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Since the last recession, talk of peak oil supply has been replaced by talk of peak oil demand.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

The post Crisis management: Lessons from the last recovery for this time appeared first on Corporate Knights.

Just maybe, however, 2020 will go down as the year we started getting things right. Science broke all speed records for developing effective vaccines. The United States elected a president with the greenest agenda ever. Solar emerged as the least expensive energy source in history. And more political and business leaders are recognizing that society’s vulnerability to COVID-19 is rooted in longstanding inequities and harmful behaviours that are finally being addressed.

All these trends, unexpectedly, helped make 2020 a banner year for Corporate Knights – and for anyone who cares about sustainability and social justice. As we continued our reporting and advocacy, we’ve seen several major advances this year:

• Our Building Back Better roundtable series last spring – masterfully moderated by the unflappable Diana Fox Carney – brought together a host of leaders in business, labour, science and government to explore innovative ways to spark a “green recovery.” The ideas put forth by our numerous experts – in energy, manufacturing, agriculture, construction, transportation and so much more – coalesced into an ambitious summary report whose proposals were endorsed by business leaders across all major sectors and are now seeping into policy agendas on both sides of the Atlantic. A short video of the Canada we could have by 2030 if we act boldly in the coming months and years can be viewed here.
• This fall we launched a follow-up roundtable series, Building Back Better Together, in partnership with the Embassy of the Federal Republic of Germany in Canada. This alliance demonstrates the growing international interest in collaborating on climate issues, and we can’t wait to see how this trend grows as the United States rejoins the Paris Climate Agreement. 
• To commemorate the 50th anniversary of Earth Day, we worked with Earth Day Canada and the Earth Day Initiative in the U.S. to produce the first-ever Green 50: Top business moves that helped the planet. Our list celebrated such game-changing events as Toyota’s launch of the first mass-produced hybrid car and Ontario’s decision to ban coal-fired power plants (still the world’s single largest GHG-reduction measure). Our goal parallelled that of Earth Day itself, as described to us by the movement’s founder, Denis Hayes: “To try to create enough pressure on governments and companies around the world to be aggressive in their [climate action] leadership.”
• The lockdown also opened a door for us to launch virtual Corporate Knights roundtables, building up a community of more than 5,000 engaged citizens, business leaders and public policy leaders who invested thousands of hours to explore and define the “angel in the details” of what it will take to build back better as we emerge from the pandemic pause. This year’s roundtables culminated in a fireside chat featuring Margaret Atwood, Sheila Watt-Cloutier, and David Suzuki, who offered a rousing call to action to take a moonshot at being the first to land a net-zero-emissions economy. 

Enough about us. I’d like to thank you for your support of Corporate Knights. Your engagement with our magazine, our events, our website and YouTube channel, and with our partners and advertisers is what enables us to go out every day and fight for sustainability and prosperity for Canada, the world and our children’s children. As the race to a zero-emissions economy speeds up and the climate threat grows, the perspective that government and science and business are all in this together is more timely and relevant than ever. We thank you for your support in 2020 and look forward to a more prosperous 2021 – the year we all begin to Build Back Better.

Happy New Year,

Toby Heaps

Founder and Publisher, Corporate Knights

The post My favourite year appeared first on Corporate Knights.

Finance Minister Chrystia Freeland made a down payment on clean-energy stimulus in her fall economic statement on November 30, but the $6.64-billion package of new measures over 10 years was far smaller than some clean-energy advocates had called for.

Corporate Knights calculates that the funding announced for a climate-focused recovery plan represents only 20% of the federal investment needed to meet the government’s own commitment to reduce greenhouse gas emissions.

In the government’s first major financial update since the COVID-19 pandemic shut down the economy last March, Freeland maintained a focus on support programs for individuals and businesses.

She promised a future budget with a more robust stimulus plan worth up to $100 billion over three years. It’s uncertain how much of that will be allocated to climate-change mitigation, given competition from other post-pandemic priorities such as a national daycare program to boost women’s participation in the workforce.

The federal green recovery plan, to date, falls well short of the commitments made by more ambitious national governments, including that promised by U.S. President-elect Joe Biden, who has pledged a US$2-trillion green recovery plan, subject to Congressional approval.

Numerous groups have urged the Liberal government to match the efforts of countries in Europe and East Asia that have announced major green stimulus plans, even as some of those nations remain in the grip of the pandemic.

As part of a green recovery plan endorsed by 50 business leaders, Corporate Knights proposed a 10-year, $108-billion program that would be front loaded to ensure that Canada can re-start the economy on a greener footing that it argues will be essential to tapping into global growth markets.

In a series of virtual roundtables hosted by Corporate Knights and the Embassy of Germany in Canada this fall, speakers pointed to opportunities in areas such as deep retrofits for buildings, the emerging hydrogen economy, and potential markets for non-combustible products from the oil sands that would trap carbon rather than emitting it into the atmosphere.

Corporate Knights publisher Toby Heaps described the Liberal plan as “meek,” saying, “I think the government’s response to the pandemic shows us what an emergency response looks like, and one cannot help but notice how different that looks from their response to the climate emergency.”

In a report this fall, another group, the Task Force for a Resilient Recovery, urged the federal government to adopt a five-year, $55.4-billion plan that would allocate $27.4 billion to deep retrofits of buildings.

As of the fall update, the Liberal government has allocated $12.6 billion over 10 years to climate-related action, including $6 billion already allocated to the Canada Infrastructure Bank. That figure will climb when Freeland unleashes her stimulus budget, likely next spring. The budget, she said in her speech, “will advance our progress on climate action and promote a clean economy.”

In the mini-budget released November 30, the minister allocated $6.64 billion in three key areas, though some of that money will be spent over 10 years: $2.6 billion over seven years for home retrofits; $150 million to install electric-vehicle charging stations; and $3.9 billion to plant two billion trees, preserve wetlands and boost sustainable agriculture.

The building-retrofit plan consists of $5,000 grants, which the government hopes will be used to improve the energy efficiency – and lower carbon emissions – of 700,000 homes. Freeland said the government will also fashion a plan for low-interest loans to support more expensive, deeper retrofits.

The grants alone will be insufficient to provide enough incentive for homeowners and landlords to make the deep retrofits needed to dramatically reduce greenhouse gas emissions from buildings, which account for 17% of the country’s total, said Ralph Torrie, co-author of a Corporate Knights white paper called Building Back Better with a Green Renovation Wave.

“At a time when the urgent need is to stimulate the business and logistical innovations for implementing mass, deep retrofits, we get instead $5,000 grants for households to go it alone,” Torrie said. “This will create lost opportunities by triggering halfway measures and upgrades that fall short of what is required for an effective emergency response to climate change.”

The fall economic statement is only part of the government’s plan, with other measures either recently announced or due to be released by the end of December.

Environment Minister Jonathan Wilkinson will soon be releasing an updated climate plan, while Natural Resources Minister Seamus O’Regan will release federal strategies on hydrogen and small modular reactors.

On the hydrogen market, the federal government lags several competitors who have already announced major strategies to be suppliers of “green” hydrogen, an emissions-free source that is derived from renewable power. Australia is fast-tracking a $36-billion hydrogen plan, while Germany and France are moving full steam ahead with plans to develop industrial uses for the clean-burning fuel.

Corporate Knights has proposed that Ottawa spend $1 billion on research and development efforts over the next five years and another $8 billion over the decade to deploy hydrogen technology across the Canadian economy.

Corporate Knights also recommended that the feds provide $1.4 billion in funding over five years to help the industry commercialize lightweight carbon-fibre production as part of a “bitumen beyond combustion” strategy, but the November 30 statement lacked any sign of a plan for shifting Canadian oil and gas economics.

How does Fall Economic Statement stack up against Corporate Knights’ Building Back Better Green Recovery Plan?

	Federal Contribution 2021-2030
	CK BBB ($M)	FES BBB ($M)	% Shortfall
Building Back Better Homes	14656	2600	82%
Building Back Better Workplaces	6000	2000	67%
Greening the Grid	6700	2500	63%
Building Back Better EV Uptake	11949	1650	86%
Building Back Better Active Mobility	2000	-	-
Building Forest Natural Capital	16000	3791	76%
Building Agriculture Natural Capital	6000	98	98%
Natural Resources and EV Innovation	40500	-	-
Building Back Better Industry	4800	-	-
Sum for all programs (2021-30)	108605	12639	TBD

Sources: Fall Economic Statement 2020 

Building Back Better with a Bold Green Recovery Synthesis Report

Earlier this fall, the Build Back Better Together roundtable heard compelling evidence that economic recovery strategies that aim to return to business as usual will reignite the growth in greenhouse gas emissions, as happened after the 2008/09 recession.

If governments want to ensure that they can fund the green recovery to avert the worst impacts of the climate crisis, they’ll have to collaborate with private-sector financial institutions, another roundtable session heard.

While there is growing focus on the importance of harnessing capital markets to address climate change, government action remains critical, said Sean Kidney, CEO of the London-based Climate Bonds Initiative, an international non-governmental organization working to mobilize debt markets for climate solutions.

“It is not possible for private markets to do this. That is a total fallacy,” Kidney said. “This is not something that is going to be solved by the private market. This is something that is going to be solved by close collaboration between public and private markets.”

In her fall statement, Freeland announced support for a Sustainable Finance Action Council, which will begin work in the new year with the goal of “developing a well-functioning sustainable finance market in Canada.” Pension funds and other investors have been urging corporations in Canada to provide greater clarity around climate-change-related risks and opportunities, and experts are urging governments to show leadership.

However, Canada still lags some of its peers in terms of financial commitment to a green recovery that will fund the transition to a net-zero economy.

The government estimated that its $100-billion stimulus package would be equivalent to 3 to 4% per cent of gross domestic product, but it is unclear how that figure was calculated. Spread over three years, the spending would represent more like 2% of GDP, and only a portion of that will go to green projects.

Many of Canada’s trading peers, including Germany, France and the EU, have already earmarked 30% or more of post-pandemic stimulus for climate action.

In partnering with Corporate Knights on the Building Back Better Together virtual roundtable series this fall, German Ambassador Sabine Sparwasser said her government is committed to a strategy that focuses stimulus spending on building back better.

“We’re not going to get out of the current crisis just by giving people social benefits,” Sparwasser said during one session. “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 post Feds’ fall economic statement shortchanges climate appeared first on Corporate Knights.

“The Government will ban harmful single-use plastics.”

These were encouraging words from Canada’s Speech from the Throne on September 23. And rightly so, the speech focused on making the health and well-being of Canadians a crucial part of our economic recovery.

Canada’s $32-billion blue economy – our oceans – must also be part of this strategy. The pandemic, climate change, habitat destruction and persistent overfishing have made it more urgent than ever that we invest in our oceans as the Earth’s largest life-support system. Canada now has a unique and powerful opportunity to make our oceans part of a sustainable recovery from COVID-19.

According to government figures, the oceans are a source of approximately 350,000 jobs in Canada — often in communities with few other employment options. The term “blue economy” casts a wide net and can include almost anything related to the ocean: energy, shipping, tourism, recreation, aquaculture, transmission cables and much more. But we can’t afford to ignore the original foundation of the blue economy: wild fish.

The throne speech stated that the government will “look at continuing to grow Canada’s ocean economy to create opportunities for fishers and coastal communities,” adding that “investing in the Blue Economy will help Canada prosper.”

Just two months into the pandemic, Prime Minister Justin Trudeau urged us all to “buy Canadian” to “help the people who keep food on our plates,” as his government invested $470 million to help fisheries recover. But you can’t buy Canadian fish if there are no fish to catch. And in many communities along all three coasts, without fish to catch there will be no long-term recovery.

Canada’s fisheries have been severely depleted over many decades, to the point where Oceana Canada’s latest Fishery Audit shows that only about a quarter of them can confidently be considered healthy. The value of Canada’s wild-caught seafood is dominated by a few shellfish species like lobster, crab and shrimp. Should any of these stocks suffer serious declines, the consequences to the fishing industry and communities would be devastating. And the situation is not improving. Our annual audits show that the overall health of Canada’s fish stocks continue to decline. The number of healthy populations has decreased from 2017 to 2020, despite new investments in science and management.

The throne speech made historic ocean commitments and delivering on them is central to harnessing the potential of Canada’s blue economy. In the coming weeks, a new mandate letter will be delivered by the Prime Minister to Bernadette Jordan, Minister of Fisheries, Oceans and the Canadian Coast Guard. That letter will contain Canada’s new, or renewed, priorities for our blue economy.

For Canada to create more opportunities for fishers, the seafood industry, and for coastal communities, healthy, abundant oceans must be a central focus of the government’s new fisheries and oceans mandate.

As an investment opportunity, oceans are more valuable now than ever before – and failure to rebuild wild fish populations represents a major loss for future generations. Globally, the ocean economy is the seventh largest economy in the world based on GDP. Ocean and coastal resources and industries contribute about $3 trillion per year (5% of world GDP) to the global economy and offer huge potential for further job creation and innovation.

Oceans are also a major source of renewable energy potential (through offshore wind and potential tidal power) and natural resources. Their environmental value is massive. Oceans eat up human-induced carbon dioxide emissions, produce over half of the world’s oxygen and regulate our climate. More than three billion people around the world depend on the oceans for their livelihoods.

Canada can be a world leader in harnessing the power of the ocean economy for food and job stability at home, and economic growth globally. We believe that investing in the blue economy will help Canada emerge stronger than ever, and hope that the new mandate letter reflects the full potential of our oceans.

We urge the government to renew its investment in rebuilding depleted fish stocks to ensure there are jobs – and fish – for our children and grandchildren.

Without fish, there is no blue economy, without a blue economy there will be no green recovery.

Josh Laughren is executive director of Oceana Canada.

The post Without a healthy blue economy there will be no green recovery appeared first on Corporate Knights.

As governments in Europe, North America and around the world announce trillions of dollars in stimulus to revive moribund economies, many experts are urging them to focus on climate-related efforts that will help the world avert the worst impacts on climate change.

This is a sentiment that has moved from the sidelines to becoming a key recommendation of the International Monetary Fund (IMF). The IMF’s recently released flagship publication in advance of its annual meeting emphasized the power of public investment in uncertain times, noting that raising public investment by 1% can increase private investment by more than 10%. It also noted that “the goal of bringing net carbon emissions to zero by 2050 in each country can be achieved through a comprehensive policy package that is growth friendly (especially in the short term).”

At the same time, institutional investors and asset managers are deepening their commitments to sustainable financing by increasing their investments in the green economy and providing fuller disclosure of their climate-related risks and opportunities.

It’s critical that government officials and business leaders have mutually reinforcing strategies in order to maximize the impact of both public and private financial efforts. Otherwise, governments could pursue investment plans that gain little traction among corporate strategists, while institutional investors may miss out on opportunities created by government programs that would reduce the risk of investing in the emerging clean economy.

While there has been growing focus on the importance of harnessing capital markets to address climate change, government action remains critical, says Sean Kidney, CEO of London-based Climate Bonds Initiative, an international non-government organization working to mobilize debt markets for climate solutions.

“It is not possible for private markets to do this. That is a total fallacy,” Kidney says. “This is not something that is going to be solved by the private market. This is something that is going to be solved by close collaboration between public and private markets.”

Kidney will join a panel of financial experts on Wednesday in a webinar, “Financing Green Stimulus: Opening the Purse Strings,” co-hosted by Corporate Knights and the German embassy in Canada. The virtual conference is part of a series sponsored by the German government; called Building Back Better Together, it looks at green recovery plans in Canada and Europe and highlights risks, opportunities and best practices to ensure those plans are practical and effective.

In a series of white papers released this spring, Corporate Knights advocated that Ottawa allocate $109 billion over the next decade to climate-related spending, with some 40% of that money earmarked over the first two years as part of a green stimulus plan.

That investment would generate an additional $681 billion of spending from private sector sources, for a 7-to-1 ratio of private sector/public sector contribution, according to analysis by Corporate Knights; Ralph Torrie, president of Torrie Smith Associates; and Céline Bak, president of Analytica Advisors. Together, that spending would reduce Canadian greenhouse gas emissions by 242 megatonnes annually by 2030, setting the course for a net-zero-carbon economy by 2050.

Similarly, the Task Force for a Resilient Recovery issued its report this summer, calling for Ottawa to embark on a $55.4-billion green recovery package over five years that would focus on building retrofits, electric vehicle production and infrastructure, clean power, natural infrastructure and adoption of clean technology.

On October 1, the Liberal government announced a $10 billion “growth plan,” which will see the Canada Infrastructure Bank (CIB) focus on five key areas. Some $6 billion of that will go to clean-energy infrastructure, the adoption of EV buses and charging networks, and energy retrofits for buildings. The CIB’s chief investment officer, John Casola, will participate in Wednesday’s web conference on climate-related financing.

The federal infrastructure bank was established to provide public-private collaboration in the financing of major projects in strategic areas of the Canadian economy. “Every dollar of public investment capital from the CIB will increase impact because we attract additional investment from the private sector,” says David Morley, the agency’s head of corporate affairs, policy and communications.

The CIB hasn’t indicated what level of private sector investment it requires before approving financing for a project, or what leverage of additional investment is expects with the $10 billion growth fund.

For the $2-billion building retrofit plan, the CIB indicated it would focus on large real estate owners, both public and private, to help them modernize their buildings and improve energy efficiency. However, residential homeowners – who have seen energy retrofit programs in the past – will likely require grants rather than loans to persuade them to do “deep retrofits,” says Corporate Knights publisher Toby Heaps, adding that a significant early push to scale up residential retrofits would be imperative to bringing the costs down through modularization, so that the momentum can be sustained without hefty public supports.

To pay for the green recovery programs, governments will rely on a mixture of new debt and tax measures. In Europe, there are proposals to tax internet giants like Facebook and Netflix, tax financial transactions, impose carbon border taxes, and extend carbon levies on shipping.

Ottawa could end tax breaks in a number of areas, particularly in high-GHG-emitting sectors, the Corporate Knights Building Back Better proposal said. It identified $240 billion in tax breaks per year, including $40 billion that amounted to “naked examples of corporate welfare, with almost no evidence of increased investment as a result.” As governments move to attract private sector investment in new electric-vehicle plants and other low-carbon industries, offering permanent tax breaks (rather than short-term grants) may prove fiscally unsustainable as clean industry supplants traditional industries as the locus of economic activity.

However, eliminating a tax break rarely results in a gain of $1 in revenue for every $1 “loophole” closed. These tax measures were put in place to help stimulate economic activity. If that activity ends as a result of the loss of a tax incentive, the tax revenue will also be lost.

Most of Europe’s green recovery will be financed through debt, taking advantage of rock-bottom interest rates that central bankers have said will remain in place for the next few years, at least. Canada’s Liberal government has also indicated that it’s prepared to borrow heavily to finance the recovery, though it has not released a budget that would provide such detail. (Finance Minister Chrystia Freeland is due to release a financial update this fall.)

There is growing interest in green bonds, which appeal to institutional investors and other asset managers that have made commitments to reduce the carbon intensity of their portfolios. Germany issued its first sovereign green bond in September; the €6-billion, 10-year offering was wildly over-subscribed. The EU plans to issue €225 billion green bonds to finance its recovery.

Last year saw a record US$263-billion in green bonds issued globally, up from just US$1 billion a decade ago, according to Moody’s Investors Service. The bond-rating service projects that up to US$225 billion in green bonds will be issued this year, despite a COVID-19-related slump in the second quarter.

There are two caveats concerning green bonds: some critics argue they provide little benefit in terms of financing costs and are essentially a marketing exercise, though there is emerging evidence that green bonds allow issuers to get even cheaper cost of debt. As well, there need to be clear guidelines as to what type of investments qualify as “green,” a standard-setting process known as taxonomy.

There are clear benefits to having an explicit connection between institutional investors and the sustainable projects they are financing, says the Climate Bonds Initiative’s Sean Kidney. But, he adds, a rigorous taxonomy is critical to ensure that green-bond issuers are truly financing sustainable activity. “That provides science-based guidance for what we have to do.”

As governments look to partner with the private sector to allocate capital to drive a zero-carbon transition, the need for better disclosure of carbon-related risks and opportunities is critical, including by any companies that want to have their bonds purchased by central banks. A network of central banks is currently pursuing further work to foster international disclosure and the standardization of data, says Henner Asche, who represents the German central bank in that exercise. He will also be joining the Corporate Knights panel on Wednesday.

Better disclosure is “a prerequisite for better climate-risk pricing,” Asche says. “Only on the back of better climate risk data can the financial system become a true driver of the transformation in the real economy.”

However, the business leaders in the “real economy” must be ready to change, says Sabrina Schulz, of Berlin’s Das Progressive Zentrum (The Progressive Centre). She notes that Germany and the EU are allocating hundreds of billions of euros to drive the structural transformation of the economy. “Right now, the structures are not there to absorb the money, to spend it wisely and to spend it on future-proof projects.”

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.

The post To pay for the green recovery, we’ll need to leverage public investment 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.

The post Throne speech laid down markers for a clean and caring economy appeared first on Corporate Knights.

“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.

The post CKTV: Lessons from the last global crisis come into focus appeared first on Corporate Knights.

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.

The post Lessons from the last recovery for this recovery appeared first on Corporate Knights.

Climate activists noted, with some combination of cynicism and optimism, how quickly the world managed to mobilize in the face of an immediate threat. And indeed, the radical change in human behaviour – the grounded planes, eliminated commutes, reduction in industrial production and power generation – had an impact. By early April, daily global CO2 emissions had dropped by 17% compared with mean levels in 2019.

But the gazillion-dollar question remains: Will the massive disruption of this pandemic serve to fuel our collective determination to combat climate change or undermine it? Will the political response to the crisis be conceived in terms of a planetary recovery or a short-term economic one? In the language of our leaders, will we decide to build back fast or will we build back better?

Europe, for one, seems to be opting for better. The EU’s recovery package, which has been built into its 2021 to 2027 budget, is unprecedented not only in its level of spending but also its commitment to climate and ecological goals. Vast in scope, it aims less to kickstart the economy than to fundamentally reshape it and place it on a greener, more sustainable footing.

It wasn’t clear that things would go this way – that the pandemic would supercharge Europe’s climate ambitions. Last December, as local health authorities were beginning to report cases of a mysterious pneumonia-like virus in Wuhan, China, the president of the European Commission, Ursula von der Leyen, was presenting member states with the commission’s most ambitious climate policy package to date: the European Green Deal. With an overarching goal of climate neutrality (zero emissions) by 2050, the proposals left no sector of the European economy – transportation, manufacturing, energy, construction, agriculture, digital technology – unturned.

But as the virus spread across the globe, voices critical of the deal grew louder: surely now was not the time for massive climate investment, surely policy-makers needed to focus on the immediate health and economic crises. Not surprisingly, this position was articulated most forcefully by the member states that felt they had the least to gain from any green deal: coal-reliant Poland and Romania, the pro-nuclear Czech Republic. But by the end of April, environment ministers from 17 European states had signed an open letter urging the EU Commission to address Covid-19, biodiversity loss and climate change as one. They framed the Green Deal as a growth strategy, “able to deliver on the twin benefits of stimulating economies and creating jobs while accelerating the green transition in a cost- efficient way.”

The economic rationale is important, given the scale of the spending that was announced in May: a €750 billion recovery package on top of a €1.1 trillion budget, totalling €1.8 trillion, 30% of which must be spent on climate action: investing in renewable energy, retrofitting buildings and expanding biodiversity through protection and restoration programs.

That spending will have to pay off, as, unlike the budget itself, which is generated largely through member states’ contributions, the lion’s share of the recovery funding will be borrowed on capital markets and will have to be repaid. Backers of Europe’s green recovery budget – from German Chancellor Angela Merkel to IMF managing director Kristalina Georgieva to former Bank of England governor Mark Carney – see this as a safe bet, not only because borrowing costs are low, but because investments in things like renewable energy and building efficiency are virtually fail-proof. They generate jobs, boost energy security (reducing dependency on Russia in the European context) and are not doomed to end as stranded assets of a carbon bubble.

The EU Commission is considering supplementary funding of its recovery package through a suite of measures that amount to 21st-century sin taxes – on non-recyclable plastics, carbon-heavy imports and digital behemoths like Apple and Facebook. These proposals are still under discussion but reflect an unassailable commitment to back the EU’s climate target with a level of investment that makes it realizable. It’s also determined to stay on track; last week the EU Commission raised its stepping-stone target for 2030 from a 40% to 55% reduction in greenhouse gases over 1990 levels, based on a cost-benefit analysis that deemed this more ambitious target “realistic and feasible.”    

“It’s hard to overstate what a breakthrough this is,” says Brook Riley, a Brussels-based Scotsman who is head of EU affairs for Rockwool, a Danish manufacturer of stone wool insulation. The breakthrough Riley is referring to is the EU’s net-zero objective – which, unlike most major policy decisions at the EU, did not reflect a compromise position but rather a unanimous endorsement by all 27 states of the most ambitious goal on the table.

Rockwool’s insulation, derived from volcanic rock, is one of many low-carbon products destined to play a major role in the coming overhaul of Europe’s building stock, which currently accounts for one third of the EU’s greenhouse gas emissions. Riley is seeing a frenzy of activity as states scramble to draft green recovery plans in a bid for their share of the €312 billion in grants to be disbursed in the coming months.

“It’s a race to figure out what are genuinely green investments, and that’s where we may see the cracks in the windscreen,” Riley says. “The administration of this will be very complex. There is no shortage of funding and no shortage of projects – it’s a matter of matching them.”

Critical to the success of this project is buy-in from the diverse states that make up Europe. The richer countries that traditionally support climate investment will receive a smaller portion of the green grants but can use political leverage – through the possibility of vetoes – to ensure that the poorer ones, which benefit more, actually use them wisely. There may be lessons in this kind of engineered solidarity for Canada.

“Poland has been wedded to coal much like Alberta is to the tar sands,” says Riley, “but Poland sees the writing on the wall.” By signing on to the net-zero goal, Poland entitles itself to a much higher level of financial support from the EU with which to finance the inevitable transition.

Isabelle Turcotte, director of federal policy at the Pembina Institute, the Ottawa-based clean-energy think tank, sees in the EU’s strategy a workable prototype for attaching green strings to recovery investment as well as a unity of purpose that Canada has yet to achieve.

“The disruption was already there,” says Turcotte, referring to the turbulence on the global oil and gas markets even prior to the pandemic. “Now we need to unite Canadians and support all workers in this transition.”

“We’re all in this together,” she says, echoing a trope that is suffering overuse in this pandemic. But the attitude will need to prevail if we, too, are to reach our own government’s goal of net-zero emissions by 2050.  Europe may well show us the way.

Naomi Buck is a Toronto-based writer.

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

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In advance of this week’s throne speech, a coalition of grassroots groups has launched the first Canadian bill that shows a $20 bill’s long-term value if the federal government invests in a green recovery.

Recent calculations made by economists at Corporate Knights found that for every $20 invested in a green and just recovery, $307.85 would be contributed to Canada’s GDP over the next 10 years. This figure was calculated by factoring $125 in direct investments by the private sector and other governments, as well as multiplier and indirect benefits.

The Green New Bill campaign talks up the potential value if the to-be-announced recovery package is invested in a green future, in particular on those low-carbon Canadian assets best aligned with global growth trends. Canadians are being invited to explore the $307.85 bill to learn more about the real socioeconomic impacts of a green recovery, from job creation to lowering global emissions to saving money on our energy bills.

Ralph Torrie, senior associate with Sustainability Solutions Group, said in a statement, “We can lay down a foundation for wealth creation, create a huge number of jobs [and] put Canada on a pathway to being carbon free by 2050 while restoring and supporting nature in the process. It’s a once-in-a-lifetime opportunity to make the changes that are necessary to get on the road to an economic and environmental recovery.”

The Green New Bill is an educative initiative informed by a coalition of grassroots groups, including the Green Budget Coalition, the Strathmere Group, CAN-Rac, Corporate Knights and the Task Force for a Resilient Recovery, led by the David Suzuki Foundation. The campaign figures are based on Corporate Knights’ Building Back Better strategy, which includes a $40 billion federal fund for research, development and deployment of breakthrough technologies to unlock billions of dollars of value from zero-carbon commodities, electric vehicles and batteries, non-energy applications of petroleum resources such as lightweight carbon fibres, and other innovations where Canada has the ingredients to succeed in globally competitive markets.

The fund would crowd in $105 billion of private capital while focusing on ensuring that all Canadians benefit from the intellectual property generated. The prize for getting this right? Canada gets to be the supplier of choice for $125 billion of zero-carbon commodities annually by 2030 while creating 1,000,000 person-years of employment.

Here’s how the plan breaks down 

Greening homes and workplaces: $3.80 yields $130 in GDP impact

With every $3.80 invested in greening Canadian buildings forecasted to yield $130 in GDP within a decade, investing in residential- and commercial-building retrofits and electrification is considered the most effective – and quickest – way to stimulate economic recovery, create jobs and facilitate emission reductions. That explains why doing so tops the agenda of most post-pandemic recovery strategies. By 2030, deep retrofits of 60% of Canadian homes and buildings will reduce our annual GHG emissions by 57 megatonnes and create more than three million person-years of employment.

Federal retrofit investing could provide grants and low-interest loans to jumpstart a nationwide campaign to upgrade the efficiency, comfort and quality of all types of homes and workplaces. The campaign hopes that the federal government will also finance workforce training and innovation in new business and financial models to reduce the costs of mass retrofits, as well as contribute to auditing and planning costs. Torrie says building heating/cooling and electricity savings of more than $20 billion per year will recoup the investment.

Greening the grid: $1.23 invested, $52.38 in GDP impact

The transition to a low-carbon future necessarily includes a massive shift to electricity for vehicles and buildings while at the same time ensuring that the electricity supply is carbon-free. Decarbonizing the grid in Canada will require $129 billion in investments that would generate more than 900,000 person-years of employment over the next 10 years and slash 75 million tonnes of greenhouse gas emissions. For every $1.23 invested in greening the grid, the GDP impact would be $52.38.

Federal spending would be highly leveraged in this sector, with the government taking a leadership role in the promotion of interprovincial trade in electricity. The key will be to focus on financing the construction of new transmission capacity between provinces that have a surplus of carbon-free electricity and those still dependent on fossil fuel generation. In provinces with high solar and wind potential, the federal government can speed the transition to a carbon-free grid by investing in renewable electricity and utility-level storage, for example by buying the emission reductions at the going carbon price. Torrie estimates that fuel and electricity savings of more than $24 billion per year will recoup the investment.

Among its many benefits, the Green New Bill will help reset relationships with Indigenous communities, says Torrie. “The decentralized and renewable technologies that comprise the emerging energy system are lighter on the land, lend themselves more readily to Indigenous community ownership and employment, and facilitate a real commitment to the standard of free, prior and informed consent.”

Supporting the electric vehicle revolution: $2.57 invested, $44.41 in GDP impact

Electric vehicles already have a lower total cost of ownership than gas-powered cars, but the initial cost and a lack of charging stations are barriers to uptake. In this plan, EVs make up more than 40% of all the cars and trucks on the road by 2030. Government spending in this area is focused on building the charging infrastructure in homes, communities and all along the Trans-Canada Highway, as well as on providing incentives for early adopters of electric vehicles, including buyers of trucks, school buses and transit buses. In addition, $370 million of the $2.57 billion would go to the construction of 2,000 kilometres of new bike and pedestrian rights-of-way. All totalled, the EV and active transportation transition are expected to generate more than 800,000 person-years of employment by 2030 and reduce GHG emissions by 66 million tonnes per year.

Nature-based solutions: $4.05 invested, $8.51 in GDP impact

Specific initiatives in this area include planting 10 billion trees, sequestering carbon by converting marginal agricultural land, and reducing the use of nitrogen fertilizer on Canadian farmland. These short-term measures will require $22 billion in federal investment, create 160,000 person-years of employment and reduce annual GHG emissions by 35 million tonnes. Complementary policies to protect at least 25% of Canada’s land and oceans and to encourage sustainable agriculture and forestry will ensure that these sectors continue their time-honoured contribution to Canadian prosperity.

Supporting Canadian innovations: $7.46 invested, $56.27 in GDP impact

The Build Back Better strategy includes a $40 billion federal fund for research, development and deployment of breakthrough technologies for zero-carbon commodities, batteries, electric vehicles, non-energy applications of petroleum resources, and other innovations where Canadian firms can succeed in globally competitive markets. The fund would crowd in $105 billion of private capital while ensuring that all Canadians benefit from the intellectual property generated. The prize for getting this right is for Canada to be the supplier of choice for the $125 billion zero-carbon annual commodities market by 2030 while creating one million person-years of employment.

Greening heavy industry: $0.88 invested, $16.17 in GDP impact

Green public procurement policies that include a premium of $100/tonne of GHG avoided for low-carbon steel and cement would give these industries the incentive they need to invest in new low-carbon production technologies. A $480-million-per-year program of subsidies for the development and deployment of low-carbon production processes in these industries could unlock the $3.7 billion of private capital investment per year they need for decarbonization. Complementary policies for the industrial sector include incentives for electrification and for zero-waste technologies and processes. These initiatives generate more than 234,000 person-years of employment and GHG emission reductions of eight million tonnes per year.

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