The financial crisis was only 12 years ago, but it seems almost everything has changed since.

At that time, policy was myopically concerned with two things. First, restoring liquidity in financial markets; central banks took unprecedented steps to do that. Second, bolstering aggregate demand through very large fiscal stimulus packages.

The crisis was devastating. But it and the policy responses did not seem all that complex. The fiscal stimulus was mostly of a conventional form. Lots of shovels-in-the-ground sort of thing. And it was almost all focused on the near-term. Indeed, Canada, like almost all other countries, dramatically swung to austerity just 24 months into the crisis aftermath, when the economy was still far from recovered.

Governments should, and appear to, have a lot more on their minds today.

Yes, there is some need to bolster aggregate demand for goods and services. But the pandemic has also hit aggregate supply hard, and that requires different approaches.

The focus is much longer-term now. There is a realization, at least in Canada, that we are slipping into a path of much lower potential growth, jeopardizing the well-being and the sustainability of the country’s finances as well as their ability to deliver needed public services.

There is also a realization that the historical sources of growth for Canada may not be there in the future. In 2008, Canada was years into a resource boom. It was dented by the crisis, but prices became strong again until 2014. Now we are in the sixth year of a depressed resource sector, and prospects for the future do not look so bright. Talk of peak oil supply has been replaced in this brief period by talk of peak oil demand. Canada’s powerful manufacturing sector had started to shrink by 2008, and it has continued on that downward trend, taking well-paying jobs with benefits with it.

Since the last recession, talk of peak oil supply has been replaced by talk of peak oil demand.

Even the environmental movement has become more sophisticated since 2008. An almost singular focus on greenhouse gas emissions has evolved into broader considerations of well-being, or the quality of life. And tangible evidence of the effects of climate change has heightened concern. There is less dogma around the idea that you can have growth or the environment but not both. Many now realize that with smart strategy both can be enjoyed.

These changes in context require a new perspective. We must find new sources of economic growth in Canada that promote or at least are compatible with environmental objectives. If this perspective can be put in the context of recovery from COVID-19, so much the better. But it goes much further than that. It is a perspective to deliver longer-term benefits to Canadians.

With our close economic relationship and physical proximity to the United States, a dark cloud of fatalism has hung over Canada the past four years, with many convinced that attempts at clean growth were futile given the apparent lack of interest in all things environment at the White House, even though actual developments were not as unfavourable as the rhetoric.

But now the clouds have been lifted, and our major trading partners in both the United States and Europe have adopted clean growth as their North Star.

Canada has all the ingredients to prosper in the clean economy, but it will take a lot more tangible action on the part of government and business if we are going to seize the opportunity.

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“It’s not just a case of sticking a whole bunch of shovels into the ground,” said Don Drummond (Queen’s University) . “We need a new mechanism and new sources of growth in Canada. The traditional sources aren’t working.”

The panel featured:

Ambassador Sabine Sparwasser (Germany), Ambassador Kareen Rispal (France), Don Drummond (Stauffer-Dunning Fellow & Adjunct Professor, School of Policy Studies, Queen’s University, Canada), Rainer Agster (Executive Board Member, Adelphi, Germany), Richard Florizone (President & CEO, International Institute for Sustainable Development, Canada), Sanda Ojiambo (CEO & Executive Director, UN Global Compact), Claire Tutenuit (Déléguée Générale, Entreprises pour l’Environnement, France).

To watch the full recording of the roundtable, head to CKTV.

See our recent coverage of the EU budget deal for a taste of the discussion, as well as Shawn McCarthy’s piece explaining the consequences of building back to business as usual.

About this series

In the spirit of globalizing a green recovery, Building Back Better Together explores key insights for how the international community can build back better post-COVID. The roundtables bring together Canadian, German and other European experts, policy-makers and business leaders to exchange insights from the current crisis to spark a global green recovery. 

This virtual series takes place under the banner of Ottawa Climate Talks, initiated by the German Embassy, which have explored climate-related topics since 2015. 

Our goal: To inspire Canadian and European decision-makers to seize this opportunity to Build Back Better Together.

These roundtables are aimed at policy-makers, business leaders, investors and civil society members from around the world, with a strong Canadian and European contingent. Each session will be preceded by a table-setting backgrounder by Shawn McCarthy, shared with registered participants in advance of the roundtable. The discussion will be international in breadth, with focused learning to support action across borders.

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GHG emissions are expected to decline by 8% in 2020, down to 2010 levels, the Organisation for Economic Co-operation and Development said in a September report. However, unless governments impose a strict climate lens on their recovery programs, the GHG reductions will likely be short-lived and growth will resume at an even-quicker pace, said the Paris-based organization that provides policy advice to developed nations.

Stimulus programs around the world have governments preparing to open the fiscal floodgates to support citizens and businesses hammered by the pandemic’s impacts, all while reviving their economies. The European Union and its member states are leading the way on green recovery plans as they announce initiatives worth hundreds of billions of euros to support clean energy; low- and zero-carbon transportation, buildings and infrastructure; and innovative technology companies that provide long-term economic and environmental benefits.

European governments are looking to leverage the pandemic recovery to drive widespread adoption of solutions to critical problems that existed before COVID-19 struck and will be with us long after it becomes a painful memory.

“We’re not going to get out of the current crisis just by giving people social benefits,” Sabine Sparwasser, Germany’s ambassador to Canada, said in an interview. “We need to invest in new technology in order to address the other crisis that is out there and is even bigger: climate change.”

The German government – which has announced a €130 billion green recovery plan – is partnering with Corporate Knights on a series of virtual roundtables this fall to address  how the international community can work together to build back an economy that is more efficient, more inclusive and greener.

In its speech from the throne on September 23, the minority Liberal government said that climate action will be the “cornerstone” of its recovery plan, with the aim of creating one million jobs. The Liberals have not put dollar figures on their proposed stimulus package but said in the throne speech that they will reveal those details in a financial statement this fall.

Parallels between the global financial crisis and the current economic slump are limited but can yield important lessons. The causes of the downturns differed greatly, as did the impacts and the sense of urgency around the climate crisis.

The 2009 recession hit heavy industry and construction particularly hard, prompting talk of a “he-cession,” while the current crisis has been particularly difficult for female-dominated sectors, such as hospitality, restaurants and traditional retail, while playing havoc with parents’ ability to keep children in school so that they can focus on work.

As well, in the intervening years, governments made commitments on emissions-reduction targets under the 2015 Paris climate accord and are due to strengthen those commitments this year.

“The fear is that because the economy has been so down, we will want recovery at any price,” said France’s ambassador to Canada, Kareen Rispal.

France has announced a €100 billion recovery plan focused on areas like clean transportation and energy efficiency. That comes on top of €130 billion the government had provided to support individuals and businesses hit by lockdowns and the economic fallout of the pandemic.

Rispal said the world cannot afford a repeat of the 2009/2010 scenario, when emissions rose dramatically as the global economy rebounded from the deep slump. “We shouldn’t sacrifice the environment because we want this economy recovery. But we think we can do both.”

The experience from 2009 and 2010 indicates the dangers of building back business-as-usual.

As the financial crisis precipitated the deepest – at that time – recession since the Great Depression, emissions declined in 2009, falling by 1.4% globally and 7.6% in the developed world. In 2010 – despite some green stimulus policies in Europe, the United States and South Korea – emissions growth roared back, with GHGs rising 5.9% per cent, the fastest rate in nearly a decade, according to a report from the University of Oxford’s Smith School of Enterprise and the Environment (SSEE).

Economist Don Drummond said there was a sense of panic in 2009, as the financial system teetered on the brink of collapse. While the current economic crisis is painful, the damage is more focused on specific sectors where short-term assistance can be provided. He said the evidence shows there’s a firm economic imperative to consider climate change – the physical costs, social implications and how it’s reshaping global markets – in the economic recovery equation.

Governments can then put in place stimulus policies that not only revive overall demand but target problems that existed prior to the pandemic, including poor productivity and income growth, inequality and the climate crisis, Drummond said.

In a recent analysis from SSEE, a group of prominent economists that includes Joseph Stiglitz and Nicholas Stern argued that evidence from the 2009 slump showed that the investments in a green recovery outperformed traditional stimulus programs, in both short- and long-term results. Support for renewable energy development and energy efficiency in buildings, in particular, quickly put people back to work while providing longer-term dividends related to productivity gains and environmental benefits, they said.

One of the most successful 2009/2010 programs was the U.S. Department of Energy’s loans to emerging clean-technology companies. Critics panned the program when one of its major beneficiaries, Solyndra LLP, a solar panel manufacturer in California, failed in 2011 after receiving a US$535 million loan.

However, that loan program is also credited with allowing Tesla to rapidly expand and challenge the traditional auto industry, whose members are all now developing electric vehicles. It also financed large-scale solar and wind projects, which allowed the industry to lower its costs. Wind and solar projects now often have lower costs than fossil-fuel electricity generation for new power facilities.

Decisive government intervention is required, the SSEE economists concluded, to address climate change “by tipping energy and industrial systems towards newer, cleaner, and ultimately cheaper modes of production that become impossible [for fossil-fuel-based producers] to outcompete.”

For an in-depth discussion with expert commentators, register for Wednesday’s roundtable.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

With the support of the Embassy of the Federal Republic of Germany in Canada.

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