36 percent of GDP, using the 15 percent federal revenue-to-GDP ratio).

Securing dignified long-term care as an element of universal health care almost certainly requires setting up a national long-term-care insurance program, with a strong community and home care component, according to the National Institute of Aging. Setting this up will likely require significant federal government contributions in the order of an additional 0.25 percent of GDP, assuming a matching contribution by provinces and territories. Together, this would raise Canada’s spending on publicly funded long-term care from 1.3 to 1.8 percent of GDP, in line with our OECD peers, and take some of the load off the 35 percent of Canadians who balance paid work with unpaid caregiving.

The federal contribution would be offset by higher levels of GDP. Corporate Knights estimates that GDP would rise by one percent, by factoring in a 35 percent productivity boost among the Canadians who currently balance paid work with unpaid caregiving, plus the economic boost associated with creating the new long-term care spaces, as estimated by the Conference Board of Canada. Savings in the order of 0.12 percent of GDP would arise from the hospital beds freed up through increased provision of long-term-care spaces and in-home-care support services, which are 80 percent more cost-effective.

Meanwhile, the government could support technological innovations and attract large-scale private investment into clean-growth areas that align with Canada’s strengths by issuing low-cost, long-dated sovereign bonds (issued now to lock in low interest rates). The European Union has a similar system. Corporate Knights economists estimate this would create a new engine of growth based on boosting the growth of clean industries, raising Canada’s 2030 GDP levels between five and 10 percent. At seven percent GDP growth, federal tax revenues would increase by 1.1 percent of GDP, enabling us to manage our sovereign debt loads and sustain a clean and caring economy over the coming decades.

Table:

Sources: Corporate Knights estimate based on Building Back Better Synthesis Report, Canadian Institute for Health Information, Caregiving and Care Receiving by Statistics Canada, Conference Board, Finance Canada, IMF, National Institute on Ageing, RBC Economics, Scotiabank Economics.

Investing in a caring and green recovery will expand, mobilize and redeploy Canada’s productive capacity, enabling us to manage the sovereign debt and sustain a clean and caring economy over the coming decades.

Toby Heaps is the co-founder and CEO of Corporate Knights.

Céline Bak is the president and founder of Analytica Advisors.

Ralph Torrie is the president of Torrie Smith Associates, and a senior associate with the Sustainability Solution Group.

This article was originally published by Policy Options.

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-Hon. Bill Morneau, Minister of Finance, Canada

Over the last few months, policymakers around the world have taken unprecedented action to protect their people from the COVID-19 pandemic. As we move beyond the acute phase of the health crisis phase, countries are now designing recovery plans to deal with the economic fallout.

Many of the world’s leading economic and political authorities, including the International Monetary Fund, the International Energy Agency and our G-20 peers, are leading calls for governments to make jobs-rich green recovery. In Canada, more than 40 major business leaders are advocating for a bold green recovery to help get people back to work and bolster Canada’s chances of playing to win in large and growing low-carbon markets where we have competitive advantages.

As policy-makers design economic recovery plans, they are making decisions that will cast the die of our economy for decades to come. For this once-in-a-generation investment, it’s vital that we look ahead and invest in building an economy that’s ready for tomorrow, instead of spending large amounts of public money on infrastructure and technologies that will soon be outdated.

The Building Back Better plan set out in this report is a synthesis of seven white papers published between April 22 and June 3 . Our plan makes it clear that governments have a unique opportunity today to boost economic growth, create millions of new jobs and position Canadian businesses as suppliers rather than buyers in tomorrow’s economy.

This document, put together with input from more than 100 of Canada’s most inspired minds, outlines a series of investments that the federal government could make to set Canada on a path to a resilient, net-zero economic recovery. The areas for investment for the Building Back Better Canada Plan include the following programs:

• deep retrofits of homes and workplaces
• accelerated electric vehicle (EV) uptake
• support for active mobility (e.g. walking and biking)
• greening of the electricity grid
• decarbonizing of heavy industry
• nature-based climate solutions for our forests and farmland, and
• making Canada a leading supplier of EV components and zero-carbon natural resources.

Combined, the proposals create or maintain more than 6.3 million years of employment and crowd in $681 billion of additional investment in the next decade. They would also deliver $44 billion annually in energy savings to Canadians while reducing greenhouse gas (GHG) emissions by 242 megatonnes (Mt) of CO2e per year by 2030 and setting a course for a zero carbon Canada within a generation. The proposals are different from what the federal government currently has in place in two important respects: they go further on emissions reductions and they go to the heart of our industrial policy, targeting investments in high-growth areas where Canada has strong competitive advantages to compete and win in global markets.

The federal investment of $11 billion per year (0.5% of GDP) for 10 years would trigger total investments of $790 billion, including both public and private, over the 2021-2030 period.

The federal investment could be paid for by issuing sovereign green bonds or closing federal tax loopholes and eliminating current Canadian corporate tax breaks, or some combination thereof.

Stronger use of regulations or higher carbon pricing could potentially reduce the cost of the plan for the federal government, but this would likely result in delays – an important consideration for stimulus spending, as well as for ensuring Canadian businesses don’t miss the low-carbon economy train that is speeding out of the station.

The federal contribution would be front-loaded, with almost 40% of it booked in the first two years and half of those early funds earmarked for deep building retrofits, which deliver broad and immediate job benefits (including for the more gender-diverse design and architecture industry) with strong economic multipliers. A study by the International Monetary Fund on climate policy and recovery found that “environmental measures have been a valuable part of fiscal stimulus packages,” emphasizing that “energy efficiency investments are particularly well-suited to stimulus spending,” because they can be executed quickly. 

Aside from jobs, this burst of investment would help to create economies of scale and bring costs down, especially for building energy retrofits.

Fully $40 billion of the $109 billion federal portion of the recovery package is earmarked to catalyze commercial-scale investments to ensure Canada is a supplier rather than buyer in the booming global markets for zero-emissions vehicles, clean fuels, property technologies and essential materials for the low-carbon economy.

The capital expenditures projected for these proposals are well within the bounds of routine levels of investment in Canada, which exceed $400 billion per year. For example, in the residential sector, Canadians spend $60 billion annually to renovate their homes. Building Back Better Homes and Workplaces would redirect 10% of existing renovation spending in the first year, rising to 60% in the fifth year and declining to 15% of current investments in the 10th year. During the transition to a fossil-free electric power system throughout Canada, the Greening the Grid proposal for investments in solar, wind and storage capacity averages $12.9 billion per year in a sector that routinely absorbs $22 to $23 billion per year in capital expenditures. Combined with other expected investments in this sector, including those needed to finish hydro megaprojects already underway, total investment in the electric power sector is expected to grow by about 20% during the transition to a carbon-free grid.

Our proposal is that the Building Back Better Canada Plan would ensure that, starting now, integrated and mutually supportive zero-carbon investment programs support Canada’s move to net-zero emissions while delivering strong risk-adjusted returns to Canadians through their savings and pensions.

In addition to direct federal investment, it is essential that the federal government set the right policy framework to drive the transition to net-zero and use its spending power to encourage provinces and municipalities to follow suit by attaching green strings as a condition for accessing federal stimulus funds. The need for supportive policy spans across all the proposals included here, from model building codes and zoning for zero-carbon affordable housing, to zero-emissions vehicles mandates, fast and fair power-grid access for storage and renewables, recalibration of agricultural subsidies, circular economy targets, and large-scale green government procurement, including embodied carbon of building materials. Providing a clear policy direction to drive toward a zero-carbon economy is essential to sustaining the momentum and securing investor confidence.

This Building Back Better Plan is a different kind of plan from what happened following the global financial crisis of 2008-9, when just 8% of Canada’s stimulus contributed to sustainability and resiliency, compared to 12% in the U.S., 38% in China and 59% in the European Union, according to HSBC Global Research.

This time we have a government that was elected with a strong mandate for climate action and a clearly stated commitment to transitioning Canada to a low-carbon economy. The government is rightly focused on getting the economy growing and people back to work as quickly as possible, especially women (who lost more than twice as many jobs as men). The best way to do that is with investments that profit from the immediate returns from energy efficiency and significant savings from steeply declining renewable energy costs.

 Ipsos global poll: 61% 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 job-rich nature of a green recovery.

 

Some of the world’s leading economists recently completed an analysis of possible COVID-19 economic recovery packages. They concluded that compared to traditional fiscal stimuli, green projects create more jobs, deliver higher short-term economic returns per dollar spent and deliver higher long-term cost savings. This finding is also supported by McKinsey’s research,  which found that a low-carbon recovery could not only initiate the significant emissions reductions needed to tackle climate change but also create more jobs and economic growth than a high-carbon recovery would.

Applying a climate lens to economic recovery can help us identify some of the best opportunities to get people back to work immediately while building a more resilient Canada for the long-term, ready to capitalize on new global growth trends.

Chart notes: (1) Federal contribution is front-loaded in first two years to maximize stimulus impact, bring costs down and incentivize complimentary policies essential to crowd in private capital and sustain the momentum. (2) Includes direct and indirect jobs as per Statistics Canada and Torrie Smith Associates analysis. Job years correspond to 1 job for 1 year; job multipliers measure only employment created during spend. In practice, economic stimulus/recovery could create jobs that become self-sustaining, resulting in more job years than shown here. (3) Based on gross-value-added (GVA) multiplier at a sector level as per McKinsey & Co. (4) Based on analysis by Torrie Smith Associates available here: https://corporateknights.com/wp-content/uploads/2020/04/CK-Residential-Retrofit-Calculator-200602.xlsx, https://corporateknights.com/wp-content/uploads/2020/04/CK-Commercial-Building-Retrofit-Calculator-200422-1.xlsx, https://corporateknights.com/wp-content/uploads/2020/04/Carbon-Free-Grid-Calculator-200527.xlsx, https://corporateknights.com/wp-content/uploads/2020/05/CK-Transport-Calculator-200611-V9.xlsx (5) Most of the greenhouse gas reductions from these investments would be concentrated downstream in what is known as scope 3 emissions, resulting from displaced emissions by light-weight carbon fibres as one example.

Global green recovery efforts already underway

• On May 27, the European Commission proposed a €750 billion ($1.14 trillion) recovery fund to steer the continent toward carbon neutrality by 2050, with a quarter of the plan earmarked for the EU Green Deal (with energy efficiency retrofits being the top budget item).

• On May 26, France announced an €8 billion ($12 billion) plan to accelerate the transition to electric cars, which will include increasing the monetary 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.” Germany’s €130 billion stimulus package includes massive investment in EV charging stations, doubling the incentive for EV purchases from €3,000 to €6,000 and the establishment of a €50 billion futures fund for R&D investment. These are in addition to demand-side policies, including €300 for every child in Germany and a time-limited reduction in the VAT from 19 to 16%.

• Denmark has allocated 30 billion kroner ($6 billion) for green building renovations, with a short-term priority to upgrade 72,000 public housing units in 2020/21.

The post Report: Building Back Better with a Bold Green Recovery appeared first on Corporate Knights.

It has been clear for some time that our economy is on a collision course with the natural ecosystems it’s dependent upon. Thankfully, there’s a large and accelerating body of know-how when it comes to the changes that need to happen to get to zero carbon. For every one of the amazingly talented and wise panellists who have participated in these roundtables, there are hundreds more who are focused on this transition. With the pandemic-triggered prospect of renewed public investment, and with the creative leadership up-and-coming generations bring to the game, a door has opened. We have tried in this series to give a glimpse of what awaits us over the threshold.

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 for chart below: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 an 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 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% 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 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.

Postscript: While this series has been largely focused on the green economy elements of a green recovery, we would like to acknowledge that it 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 as we’ve noted repeatedly throughout the series, by supporting thriving Indigenous communities.

Ralph Torrie is senior associate with Sustainability Solutions Group and partner at Torrie Smith Associates.

Céline Bak is the founder and president of Analytica Advisors.

Toby Heaps is the CEO and co-founder of Corporate Knights. 

Notice to reader: Please be aware some of the figures and other details in this white paper have been updated in the Final Report to reflect feedback.

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That very approach that helped unleash the economic potential of Alberta’s oil sands can now be reimagined to drive progress to the growth markets of the future. In the low carbon economic transformation, Canada is well equipped to lead the way and supply growing global markets with zero-carbon products and technologies.

There are three key ingredients from AOSTRA that should inform government support for decarbonizing and diversifying our economy:

1. Right goal: Investment should avoid areas that involve incremental advances and focus instead on aspects that leverage innate competitive advantages, are disruptive and go beyond immediate commercial interests.
2. Right structure: Full backing and long-term capital from government, but independently delivered.
3. Right scale: Sufficient funding to realize the goal while taking into account available human and natural capital as well as industrial infrastructure.

If the federal government, working in partnership with provinces, takes this type of proactive approach now, it can help struggling regions thrive in the transition to a net-zero economy. Doing so will help to diversify Canada’s commodity risk, insulating us from the whims of a volatile global market that is vulnerable to structural disruption as the electrification of vehicles threatens up to one-third of the demand for crude oil.

The great strides made in the oil sands since 2000 in terms of GHG and cost reductions put the industry in good stead to supply global markets for some time to come, albeit with margins likely much slimmer than the industry used to enjoy. There now remains little doubt that disruptive large-scale growth opportunities are no longer centred on combustion of fossil fuels, but rather on what the Energy Futures Lab calls future-fit hydrocarbons, which include carbon fibres, activated carbon, hydrogen and sustainable aviation fuels.

The oil and gas extraction sector directly employs roughly 100,000 salaried and hourly people. It contributed 5.6% of our GDP in 2019 and provided $131 billion in annual export revenue last year, up 32% from 2015 (when oil prices hit a valley), but the value of exports is expected to drop significantly in 2020. Alberta Innovates estimates that oil sands revenue (which represents about two-thirds of Canada’s five million barrels per day of oil production) will dip to $27 billion in 2020.

The sector’s vulnerability to downturns in the global market puts Canadian workers and our economy at risk. During the most recent crash in oil prices, Rystad Energy said that “Canada leads the list of those in trouble” as Canadian oil companies plan to reduce production and capital expenditures to $14.5 billion – down 21% from the 2016 to 2018 average. Company restructuring plans are now emerging as investors seek greater returns in light of market volatility. Cost containment pressure and the move to automate the industry could lead to fewer, not more, jobs in Canadian oil- and gas-producing regions. An estimated 7,700 jobs were already lost in the Canadian oil and gas sector between March and April of this year.

As an illustration of the oil sector’s long-term decline, energy ​stocks’ share​ in the S&P 500 has fallen from a recent highpoint of 14% in 2009 to less than 3% today.

The opportunity

While the pandemic-induced market crash of the last few months was triggered by an unprecedented situation, the outlook for the sector was already troubled before COVID-19. The one-third drop in oil demand resulting from the temporary economic lockdown is a glimpse into a not-too-distant future where electrification could disrupt demand on a similar scale. According to BNP Parabas, “the economics of oil for gasoline and diesel vehicles versus wind- and solar-powered EVs are now in relentless and irreversible decline.” While the world will require tens of millions of barrels of oil per day for years to come, there is no avoiding the fact that we are living in an era of energy transformation.

Canada is home to a number of companies that already know the benefits of getting ahead of global market shifts. TransAlta Corp., a 109-year-old predominantly fossil-fuel power producer, ramped up its wind and hydro investments and spun these off into a separate company. TransAlta Renewables is now worth more than its parent.

Wind, solar and hydro aren’t the only options for diversifying. While still dwarfed by global crude markets, we know that there are potential multibillion-dollar markets close to the conventional energy industry that don’t involve combustion: bitumen-based carbon fibres and activated carbon, hydrogen, renewable jet-fuels and geothermal energy. On the broader natural resources front, Canada is a treasure trove of low carbon commodities the world needs to decarbonize, and we are producing those commodities in an increasingly low carbon manner.  Notably, Canada is one the top-five producers of important minerals for rapidly expanding battery markets, including nickel, cobalt and graphite (and soon lithium from Alberta’s oilfield brines could be added to that list). We have the resources and  industrial ecosystem to be a North American hub for battery production and zero emissions vehicles including freight trucks and buses. 

These markets will grow quickly, driven by policy and economics – and Canada has all the ingredients to be a supplier of choice.

Carbon fibre, activated carbon and hydrogen potential

Carbon fibres (CFs) and activated carbon may be the least well understood of these opportunities for the oil sands and the ones with the most disruptive potential.

Activated carbon (AC) is a form of carbon with small, low-volume pores that increase the surface area available for adsorption or chemical reactions. Due to its high degree of microporosity, one gram of activated carbon can have a surface area of 3,000 square metres. The high surface area provides many useful applications. Further chemical treatment often enhances adsorption properties.

Commercial application of AC includes methane and hydrogen storage, air purification, solvent recovery, decaffeination, gold purification, metal extraction, water purification, medicine, sewage treatment, air filters in gas masks and respirators, filters in compressed air and teeth whitening. Alberta Innovates has done a preliminary market analysis and assessed the potential of using bitumen to make AC.

For the period of 2017 to 2023, global demand for AC is expected to be 1.3 million metric tonnes. If 15% of this demand could be satisfied by oil sands, it would represent asphaltene (the stuff that makes the oil sands so viscous) and bitumen demands of 316,000 metric tonnes (at US$2,500 per tonne) and 36,000 barrels per day, respectively. If oil-sands-derived AC could capture 15% of the total global AC market by 2030, it would create asphaltene and bitumen requirements of 1.4 million metric tonnes and 160,000 barrels per day, respectively, generating $21 billion in annual revenue.

Composed mostly of carbon atoms, CFs possess unparallelled strength and stiffness (carbon fibre is five to 10 times stronger than steel and twice as stiff) coupled with low density (making it lighter than aluminum) and high resistance to corrosion. This makes the material particularly well suited for use in electric vehicles and aviation, and commercial polymers.

Currently, most commercial CFs are made from polyacrylonitrile (PAN), and a small fraction of commercial CFs are made from petroleum pitch, mostly outside of Canada. The supply chain for making carbon fibre from PAN spans three continents, with production costs starting at about US$18/kilogram (kg) for PAN-derived CFs. Demand at the current cost is about 100,000 tonnes per year. If costs were halved to US$9/kg, some experts believe that demand would increase tenfold based solely on automobile sector uptake, with Alberta Innovates estimating a potential $44 billion in annual revenue from CFs by 2030. (Canadian CF production on this scale could help Ontario become the lowest-cost manufacturer of lightweight frames for aviation, freight and personal vehicles.)

Canadian-made CF using Alberta bitumen could be the solution for low-cost carbon fibres. Asphaltene, which makes up 15 to 20% of bitumen, is a promising feedstock for making CFs and AC. If we can crack the cost nut of extracting CFs and AC from bitumen, it has the potential to deliver four times the revenue from Alberta’s current bitumen output. By diverting 30% of current oil sands activity to high-value advanced materials such as carbon fibre, activated carbon and asphalt binder, Alberta Innovates estimates the added economic potential could be in the range of $84 billion annually (including $19 billion from asphalt binder), while reducing GHG emissions from combustion by over 120 MT CO2 per year.

Materials companies such as BASF, Zoltek, Lafarge and Mitsubishi Chemicals, not surprisingly, have their eyes on CFs as a future market. Alberta Innovates is engaged with the Oak Ridge National Laboratory and three private sector partners on scaling up CF production from Alberta bitumen. One potential first application: CF hydrogen storage tanks.

Globally, Bloomberg New Energy Finance (BNEF) recently characterized hydrogen as a clean-burning molecule that could become a zero-carbon substitute for fossil fuels in hard-to-abate sectors of the economy, including as feedstock for heavy industry. The cost of producing hydrogen from renewable sources will continue to fall, but we need to ramp up demand to drive down costs and build out the delivery infrastructure. BNEF argues that this will not happen without government targets and subsidies that BNEF pegs at US$150 billion of cumulative subsidies globally by 2030. The goal of these policy investments would drive the delivered cost of hydrogen down to $15 per million British thermal units (MMBtu) in many parts of the world by 2030 and to $7.4/MMBtu by 2050.

In Canada, an industry collaboration project is already underway in Alberta. The Alberta Zero Emissions Truck Electrification Collaboration (AZETEC) project, a $15-million, three-year joint venture between Emissions Reduction Alberta, AZETEC and the private sector, is focused on building out the infrastructure that’s needed for a wider network of hydrogen fuelling stations for long-haul transportation. Trucks are the dominant mode of moving freight in Canada, and while the largest long-haul rigs make up only 9% of the freight truck population, they account for 47% of commercial truck fuel consumption. The AZETEC project is focused on the largest vehicles on our roads. While it is uncertain whether hydrogen or electricity will power heavy freight vehicles of the future, there’s a strong consensus that both technologies will have a role to play.

The prospect of producing zero-carbon, “green” hydrogen from renewable electricity where oil and gas are produced today is within our grasp. In our Building Back Better Power scenario, we envisioned a 10-year program of wind and solar development in Alberta and Saskatchewan, complemented by energy storage and enhanced transmission capacity both within the provinces and with their hydro-rich neighbours. The investment in Alberta alone would top $50 billion over the 10-year period and create more than 50,000 full-time jobs for the rest of the decade. The $5 billion per year average capital expenditure is of the same order as recent capital investments in Alberta’s energy sector (15 to $20 billion per year in oil and gas, $3.5 billion per year in utilities). The Travers Solar Project in Vulcan County, Alberta, which has received $500 million from a Danish group, is an indicator of the growing investor interest in the solar-rich resources of southern Alberta and Saskatchewan.

Geothermal potential

Canadian resources of geothermal energy – the heat found deep underground in hot aquifers and rocks – are concentrated in western Canada and can be harnessed for both power and heat for buildings. Exploratory drilling costs usually represent a major component of the cost of developing geothermal energy, but western Canada’s geothermal energy resources have been largely located as the result of oil and gas exploration and drilling. The expertise and technical know-how required for geothermal energy development already exists in the Canadian oil and gas industry and constitutes another strategic advantage, with both the supply chains and skilled human resources readily available. In addition to their potential for baseload power production, the Energy Futures Lab suggests that geothermal resources could be used to create new district heating systems for pulp- and paper-making and agriculture.

Aviation fuel potential 

A final example of a global market that may grow substantially is sustainable aviation fuel (SAF). The World Economic Forum’s report on the Net Zero Challenge puts the cost of abating a tonne of CO2 in the aviation industry at $200, compared to cement at $90 and steel at $130. Given that the COVID-19 pandemic has forced the global aviation industry to restructure at a unprecedented scale, it remains to be seen whether the industry will stick with carbon-reduction goals established under the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). It’s worth noting, though, that under the International Energy Agency’s Sustainable Development Scenario, SAF is projected to grow to 18 billion litres by 2025 and 37 billion litres by 2030. Companies such as Finland’s Neste have made bold moves to diversify into sustainable biofuels and have already developed profitable niches serving airports such as Bergen, Oslo and Stockholm, three of only five airports globally that offer regular SAF distribution. In the past five years following Neste’s big bet on sustainable biofuels, its share price has more than tripled to bring its value up to C$40 billion, while the value of oil and gas peers has been cut in half.

Given the economic opportunity in moving beyond carbon and Canada’s commitment to reach net-zero by 2050, Building Back Better means that we need to harness the growing global markets for zero-carbon products and technologies as part of the transition away from producing oil and gas.

The proposal

In previous installments of this Building Back Better series, we have outlined the economic and job-creation potential in Canada from public and private sector investments in retrofitting buildings, decarbonizing the power grid, greening heavy industry, electrifying vehicles, promoting active transportation, and innovating nature-based climate mitigation solutions in forestry and agriculture. For the oil-producing provinces of Alberta, Saskatchewan and Newfoundland, these proposals include $200 billion in capital investments that generate 140,000 full-time jobs over the 10-year recovery program. All combined, the lion’s share of this activity would be in Alberta – $140 billion and 100,000 full-time jobs.

In addition, the federal government should create a $40 billion Natural Resources and EV Innovation Fund, which would be endowed through the issuance of sovereign green bonds, taking advantage of low borrowing rates.

Building on the lessons from AOSTRA, the Natural Resources and EV Innovation Fund would need:

1. Right goal: The goal of the fund should be rapid research, development and deployment to de-risk breakthrough technologies and to produce zero-carbon commodities, batteries and EVs on a commercial scale to sell into growing global markets where Canada has a competitive advantage. Opportunity areas include bitumen-based carbon fibre and activated carbon as well as green hydrogen, geothermal heat loops and sustainable aviation fuels. Assuming moderate levels of follow-on investment by the private sector to deploy the new technologies to produce the zero-carbon commodities (financed via debt capital markets for which the federal government could offer public incentives), it’s estimated that investment in these sectors on this scale would create up to 100,000 permanent high quality jobs over the next 10 years.

2. Right structure: The fund will be independently delivered by an organization with strong technical capacity, with government setting goals that prioritize public benefit over the long-term with two buckets: one for R&D and one for commercial deployment. As with AOSTRA, the ownership of intellectual property (IP) should remain in public hands so that it will be widely used for the benefit of all Canadians. Organizations with the technical expertise to deliver on this mandate include Alberta Innovates and Emissions Reduction Alberta. And unlike AOSTRA, which was strictly an R&D vehicle, the fund would have a mandate (in an expanded and revamped version of the Strategic Innovation Fund, or possibly as a new sleeve within the Canadian Infrastructure Bank) to make direct investments to deploy these commercial technologies and would take minority equity stakes in exchange for these direct investments. Two important things to note:

• AOSTRA made their investment over 30 years and then hit the exit after they had proven the viability of SAGD (steam-assisted gravity drainage) technology in extracting bitumen from underground oil sands deposits. Given the realities of today’s strained provincial and corporate balance sheets, the pace of change in global energy markets, and the scale of the incumbent industry (which makes the stakes higher for getting it right), we are looking at a compressed time scale that requires more investment in less time.
• It is important to get IP protection right. We can invest a lot of money and develop successful technologies, but we may lose out on benefits if we lose control of IP. The government will need to fund 100% cash for R&D up to the point of deployment in order to own IP for any research that involves non-Canadian entities. Industry co-investment may give partners usage rights but not IP ownership.

3. Right scale: A 10-year investment by the federal government of $40 billion ($5 billion for R&D and $35 billion to deploy and crowd in private sector investment), with the objective of securing triple that amount from the private sector and support from provinces as per their capacity. The fund would be fully endowed to insulate it from changing political priorities and to take advantage of low interest rates.

While drawing lessons from AOSTRA, we also need to be mindful that 2020 is not the 1970s in two important respects:

• The scale of human capital and infrastructure for Canadian innovation today is much greater than in 1974, when AOSTRA was established.
• In response to post-pandemic recovery needs, the federal government is poised to make large-scale (once-in-a-generation levels) public investment over the coming years to help Canada build back better.

We have a lot more to lose if we don’t invest wisely now to create an economic engine for the future. At the same time, the current moment offers an opportunity to act quickly and place Canada in a leadership position in fast-growing global markets.

We estimate that the prize for getting this right is being the supplier of choice for $125 billion zero-carbon commodities per year by 2030, while creating 1,000,000 person years of employment.

To paraphrase the philosopher George Santayana, those who learn from the past are empowered to win the future.

Ralph Torrie is senior associate with Sustainability Solutions Group and partner at Torrie Smith Associates.

Céline Bak is the founder and president of Analytica Advisors.

Toby Heaps is the CEO and co-founder of Corporate Knights. 

With files from Aleena Naseem and Laura Väyrynen

Notice to reader: Please be aware some of the figures and other details in this white paper have been updated in the Final Report to reflect feedback.

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The history of Canada and its people is largely written in the history of its agricultural and forestry ecosystems, and the “pandemic pause” provides an opportunity to assess the health and sustainability of those ecosystems and the economic activity that depends on them. The total industrial harvest of wood in Canada peaked in 2004, and the pandemic hit when the forest industry was in decline. Agricultural practices are clearly not sustainable, and the pandemic has revealed the vulnerability of our food production and supply chains. Forestry and agriculture are both susceptible to the ravages of extreme weather and a destabilized climate, but both sectors have great potential to contribute to a rebalancing of the climate system and the establishment of a green economic recovery.

Canada, with its vast areas of forests, wetlands and farmland, has abundant opportunities to adopt nature-based climate solutions. Conservation, restoration and land management actions can help store carbon and avoid climate-changing greenhouse gas (GHG) emissions. Approximately 84% of land in Canada is forested (857 million acres), of which 55% (558 million acres) is managed forests. An additional 158 million acres are dedicated to agriculture. Because forests and land can sequester carbon and because of the sheer scale of Canada’s land mass, nature-based climate solutions can have a material impact on both the climate and biodiversity crises.

Globally, more than 11.3 billion tonnes of GHG emissions per year could be avoided or offset by nature-based climate solutions (that is a full third of annual GHG emissions), including afforestation (in areas where there was no previous tree cover), reforesting degraded forests, engaging in responsible forest management and improving cropland and peatland management.

Canada has already committed to a $3 billion Natural Climate Solutions fund: $2 billion to plant 200 million trees per year over 10 years and $1 billion to support other projects that improve the storage of carbon through stewardship of Canada’s forests, wetlands and farmlands. The goal of the fund is to achieve annual emissions reductions of 30 million tonnes by 2030.

According to the International Union for Conservation of Nature (IUCN), 7% of 857 million acres, or about 59.3 million acres of Canadian forest, are under some form of conservation. The federal government has committed to protecting 25% of Canada’s land and 25% of our oceans by 2025 – with an ambition of 30% of each by 2030. If achieved, these new protected areas could also contribute to Canada’s efforts to tackle climate change and form the basis of tourism that enables us to deepen our connection with the land as we stay closer to home for recreation and holidays during the COVID-19 pandemic and into the future.

Also firmly rooted in the land and nature, Canada’s agricultural sector is a vitally important part of our economy and our food security. A robust agricultural sector is essential to Canada’s economic recovery. A recent Intergovernmental Panel on Climate Change (IPCC) Special Report, Climate Change and Land, stresses that to keep global temperatures within safe levels we need to transform the way we produce food and manage land. Canada reports that the sector accounts for a 10th of the country’s GHG emissions – the majority of those emissions are traceable to beef and overuse of nitrogen fertilizer. If all the parts of our food system are included, from farm inputs to the emissions resulting from wasted food, 25 to 30% of global GHG emissions are attributable to the system that generates our food.

The COVID-19 pandemic has exposed the risks of our heavy reliance on global supply chains and brought heightened awareness to the value of producing food in Canada. For livestock farmers, the pandemic has meant that many of the chickens, pigs, cows and sheep that were bred and raised for food are not finding markets, as meat processing plants are shut down and restaurants, hotels, convention centres and sports venues are shuttered because of the pandemic.

Before COVID-19, about 58% of food produced was lost or wasted, and 32% of this food could have been rescued to support communities across Canada. This is the goal of the federal government’s recently announced $50 million fund to purchase and divert surplus food. COVID-19 has also clearly exposed the reality that many Canadians cannot always afford healthy and nutritious meals, leading to greater reliance on food support programs. The number of Canadians experiencing food insecurity is highest among Black and Indigenous Canadians. With increased poverty caused by COVID-19, the number of Canadians experiencing food insecurity is expected to double from 4.4 to 8.8 million. At a time when so many Canadians are deeply concerned about putting food on the table, it’s striking that the federal relief program for farmers ($252 million) was 15% of the amount announced to subsidize the safe shut-in of wells illegally abandoned by oil and gas companies ($1.7 billion).

Creating incentives for farmers to adopt practices that reduce emissions and conserve biodiversity can make Canadian farms more resilient while creating jobs in local communities. Healthy ecosystems on farmlands provide both ecological goods and services (EGS), with direct economic and cultural benefits, including food, water and timber, as well as services such as  water filtration, flood protection, wildlife habitat and GHG sequestration. Where crops can’t be produced profitably, agricultural land can be put to use for EGS as part of Canada’s green stimulus plan. Doing so will put money in farmers’ pockets and keep much-needed Canadian farms in business.

Planting trees on marginal agricultural lands reduces atmospheric carbon dioxide levels by sequestering carbon. So does restoring wetlands and converting marginal cropland to perennial grassland cover. These are all examples of land use that delivers essential ecological services to society.  Beyond sequestering carbon, they deliver cost-effective natural infrastructure, reducing the impacts of flooding and drought and making water treatment less expensive. Climate-related water disasters are costly, rising to $28 billion between 2000 and 2017. Restoring natural infrastructure also saves money by decreasing damage to roads and other built infrastructure. Communities struggling with the tax revenue losses of COVID-19 can’t afford to spend 80% of their budgets on road maintenance with costs rising due to climate change. Natural infrastructure can help protect roads from flash floods and keep repair costs down.

 

The EU Green Deal’s approach to natural ecosystems 

As an example of international developments on natural ecosystems, the EU Commission (the executive branch of the EU) has included preserving and restoring ecosystems and biodiversity as well as a fair, healthy and environmentally friendly food system as two of the 10 planks of the EU Green Deal. In March of this year, the EU Commission proposed that regulatory and non-regulatory initiatives would enable the achievement of these objectives.

As an indication of the political support the EU Green Deal has garnered, in May the EU Parliament (the legislative branch of the EU) passed a motion with all-party support framing the EU Green deal as the foundation of the EU’s next seven-year budgetary cycle starting 2021. It also stressed the need for new sources of funding above and beyond existing sources and stated that “Parliament has been adamant that the Green Deal and the European digital agenda be a priority in the next long-term budget and the recovery strategy. If its demands are not met, Parliament warns it will make use of its veto powers.”

The Proposal

Given the important role of our forests, wetlands and farmlands for rural employment and in the transition to a net-zero economy, the federal and provincial governments should establish policies and investments that support them if we’re to meet our climate commitments in economically sound ways. These range from protecting larger swaths of forests, wetlands and marine areas, to improving logging and farming practices, to determining credible carbon-offset frameworks. These will take time. In the short term, there are opportunities for Canadians to Build Back Better through Natural Climate Solutions.

Here we focus on three core proposals that can play a role in a resilient recovery:

1. Incentivize farmers to adopt practices that sequester carbon on marginal agricultural land

Of Canada’s 158 million acres of farmland, 93 million are dedicated to crops. A quarter of Canada’s farmland is considered to be marginal land. The potential for sequestering carbon on marginal agricultural land depends on the willingness of farmers across the country to commit to, and invest in, afforestation, restoration and conservation efforts. Such incentive-based programs for farmers and rural-land managers do double duty by both sequestering carbon and delivering valuable natural infrastructure services like flood and watershed protection for nearby large cities and rural towns.

An investment of $400 million per year ($4 billion over 10 years) to support farmers in converting 10 million acres of marginal agricultural land to deliver ecological goods and services (EGS) that would sequester  22 million tonnes of GHG emissions annually by 2025 and create 5,600 jobs annually.

Farmers are already being supported to convert marginal land into new uses that deliver multiple benefits. For example, ALUS Canada works with farmers and ranchers on 27,000 acres of Canadian farmland to produce valuable ecological services, including clean air, clean water, flood mitigation, climate adaptation, carbon sequestration, habitats for species at risk and support for our native bees and pollinators.

During the COVID-19 pandemic, other noteworthy positive impacts of these investments in natural infrastructure include:

• creating more liveable communities and supporting residents;
• retaining and attracting highly educated young professionals to jobs in rural communities;
• engaging rural volunteers;
• introducing urban Canadians to rural communities and farming through media coverage of the important services that farmers and rural communities are providing; and
• increasing property values.

2. Incentivize farmers to use less nitrogen fertilizer, save money and reduce emissions

An additional investment of $200 million over the next 18 months to optimize and reduce nitrogen use on Canadian farms, create 2,800 jobs in hard-hit agricultural communities and reduce GHG emissions by 3.75 million tonnes annually.

Nitrogen fertilizer is the largest source of on-farm emissions. Nitrogen use in Canada has doubled since 1993, driving emissions higher; more than a quarter of all GHG emissions in agriculture stem from fertilizer derived from natural gas. Farmers need help to reduce fertilizer use while maintaining yield by implementing alternatives such as enhanced crop rotations that include more nitrogen-fixing legumes – nature’s fertilizer. Because lowering fertilizer use reduces costs, this investment would in time return $850 million per year to farmers through a 15% reduction in fertilizer use, with commensurate reductions in emissions. Paired with efficiency measures, this 15% reduction in tonnage would have little or no effect on yields. The immediate need is to hire hundreds of independent agrologists who can work in the countryside to help farmers reduce nitrogen use and attendant emissions.

3. Plant 10 billion trees by 2030

Canada has committed to planting two billion trees by 2030. Conservatively estimated, this will reduce emissions by three megatonnes by 2030 and six megatonnes by 2050, with an estimated average cost of $20/tonnes CO2e, and create an estimated 3,500 seasonal jobs each year.

While there are economies of scale involved in tree planting, it’s generally assumed that the cost-per-tonne of carbon emissions avoided rises with the ambition of a tree planting program due to varying absorption capacities of land across Canada.

Assuming that the costs rise in a more ambitious scenario, where the federal government is paying to plant a billion trees per year (an increase of 800 million from the current planned levels of 200 million per year, compared to the forestry industry’s current replacement planting of 500 million trees per year), Dave Sawyer, chief economist for the Canadian Institute for Climate Choices, estimates that the cost per tonne of reduced emissions on an annualized basis between 2020 and 2050 would be about $30/tonne CO2e.

The carbon benefits from planting trees will start slowly but grow quickly in the critical 2030 to 2050 period, when they can make an important contribution to flattening the GHG-emissions curve. Planting trees can also help restore degraded lands, increase tree cover in urban areas and improve ecosystem function on marginal agricultural lands. If the right types of land are targeted, that planting can create habitat for species at risk and other wildlife, provide relief from floods and prevent soil erosion, all in addition to sequestering and storing carbon. Urban forests can reduce temperatures in the summer (thus helping cities adapt to climate change), clean the air, improve water filtration, reduce stormwater runoff, promote physical activity and mental well-being, and reduce buildings’ heating costs.

As part of a resilient recovery, the commitment to plant two billion trees by 2030 could be scaled up to 10 billion trees. This could be done by putting an additional $16 billion into the Natural Climate Solutions fund over the next 10 years to plant an additional 800 million trees per year. 

To give an indication of the impact this would have, using data from Forests Ontario that attributes 8.2 jobs per million dollars invested in tree planting, a $1.6 billion federal spend to plant the additional 800 million trees per year would generate 15,000 full-time jobs per year, including 8,000 seasonal jobs for young tree-planters.

The effectiveness of an expanded tree-planting program will depend on carefully identifying where to plant. The impact of tree planting on the albedo effect (solar radiation reflected by surfaces) in northern areas, and the impact of increased forest fires as a result of climate change, need to be factored in. Also, biodiversity considerations need to be paired with climate considerations – reforesting a degraded area that was previously forested can have a positive impact on both, whereas foresting a native grassland can have both a positive climate impact and a significantly negative biodiversity impact. As well, the ability of trees to grow and thrive where planted, the degree to which planted trees are protected into the future and the ability of seedling suppliers to scale up all need to be incorporated into the design of the program.

Complementary policies

In addition to these two proposed investments, implementing other policies to support nature-based climate solutions will be important for achieving our climate and biodiversity goals.

First, the federal government needs to deliver on its commitment to protect 25% of Canada’s land and 25% of our oceans by 2025 – with an ambition of 30% of each by 2030. This will protect important ecosystems and biodiversity and contribute to Canada’s efforts to fight climate change. Protecting more of our land and oceans can also support nature-based tourism, for which there may be a growing market among Canadians following the pandemic’s impact on air travel. As with the recommendations we made in the industry white paper (to pay a carbon rebate of $100/tonne of avoided emissions for steel used in public infrastructure), the federal government could extend a similar premium for Forest Stewardship Council–certified wood products to reflect the locked-in carbon savings versus conventional materials.

Indigenous Protected and Conservation Areas – lands and waters where Indigenous governments have the primary role in protecting and conserving ecosystems through Indigenous laws, governance and knowledge systems – will be an important part of achieving the commitment. They represent a modern application of traditional values, Indigenous laws and Indigenous knowledge systems, an exercise in cultural continuity on the land and waters and a foundation for local Indigenous economies.

Second, in addition to tree planting, the Natural Climate Solutions fund is intended to support projects brought forward by communities, provinces, private landowners and businesses to reduce emissions from forests, wetlands and farmland. This is an opportunity for the federal government to support innovative projects that can be good for the climate, biodiversity and local communities. It could build from the example of the Great Bear Initiative, led by the Coastal First Nations in B.C., where conservation, local economic development and carbon management have been achieved in tandem. It has resulted in a first-of-its-kind carbon offset project, where the First Nations have the ownership and right to sell carbon offsets from their territories.

Projects supported by the Natural Climate Solutions fund will need to result in emissions reductions that are real, permanent, additional, verifiable and avoid leakage.

Research suggests that care must be taken to ensure that new climate-related agricultural policies are grounded in science. The National Farmers Union estimates that agricultural emissions could be cut by 30% by 2030 and 50% by 2050 using practices and technologies that exist today. These include changing the way farmers seed, control weeds, manage soil health, till and plough; moving from gas to electricity to power on-farm vehicles and equipment; and changing how livestock graze and how compost and manure are handled.

These changes can also boost farm profitability by cutting costs, increasing employment with more labour-intensive practices and improving water quality and soil health.

Forestry and agriculture sustained life in Canada long before the arrival of Europeans and long before the disruption of the fossil fuel era. As we turn our attention to how we can rebuild our economy, foresters and farmers have critical roles to play. For as little as 0.1% of annual GDP, Canada can rejuvenate its forest and agricultural ecosystems while at the same time creating thousands of jobs in hard-hit rural communities as we Build Back Better.

Ralph Torrie is senior associate with Sustainability Solutions Group and partner at Torrie Smith Associates.

Céline Bak is the founder and president of Analytica Advisors.

Notice to reader: Please be aware some of the figures and other details in this white paper have been updated in the Final Report to reflect feedback.

The post Building Back Better with nature-based climate solutions appeared first on Corporate Knights.

When we turn our attention to how we will restore our lives and our economy when the pandemic passes, the future of the electricity system emerges as a key question. While we are becoming even more dependent on electricity, we have been reducing the greenhouse gas (GHG) emissions and air pollutants from power plants by phasing out the dirtiest of the generating stations, switching out coal for gas, and investing in efficiency, solar and wind energy. Still, the power sector remains a major source of GHGs and pollution in many parts of Canada, and electric vehicles and heat pumps are opening up vast new markets for electricity that could threaten the gains we have made. The post-COVID recovery presents a historic opportunity to make a final push for a fossil-free, renewable electricity system for all Canadians. What would it take?

Good news and bad news

Thanks to the legacy of Canada’s vast, hydroelectric resources, most of the power we generate is emission-free, on a nationwide basis. In fact, because we generate more power than we consume, the carbon-free portion of our generation is enough to cover more than 90% of our domestic electricity needs. That’s the good news. The bad news is that our electricity system is divided into regional and provincial silos that are well connected with their U.S. neighbours but not with each other. As a result, there are provinces with large surpluses of renewable hydropower right next door to provinces that are still dependent on coal-fired power plants for most of their electricity. To provide carbon-free electricity to all Canadians, it will be necessary to build new transmission links between the “hydro have” and the “hydro have-not” provinces.

In addition to improving access to the current surplus of hydropower that exists in some provinces, the complete decarbonization of Canada’s electricity supply will require expanding renewable electricity production. There is more good news here. Since 2009, the cost of wind and solar energy has declined by 70 and 89%, respectively. You’ll recall from our Build Back Better Homes and Buildings plan that the cost of Model T Ford automobiles plummeted by 80% between 1910 and 1920. One hundred years later, we’ve seen the same tumble in the costs of renewable energy, both propelling and propelled by a 14-times increase in global installed solar capacity – from 40 gigawatts (GW) in 2010 to 580 GW in 2019 – and a fourfold increase in global installed wind capacity over the same period – from 148 GW in 2009 to 594 GW in 2019.

In Canada, the physical supply of sun and wind energy isn’t a limiting factor in determining the role these energy sources will play in our energy future. Wind energy is now the cheapest source of new electricity supply, and solar is not too far behind. Once the purview of backyard hobbyists, billion-dollar wind and solar projects are now commonplace. The 400 MW Vulcan solar project under construction in southern Alberta will be the largest in Canada to date, and Canada’s largest wind farm is the 363 MW Seigneurie de Beaupré complex in Quebec. Before the onset of the pandemic crisis, clean energy was firmly established as one of the fastest growing and dynamic sectors of the global economy, and it will surely resume that position in the post-pandemic economy.

Greening the grid: Connectivity is key

Ensuring Canadian provinces have equal access to the benefits of the emerging clean energy economy will require improving the infrastructure for interprovincial trade in electricity. Canada is an east-west idea in a north-south continent, and nowhere is this more apparent than in the electricity flows across the U.S. border. At more than 60 billion kilowatt-hours (kWh) per year, exports of electricity to the United States dwarf interprovincial trade, and what interprovincial trade does take place is dominated by the flow of Labrador’s Churchill Falls power to Quebec, which is itself about equal to 75% of Quebec’s power exports to the U.S. In western Canada, Alberta and Saskatchewan rely heavily on fossil fuel generation while sandwiched between B.C. and Manitoba, both of which have nearly 100% carbon-free grids, with power to spare. In eastern Canada, Quebec and Newfoundland generate a large surplus of renewable electricity, most of which is exported to the U.S., while the Maritimes and Ontario face the prospect of continuing or increased reliance on fossil fuel generation as aging nuclear plants approach retirement.

There may one day be a national power grid in Canada, but long distances between generators and markets and the bane of asynchronous grids make that day far off. In the medium term, in the context of post-COVID economic recovery investments in clean energy, priority should be given to building new transmission links that have the highest potential for expanding Canadian markets for existing clean energy and leveraging growth in new renewable power investments. These projects take time to plan and build, but they are necessary elements of any effective strategy for a sustained recovery based on clean energy. We have included the following shortlist of indicative projects in our scenario for a carbon-free Canadian grid:

• Add a 500 kilovolt connection between B.C. and Alberta to facilitate clean power flow to and from Alberta, $2–2.8 billion

• Strengthen the intra-provincial grids in Alberta and Saskatchewan to facilitate the growth of wind energy supply, $1.3 billion (transmission only)

• Add a new high voltage connection between Manitoba and Saskatchewan, $2 billion

• Build an additional Nova Scotia/New Brunswick tie line to facilitate the flow of Quebec hydropower to the Maritimes, $500 million

• Upgrade the current interconnection and build a new 2,000 MW high-voltage, direct current (HVDC) connection between Ontario and Quebec to facilitate the supply of hydropower to Ontario and to provide Ontario with access to seasonal reservoir storage in Quebec, $1.7 billion

Greening the supply: Tapping into Canada’s renewable cornucopia

To establish a reference level of carbon-free generation in Canada, we have added projects that are committed or under construction to the existing supply. This includes both the Site C hydro project in B.C. and the Muskrat Falls hydro project in Newfoundland and Labrador, as well as smaller planned additions to hydroelectricity generation in Manitoba and Alberta. As well, we have included wind and solar power projects that are underway or committed in most provinces, totalling an annual supply of 26 terawatt-hours (TWh). Depending on circumstances, these additions either displace fossil fuel generation or add to the surplus that is available for export or interprovincial trade. We also have assumed a reduction of 20 TWh per year to reflect the planned retirement of the Pickering Nuclear Station in Ontario. The net result is a reference level of 551 TWh of low-carbon electricity.

The new interconnections included in the above list allow increased supply of carbon-free electricity to Alberta, Saskatchewan, Ontario and the Maritimes. In the Maritimes and Ontario, the residual fossil fuel generation is relatively small and easily displaced with additional wind power and, in the case of Ontario, some refurbishment of aging hydroelectric stations. In Alberta and Saskatchewan, the feasible wind power potential (according to the GE Pan-Canadian Wind Integration Study) is not sufficient to completely displace fossil fuel generation, so further investments in solar farms were used to eliminate the remaining fossil fuel power plants.

All totalled, the scenario includes $8.3 billion for the transmission projects, $57 billion for 28.5 GW of wind capacity, $30 billion for 15 GW of solar capacity and $5 billion for storage facilities. Most of the storage is pumped hydro, and while it’s not fully modelled in this scenario, any stimulus measures should also be inclusive of additional hydropower potential to be reaped through upgrades and refurbishments. Annualized capital costs over the lifetime of the assets are in the range of $4.5 billion to $6.7 billion. By way of context, Canadian households, governments and firms already spend more than $60 billion per year on electricity. It’s envisaged that implementation of the scenario would extend over a 10year period, by which time the annual 75 Mt CO2e (carbon dioxide equivalent) of GHG emissions from the Canadian power sector would have been virtually eliminated.

This is only one scenario, but it is indicative of both the possibility for and the magnitude of a final transition away from fossil fuels in the Canadian electricity sector. When fully built out, it yields an annual carbon-free electricity supply of 625 TWh – 40 TWh above current domestic consumption levels. In order to focus on opportunities for federal economic stimulus investment, the scenario has focused narrowly on the supply side and the interprovincial trade in electricity, but there is an enormous potential to free up additional supply through efficiency gains in lighting and other electrical end uses, and through conversion of resistance heating to heat pump technology.

Finally, while investments in the bulk transmission system will help connect end users to centralized supplies of hydropower, seasonal storage, wind and solar farms, and local distribution systems are at the heart of the transition in the electric power sector. Electrification of buildings and vehicles, the growth of rooftop solar and other embedded generation (electricity production that is “behind the meter” in the traditional power sector), vehicle-to-grid storage, microgrids, 5G infrastructure, end-use efficiency gains and informatics, the changing out of inefficient electric resistance systems – all these things happen locally, wherever people live and work. In the post-COVID recovery period, the investments we make in local infrastructure and the built environment will determine how successfully we make the transition to a renewable and carbon-free electricity system. Opportunities for federal stimulus initiatives in this area range from green power procurement for federal facilities to investments in the acceleration of distributed power and smart grid systems.

Canada 2020–2030 Build Back Better Power Program

Recovering stronger by topping up our green power sources, storage and connections

The opportunity

We will continue to face many challenges in the coming weeks and months as the COVID-19 pandemic unfolds. As we work to “wake up” the economy in a safe and prudent manner, we should also be thinking about how we can build back better.

On average, Canada’s electricity grid is clean. Currently, 82% of electricity generation in Canada is carbon-free, and coal is set to be phased out by 2030 in Alberta and Saskatchewan. But for the moment, powering our electricity grid still results in air pollution, and after 2030 we will continue to see a rise in carbon pollution as gas plants replace coal power plants.

Saskatchewan and Alberta generated 82% and 91%, respectively, of their electricity from fossil fuels, split almost evenly between coal and natural gas, and Nova Scotia relies on coal for 60% of its power. Canadians living in these jurisdictions are exposed to air pollution that is harmful to their health, shortening lives by nearly a year, and now rivalling tobacco smoking for its negative health effects on society. Globally, the loweringof life expectancy from air pollution exceeds that by all forms of violence. Working together to clean up the air pollution caused by our grid is the right thing to do now.

Like the Building Back Better Homes and Buildings plan, the Building Back Better Power plan would deliver a strong triple benefit. Over 10 years, it would create 675,000 person-years of work, eliminate the 75 million tonnes of GHG emissions from the power sector and deliver better health to Canadians by reducing air pollution. A carbon-free grid across Canada would be achieved by:

• investing in the transmission infrastructure needed for increased interprovincial trade between B.C. and Alberta, between Manitoba and Saskatchewan, and between Quebec and both Ontario and the Maritime provinces. This will expand markets for low-carbon power surpluses while providing flexibility for Alberta or other importing provinces to become power exporters in the future;

• building the intraprovincial transmission capacity to ensure access to wholesale markets, thereby attracting investments in renewable energy, especially in the rich solar and wind regimes of southern Alberta and Saskatchewan; and

• decreasing air pollution exposure and providing the backbone needed to grow the flow of renewable power.

These proposals are consistent with the plan we put forth last week. They go hand in glove to reduce demand for energy to heat our homes and workplaces, to convert the power for our cars from fossil fuels to electricity and to ensure that all provinces have clean electricity grids with the requisite capacity. The Build Back Better Power plan would create more and better jobs each year for a decade as more and more people, both young and experienced, learn how to deliver transmission projects. Such a plan would benefit the West and the Atlantic provinces in particular. In turn, these transmission projects would accelerate renewable energy investment, resulting in more jobs and significant progress in building out the renewable energy supply.

So let’s explore the power of power.

The proposal: Build Back Better Power

A 20% federal incentive of $1.7 billion in line with the value of GHG-emissions reductions for the first two years after the project is commissioneding would attract $6.6 billion in private investment, for a total of $8.3 billion to finance Canada Clean Power Transmission Lines.

The Canada Clean Power Transmission System (Canada CPTS), to be commissioned within five years, would in turn help attract $92.5 billion in private, co-op and Crown corporation-sector investment to scale up the renewable power needed to make all provincial grids 100%t carbon-free. Wind energy would require $57.1 billion to deliver 28.5 Gigawatts (GW) of new clean power capacity, mostly in Alberta and Saskatchewan. Solar energy would require an additional $30.3 billion to deliver 15.1 GW of power, again to be sited mostly in Alberta and Saskatchewan. Nova Scotia and Ontario would benefit from surplus power from neighbouring Quebec to eliminate coal in Nova Scotia and to eliminate the need for gas power plants to offset the retirement of the Pickering Nuclear Station.

Accelerating the commissioning of the Canada CPTS to 2025 rather than 2028 or 2030 would help put Canada at the forefront of the burgeoning global market for clean power. It would create 675,000 person years of employment over 10 years and deliver 75 million tonnes in GHG reductions annually over the same period. Perhaps most importantly, it would deliver clean air to Canadians in Nova Scotia, Saskatchewan and Alberta.

Steps for Build Back Better Power to fund the Canada Clean Power Transmission System

1. The Canada Infrastructure Bank (CIB), with support from the federal government, commits to funding for grants to buy down risk to bring parties together, including:

· $1.7 billion to buy the emissions reductions for the first two years of operations for elements of the Canada Clean Power Transmission System that are commissioned before 2025. These concessions would attract $6.6 billion in private investment and would bring provincial parties together with the necessary speed and efficiency. The goal of the Canada Clean Power Transmission System would be to help unlock $92.5 billion in private, co-op and Crown corp–sector investment for renewable energy.

2. Provinces only pay for new interties (interconnections permitting passage of current between two or more electric utility systems) in years they see value from them through federal Price Indexed Transmission Contracts. The CIB takes long term price risk of interties providing a mechanism in which the provinces pay for the interties only when they see value in the trade. In years they do not see value in the intertie, the CIB pays for the revenue requirement of the intertie. The CIB would in theory collect enough revenue in the years the interties are used frequently to pay for the years that they are not used as much. This will ensue the provinces are not at long term electricity price risk or stranded asset risk.

3. If the Federal Government or its crown corporation wants to “sell-on” this risk, it could possibly do so with a 45 year perpetual bond on which interest only is payable for the risk weighted net present value of the intertie revenue requirement.

Building intra- and interprovincial grid connections have been a “priority” for decades.  Now is the time to bring parties together to build the backbone needed to attract investment at scale to deliver a zero-carbon grid by 2030.  Doing so would reduce air pollution for many communities and would create 675,000 person-years of work.  That’s the power of … power.

With files from Toby Heaps, Aleena Naseem and Laura Väyrynen

Notice to reader: Please be aware some of the figures and other details in this white paper have been updated in the Final Report to reflect feedback.

The post Building Back Better with a green power wave appeared first on Corporate Knights.

So how do we get there?

Greening our residences: Home is where the heart of GHG savings is

There are 15 million dwellings in Canada, including 10 million single-family homes and five million apartments with a combined floor area of 2.1 billion square metres.

Most of the housing that will exist 30 years from now is already standing, locking in 65 million tonnes of carbon emissions unless we intervene.

The age of a house is a much better indicator of how much it costs to heat than whether it’s located in balmy Vancouver or wintery Winnipeg. Canada’s existing housing stock leaks heat at several times the rate of the best new homes being built.

About two thirds of the residential-space heat is provided by fuel (mostly natural gas) and the rest by electricity (mostly electric resistance). The key to all low-carbon transitions is to combine efficiency and electrification with decarbonization of the electricity supply. A 10-year, phased-in program for thermally retrofitting and electrifying 60% of Canada’s dwellings would reduce GHG emissions by 45% and annual fuel and electricity costs by $12.7 billion per year, more if prices go up.

The retrofits would include:

• conversion to heat pumps for space heating and water heating;
• controlled ventilation with heat recovery;
• 40 to 70% reductions in thermal leakage (depending on the type and vintage of a building); and
• a 20% improvement in lighting efficiency.

No gains from appliance efficiency are included, and air conditioning is assumed to grow by more than 70%.

Once renovations are undertaken, Canada’s consumption of electricity by the residential sector would decline, even though electricity’s share of space heating would be close to triple today’s. In houses that are heated with electric resistance heating, the conversion to heat pumps results in a sharp drop in electricity demand, and this, combined with the building shell and lighting upgrades, allows the existing electricity supply to more than cover the demand from all the houses converted from fossil fuel furnaces.

The renovation industry’s Model T moment

Costing an investment strategy like this in 2020 is a bit like trying to estimate what it would cost for every household to own a car in 1910, when the two innovations that would make that possible – the moving assembly line and consumer credit – were still around the corner. The going rate for a Model T was $25,000 in today’s dollars, and Ford sold 19,000 of them. By 1920, the price had dropped by 80% to $5,000, and Ford sold 941,000 that year.

The housing renovation industry we have in place today could not deliver the retrofits we need for the low-carbon transition any more than Ford could have delivered 941,000 cars in 1910.

Canadians currently spend more than $60 billion per year renovating their homes (more than they spend on new homes), plus another $30 billion per year for heating fuel and electricity, resulting in 65 million tonnes of GHG emissions.

When costed at today’s prevailing prices, where every job is a custom job, a deep retrofit with heat pump conversion for a single-family house costs $40,000 or more. At that rate, the capital cost for the 9.5 million dwellings included in the transition scenario here would average $36.7 billion per year over the next decade. After allowing for the savings (at today’s prices), it works out to a carbon cost of $141 per tonne.

Is the equivalent of an assembly-line approach possible for the greening of Canada’s existing housing stock? In “mass retrofits” or “area retrofits,” many architecturally similar buildings in a common neighbourhood are systematically retrofitted. It’s an idea that’s gaining traction in many countries, and indications are that unit costs drop by more than 50%, sometimes much more. If the capital cost of the scenario described above were reduced by even 35%, the cost of carbon drops dramatically to $10 per tonne. The value of the retrofits also increases as the real price of fuel or electricity goes up.

The retrofit industry is ripe for disruption and ready for its “Model T moment.” Modern management methods, aggregation of projects and logistical genius are needed to achieve the efficiencies and economies of scale required to accelerate the pace of retrofits.

The sector also needs financing innovations and public investment in training. The homeowner should not have to bear the front-end costs and risks, let alone serve as their own general contractor. And the current practice of retrofitting in which a household routine can be disrupted for weeks or even months is unacceptable; a good target would be to limit the physical intervention in any dwelling to two days.

Greening our workplaces: commercial and public buildings

There are 750 million square metres of commercial and institutional buildings in Canada, with offices, retail outlets, hospitals and educational buildings being the four largest energy users. Annual fuel and electricity costs are $21 billion, and GHG emissions are 43 megatonnes (Mt) of carbon dioxide equivalent  (CO2e) per year. On a national basis, natural gas supplies more than 80% of the space heating needs of commercial and institutional buildings, but lights, fans, motors, pumps and a diversity of plug-in equipment keeps electricity’s share of total energy over 40%.

As with the residential buildings, the key to decarbonization in these buildings is the combination of thermal retrofits and conversions to heat pumps.

In the scenario developed here, we assumed:

• 60% of the sector would be retrofitted over a 10-year period;
• a 33% improvement in the thermal efficiency of the building shells; and
• a 50% reduction in electricity used by lighting and HVAC auxiliary equipment.

Under this scenario, total electricity consumption declines by 20%, even while electricity’s share of total heating grows from 10% to 60%, reflecting the same phenomenon observed in the residential buildings where the combined impact of heat pump conversions and building retrofits offset the increased share of energy provided by electricity.

The result: Energy costs will drop by a third ($7.3 billion), and GHG emissions will drop by 50%, or 22 Mt CO2e.

At a cost of $250 per square metre for the conversions and retrofits, the 10-year program has a total capital cost of $113 billion and generates GHG reductions for a cost of -$36 and +$74/tonne.

That assumes that gas and electricity prices and the carbon intensity of the grid stay at their current levels. The decarbonization of the grid will be the subject of another article in this series.

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Building retrofits could power up national electric-vehicle fleet – ­and years of jobs

This investment in deep retrofits presents two important additional opportunities. The deep retrofit of our homes, hospitals, schools and offices would free up existing electricity capacity for the conversion of our private cars to electric vehicles (EVs). The absolute drop in electricity consumption from the combined residential and commercial building retrofit would be more than enough to power an EV fleet of 13 million, more than one EV for each of the 9.5 million households included in the retrofit scenario. Rapidly deploying EVs can help address the negative health impacts of air pollution on Canadians. And the displaced gasoline consumption would cut GHG emissions by another 48 million tonnes of CO2e annually, over and above the 58 million tonnes of direct emission reductions from the building retrofits.

Taken together, the investments in residential and commercial building retrofits and electrification described here would reduce annual fuel and electricity costs by $20 billion.

It’s time to move the building renovation industry to its Model-T moment. A near-term $20 billion investment in residential building retrofits and a $6 billion investment in public and commercial building retrofits would set the wheels in motion to do that.

Targeted stimulus investment at this scale at this scale would generate an enormous number of jobs – ­up to 220,000 for a wide variety of professions and skilled trades. Training and deploying the workforce needed—much of which already exists–will be critical to the implementation of these retrofits. That investment and employment would be evenly distributed throughout the country (wherever there are buildings!), an attribute that makes it an ideal candidate for stimulus financing in the post-COVID recovery period.

Canada 2020–2030 Build Back Better Homes and Workplaces Program

The Opportunity

Canadians are faced with unprecedented challenges as they shelter in place during the COVID-19 pandemic. But in the coming weeks and months, we will be looking at how we can reawaken an economy that has been put to “sleep” to keep us out of harm’s way. Once building and construction is allowed to resume, a national program could enable Canada’s home and building sector to be part of Building Back Better – for instance, by scaling up Canada’s renovation industry so it can transition to a deep-retrofit industry that puts 220,000 Canadians to work over the next 12 months. This opportunity to deliver better, more climate-change-resilient homes and workplaces is also a chance to grow local manufacturing.

The estimated cost would be $20 billion for residential homes and $6 billion for workplaces. To put that in context, the residential portion represents just one-third of the $60 billion that Canadians already spend each year renovate their homes. The Build Back Better Homes and Workplaces Program will enable Canadians to save money, reduce air pollution and increase the value of their homes, all while making our dwellings and workplaces both more efficient and more resilient.

The Proposal

Build Back Better Homes: Invest $20 billion to deep retrofit over 300,000 homes in single- and multi-dwelling buildings and 8,000 apartment buildings to protect against floods and to reduce fuel and electricity costs by $19 billion over the next 20 years (in today’s dollars) while reducing greenhouse gas (GHG) emissions by 54 megatonnes (Mt) over the same period. This investment would also enable homes to power electric vehicles (EVs); this would go a long way toward reducing air pollution, which has been shown to contribute to the spread of the novel coronavirus and which already represents a considerable disease burden on Canadians in the best of times.

Build Back Better Workplaces: Invest $6 billion to retrofit 23 million square metres of Canadian public and private workplaces with place flood-protection measures and to reduce fuel and electricity costs by $11 billion over the next 30 years, while reducing GHG emissions by 33 Mt over the same period. It would also help ensure that workplaces such as hotels, restaurants, hospitals and schools are better places for Canadians.

Steps for Build Back Better Homes and Workplaces

1. Federal government commits to funding for grants to Build Back Better, including:

• $20 billion for homes;
• $6 billion for workplaces;
• 1%–2% of the capital for energy-audit and local capacity building;
• 1%–2% of the capital for “just transition” skills training in collaboration with colleges, universities and polytechnics; and
• 1%–2% of the capital for loans to local manufacturing and logistics companies wanting to grow and support this market.

2. Canada Mortgage and Housing Corporation (CMHC) publishes criteria for Build Back Better Credit Insurance for Home and Property Owners. The eligibility criteria for these lines of credit and mortgage-insurance policies would include:

• conversion to heat pumps for space and water heating;
• significant improvement on the EnerGuide rating for homes or ENERGY STAR score for buildings;
• controlled ventilation with heat recovery;
• 40%–70% reduction in thermal leakage from building envelope;
• 20% improvement in lighting efficiency;
• safeguards against basement flooding; and
• installation of EV charging stations.

3. CMHC establishes a public platform on which municipalities, retrofit contractors, equipment manufacturers, utilities, energy audit firms and home and property owners can register their interest in the Build Back Better Homes and Workplaces Program.
4. CMHC establishes a public platform that shows the average cost of Build Back Better Homes and Workplaces equipment and labour, based on postal codes. This platform, which is continuously updated, publishes regional reports on equipment costs and labour shortages.
5. Homeowners apply to banks for Build Back Better loans. Loans qualifying for rebates and discounts will be covered through the CMHC Build Back Better Credit Insurance for Homes and Property Owners.

• Phase 1 loans of $40,000 (2020–21) are 100% forgivable upon providing proof of a Build Back Better Audit, including information specifying costs and installed equipment.
• Phase 2 loans of $40,000 (2022–30) benefit from lower financing rates upon providing proof of a Build Back Better Audit, including information specifying costs and installed equipment.

6. Residential property owners apply to banks for Build Back Better mortgages. Loans qualifying for rebates and interest discounts will be covered through the CMHC Build Back Better Credit Insurance for Homes and Property Owners.

• Phase 1 loans of $45,000–$2,000,000 (2020–21) are forgivable upon providing proof of a Build Back Better Audit.
• Phase 2 loans of $45,000–$2,000,000 (2022–30) will benefit from lower financing rates upon proof of a Build Back Better Audit.

7. Workplace property owners apply to banks for Build Back Better mortgages. Loans qualifying for rebates and discounts will be covered through the CMHC Build Back Better Credit Insurance for Homes and Property Owners.

• Phase 1 loans of $250 per square metre with an expected range of $6,000,000 to $60,000,000 (2020–21) are forgivable upon proof of a Build Back Better Audit.
• Phase 2 loans of $6 to $60 million (2022–30) will benefit from lower financing rates upon proof of a Build Back Better Audit.

8. Banks underwrite Build Back Better loans and mortgages and sell the insurance, which requires registration with CMHC. When retrofits are complete and a Build Back Better Audit is presented, banks apply to CMHC for the Build Back Better for the loan benefit.

• Phase 1 loans are repaid by the Build Back Better Homes and Workplaces federal fund administered by CMHC. Banks receive reimbursement and use it to repay the loan or mortgage.
• Phase 2 loans could receive a discount on the basis of market operations undertaken by the Bank of Canada, which assigns a preferred cost of funds (-0.25 to lower than the Bank of Canada rate) to market operations associated with these loans.

9. Banks can then use green bond issuance and securitizations to continue incentivizing participation beyond the original forgiveness envelop.

To learn more, explore our retrofit calculators:

CK-Residential-Retrofit-Calculator

CK Commercial Building Retrofit Calculator

Ralph Torrie is senior associate with Sustainability Solutions Group and partner at Torrie Smith Associates.

Céline Bak is the founder and president of Analytica Advisors.

With files from Toby Heaps, Aleena Naseem and Laura Väyrynen

Notice to reader: Please be aware some of the figures and other details in this white paper have been updated in the Final Report to reflect feedback.

The post Building Back Better with a green renovation wave appeared first on Corporate Knights.