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.

Canada’s manufacturers generate more than 10% of total GDP, export more than $354 billion in goods each year and employ 1.7 million Canadians. Along with all the many benefits, manufacturing also has a sizable footprint. When it comes to greenhouse gas (GHG) emissions, there are two distinct groups: general manufacturing and what we call heavy industry. The heavy industries are the energy-intensive, primary processors, sometimes called the “smokestack industries” – steel, metal smelting, pulp and paper, lime and cement, and industrial chemicals. They consume 80% of the sector’s energy and emit more than 85% of total manufacturing GHG emissions. Their energy and emissions intensities are tied to the production technologies and processes used to make useful materials from raw inputs like trees, ores and aggregates, often in high-temperature furnaces and kilns. They are economic and employment mainstays of the communities and regions where they are located, but most of them operate in global business environments and markets where innovation is driving rapid change. For them, the low-carbon path is a game changer.

The transition to a sustainable production system is proceeding on many fronts, led by a reframing that shifts the focus from commodities to services, and includes dematerialization and lightweighting, reuse and recycling, the substitution of renewable energy for fossil fuels and information for energy, the elimination of toxic by-products and pollutants, and a redoubling of efficiency everywhere. Human production systems may never equal the elegance, efficiency and circularity of the natural systems in which they are embedded, but that is the aspirational goal and that is the direction in which they were evolving when the pandemic put the world on pause.

We have become accustomed to thinking of the primary processors as being necessarily energy- and carbon-intensive, but nowhere is the drive toward cleaner production more intense than in the heavy industry group. Most of the technologies we need to dramatically reduce emissions already exist: in patents, in some engineer’s lab or already in commercial use.

For the rest of the manufacturers, from food and beverage to the auto and industrial machinery industries, energy is no less critical an input, but it is a smaller contributor to the cost of production. Particularly for light manufacturing like consumer goods manufacturing and food processing, decarbonization is possible by electrifying the energy and transportation used, which, although it requires upfront investment, is increasingly popular because of the favourable economic paybacks. This means that there are ready-made solutions available today to significantly reduce emissions, including switching from natural gas to electric heat pumps, improving process efficiency, electrifying fleets and using alternative fuels like sustainable biofuels or hydrogen where available.

A critical component of the transition to net zero will be creating a circular economy, one that designs products for durability, uses fewer raw materials and returns as much used material back into the production chain as possible. A circular economy reduces emissions and waste sent to landfill as well as pressure on natural resources. It also creates jobs and new economic activity: the International Labour Organization projects that worldwide employment would grow 0.1% by 2030 under a circular economy compared to business-as-usual, with a net creation of 18 million green jobs.

Setting Canada’s manufacturing industry on a pathway to decarbonizing as part of building back better can help meet Canada’s goal to be net zero by 2050, as well as support good jobs by enabling the manufacturing sector to weather the economic downturn while retooling for the future and, at the same time, make Canadian companies leaders in exportable low-carbon technology.

 Some key steps for getting there include:

• creating jobs in the transition to a zero-waste economy by setting policy direction that sends a clear signal to business;
• accelerating the uptake of technology to switch from natural gas to electricity where it already exists and is affordable;
• using the power of government procurement to support the use of zero- and low-carbon materials and the adoption of deep decarbonization technologies for cement and steel, and reward producers for the amount of carbon reduced; and
• attracting businesses that build low-carbon equipment and technology in Canada with research and development and business supports.

Building Back Better Manufacturing:

The proposal

1. Drive investment and innovation toward a circular, zero waste economy: Shifting our manufacturing and retailers to support the transition to a circular, zero-waste economy can reduce the need for raw materials, support local economic development and domestic manufacturing (including “upcycling” of materials), and reduce vulnerability to global market disruptions. It can also reduce waste that goes to landfill, reduce GHG emissions and support new jobs in the technologies to reduce, reuse and recycle products in the waste management sector, which has grown three times faster than the rest of the economy over the past two decades.

The recycling industry is currently in crisis. For the industry to work, companies need to earn a return on their investments. There is a clear role for the federal government here to help create markets for recycled material, for example by establishing mandatory recycled content in products and packaging that contain plastics. The federal government could also provide carrots in the form of financial support for new investment in circular economy initiatives in provinces that agree to better harmonize their extended producer responsibility (EPR) standards (under which producers of packaging and paper are responsible for 100% of costs) as well as Nova Scotia–style landfill bans – both of which create reliable supply for recycling firms).

While waste management is largely under provincial and municipal jurisdiction, the federal government has an important role to play in setting the policy and public procurement framework to help drive investment in the circular economy. This includes:

• setting rising standards and integrating requirements for the recycled content of plastic produced to drive demand for recycled plastic in Canada and send a clear signal to recycling firms that they will have a domestic market; this would reduce vulnerabilities to supply- and value-chain interruptions and boost domestic recycling capacity;
• delivering on the government’s commitment to ban harmful single-use plastic products while providing financial carrots for provinces to adopt a more harmonized approach to landfill bans, modelled on the approach taken in the EU; and
• making producers fully responsible for their products, including packaging, at end of life by working with provinces and territories to ensure that companies that manufacture plastic products or sell items with plastic packaging are responsible for the cost of collecting and recycling, through EPR programs, and to set increasingly aggressive targets for recycling.

2. Leverage public procurement: The steel and cement sectors produce critical materials needed to build our transit, buildings and infrastructure, and they employ tens of thousands of Canadians. As part of the pathway to net zero (which the Canadian Steel Producers Association has recently adopted as a formal goal), these sectors will need significant investments in new process technologies. But if Canadian steel and cement producers do not make these investments as soon as possible so they can begin gradually dialling down emissions, there is a risk that it will cost a lot more to move quickly later to comply with Canada’s net-zero targets.

All levels of government are significant purchasers of steel and cement for the construction of public works projects like hospitals, transit and bridges. To support the decarbonization of these sectors, Canada should follow the lead of California and Europe by adopting green public-procurement policies for construction materials. California’s “Buy Clean Act” will set standards for the maximum amount of GHGs produced by steel and other building materials used in public works projects. The European Green Deal is building on existing green public-procurement policies to drive toward the EU’s net-zero goal.

The federal government and some provinces have already taken steps to lay out guidelines for greener procurement.

The federal government can send a clear signal to the steel and cement sectors that there will be a strong market in Canada for low-carbon materials by:

• paying a premium for lower-carbon cement and steel in public projects ($100 per tonne of carbon avoided), based on an industry benchmark, that declines as the cost of adopting the technology decreases;
• adopting a policy to reward lower-carbon suppliers in its own public procurement that sets a maximum threshold for GHG intensity that declines over time; and
• requiring that comparable thresholds are phased in by provincial and municipal governments for projects that receive federal government funding.

It is estimated that a $350 million per year program in subsidies for avoided greenhouse gases could (if combined with $50 million per year for measurement and verification systems and $80 million per year in R&D support) help unlock the $3.7 billion of private capital investment per year that is required for deep decarbonization in these sectors, as well as open up potential opportunities for other low-carbon building materials. With these measures, energy economist Chris Bataille estimates that by 2030, the carbon intensity of steel and cement could be reduced by 30%, and the technology will have developed such that new facilities could be net-zero carbon by 2035.

3. Incentivize electrification of light manufacturing: Light manufacturing has been reducing its energy use over the last several years and increasing electrification. There is an opportunity to accelerate this process and reduce GHGs quickly by creating a financial incentive for facilities to convert from natural gas to electricity, making them more efficient and competitive and securing jobs. The federal government could help spur investment by the private sector in technologies like heat pumps with a time-limited investment tax credit of 50% for the purchase and installation of equipment that eliminates the use of natural gas. To attract the facilities that manufacture this equipment to Canada, such as heat pump manufacturers, the federal government could extend this investment tax incentive for new heat-pump manufacturing facilities located here.

4. Incentivize new circular, zero-waste facilities: In addition to setting the policy and procurement framework to help drive the transition to a circular, zero-waste economy, the federal government can help attract new businesses and technologies to Canada to take advantage of the market. To accelerate these new investments, the federal government could offer an investment tax incentive, similar to what was used to spur solar investment in the U.S., for businesses that want to set up in provinces that have established a policy framework that creates the right conditions for a circular economy (including the phase-in of harmonized EPR and bans along the lines of Nova Scotia, which has among the best diversion rates in the country).

Smart, dynamic policies can help us build back better by accelerating the circular economy, electrifying light industry and decarbonizing heavy industry – moves that will help us build a resilient foundation to strengthen Canada’s manufacturing sector for a thriving 21st-century low-carbon economy.

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

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

With files from Céline Bak.

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 by greening industry appeared first on Corporate Knights.

When the pandemic hit, Canadians were spending over 200 hours per year in their cars, driving a total of more than 300 billion kilometres a year – 2,000 times the distance from the earth to the sun. The cost of owning and maintaining private automobiles comprises a larger share of household spending than food, clothing or any other household expense except shelter, even without including the share of taxes that goes to building and maintaining the transportation infrastructure. Yet cars are parked 95% of the time and are increasingly slowed down by traffic congestion during the 5% of the time they are actually being used. 

We know that the gasoline-powered mobility system is not sustainable. Transportation accounts for 25% (185 megatonnes of carbon dioxide equivalent) of our total national greenhouse gas emissions, and between 1990 and 2018, GHG emissions from transportation grew by an eye-watering 53%. The trend is sobering and should make us reflect. In cities, our cars, SUVs and pickup trucks as well as the light freight vehicles that deliver our e-commerce purchases account for as much as 50% of the urban carbon footprint, bringing with it the air pollution that shortens the lives of children and adults alike. 

Canada’s aspirations to make the transformation to a low carbon economy are not achievable without deep reductions in personal vehicle emissions. Transportation remains a major and growing source of GHGs and air pollution. When we turn our attention to how we will restore our lives and our economy once the pandemic passes, the future of the system of our transportation and mobility services emerges as a key question. The post-COVID recovery presents a historic opportunity to make major improvements in Canada’s transportation system.

What would it take?

The Active and Safe Mobility Fund and Free and Safe Transit Fund

Physical distancing has encouraged new habits that depend on walking and cycling rather than driving and taking public transit. Let’s try to keep some of these new habits.

A number of cities are enabling more people to walk and cycle while maintaining physical distance by converting roads into pedestrian and cycling areas. There are several cities globally that are implementing low-emission zones (LEZ) or zero-emission zones (ZEZ), sometimes called exclusion zones. Currently, there are no such zones in Canada. –Some cities, such as Vancouver, are considering zero-emission zones, but no formal zones have been implemented. Low-emission zones benefit the health of residents thanks to reduced air and noise pollution resulting from a general reduction in vehicles entering the area. They can also be a source of revenue for the city implementing the policy, money that could in turn be redirected toward environmental initiatives and perhaps electric vehicle incentives.

In some cities, the thinking has shifted from giving preferential treatment to zero-emission vehicles to prioritizing pedestrians and cyclists and other active mobility as a way of getting around. For example, Milan has announced that over the summer, 35 kilometres of streets will be expanded for increased cycling and walking space to protect residents as COVID-19 restrictions are lifted. Closer to home, Vancouver banned vehicular traffic in Stanley Park, with the roads remaining open to joggers and cyclists. The change is temporary, but there are voices calling to implement the policy permanently. In general, active mobility corridors have several benefits, including reduced air pollution, greater opportunities for outdoor recreation in cities and incentives to use active mobility modes for transport instead of cars – once again improving the general health of the population. And spaces for active mobility where the air is clean may also play an important role for recreation that is affordable for families living with the economic fallout of COVID-19. That is why our first proposal for creating jobs by building back better mobility is for an Active and Safe Mobility Fund. 

This fund would support communities by creating permanent corridors for safe and active mobility for people walking and cycling to work and school, while maintaining physical distancing. The grants would be available for all permanent active mobility corridors that municipalities implement within the next 12 months. This program would put people to work right away by leveraging the pressing need for safe, active mobility. 

In addition, we are proposing a Free and Safe Transit Fund. This fund would ensure that people have free access to transit throughout all of Canada’s municipal transit systems for one year. It would require $6 billion in stimulus spending, which would flow directly into the pockets of people, with a strong tilt toward lower-income groups, where the GDP multipliers are highest. This fund will support essential and other workers who rely on public transit at a time when every dollar counts. It will also ensure that students are able to get to school without worrying about the cost of transit fare. The fund will guarantee the revenues that user fees have previously represented. It will also provide the cash needed to enable transit authorities to hire additional staff to clean the surfaces of vehicles and cars.

Where greater distances make walking and cycling unfeasible, and where transit is not able to meet mobility needs, we need to take a deeper look.

Electric vehicles are a must-have 

The reductions in the cost and improvements in the performance of electric vehicles are reminiscent of an earlier historical period, exactly 100 years ago. In 1920, in the wake of the global influenza pandemic, relatively few Canadian households owned a car. Ten years later, half the households in Canada had a private automobile. Every year throughout the 1920s, the price of owning a car dropped and the comfort and performance of the cars improved. We are at a similar fork in the road with electric vehicles. They are so much more efficient than fuel-powered cars that in spite of the higher cost of electricity, they cost much less to operate than cars that run on fossil fuels (about 80% less) and need less  maintenance. The total cost of ownership over the lifetime of an electric car is now lower than for a gas-powered vehicles in most cases, and sticker-price parity with gas-powered cars is expected within the next three or four years. 

There is another interesting parallel with the early history of the car in Canada. In the 1920s, the roads infrastructure and fuel distribution systems to support the burgeoning car population lagged behind the growth in car sales, as did consumer credit support for car purchases. Governments scrambled to build and pave the roads, and financing innovations paved the road to affordability for average families. Electric cars now face a similar situation – the cars are ready and Canadians are ready, but the financing and charging infrastructure lags behind.

By switching from gas and diesel to electricity for transportation wherever it’s feasible, it is possible to save money while making our drive to a net-zero emissions economy a reality. The situation is reflected in the federal government’s current goal for zero-emission vehicles (ZEVs), which is to capture 10% of all passenger vehicle sales per year by 2025, 30% by 2030 and 100% by 2040. 

However, Canada’s rate of zero-emission car, truck and bus deployment lags far behind that of other cold-climate peers – like Norway, where in 2019 electric vehicles represented 56% of all new cars sold (with the goal of electric vehicles being 100% of all new car sales by 2030). In Canada, electric vehicles, including hybrids, represent only 3.5% of passenger vehicle sales. In 2018, the market share of battery electric vehicles (BEVs) in Norway was 29.5%, while Canada lagged far behind at only 1.2%, in the company of the United States (1.62%) and Germany (1.05%). 

If our goal is to reach net-zero GHG emissions by 2050, why is Canada stalled? There are many moving parts to the mobility and transportation market, but there are at least four areas we need to improve: 

• providing loan guarantees to buyers where credit markets are still emerging (i.e. leasing and lending structures);
• accelerating investment in public infrastructure on which carbon-free vehicles depend (i.e. EV charging stations); 
• broadening eligibility for incentives to make up for the difference in price between new carbon-free vehicles and internal combustion vehicles (i.e. including fleets as eligible for EV incentives); and
• attracting investment to establish competitive supply chains (i.e. to process minerals needed to make batteries, as well as make and assemble components for EVs and charging stations and to assemble electric vehicles).

Canada has  programs in place to address some of these elements but needs to do much more. So let’s look at how stimulus programs by the federal government can contribute to creating efficient credit markets; increase EV purchases by individuals, businesses and public institutions; build charging infrastructure; and attract investments to create supply chains for a variety of EVs, including private automobiles, transit and school buses, and light freight trucks.

Establish efficient carbon-free lending for EVs

Let’s start with the consumer who wants to buy an EV. Buying a car became easier over the 20th century, ever since Henry Ford put his mind to making the purchase of a Model T something his employees could manage on the salaries he could afford to pay them while still keeping the price of the Model T down. To make things work, his employees needed to pay for their cars over time. The solution was for the banks to treat the car as an asset that could be used to underwrite the loan needed to buy the car. Doing this was a little tricky because in order to have “security,” the banks needed to know the value of the car from the time it rolled off the production line and was purchased, and each year thereafter for the duration of the loan. With this information, a bank could lend money for a car purchase because if the borrower could not pay back the loan, the bank could take back the car and sell it to repay what was owed. The risk of default was therefore very low, and as a result buying or leasing a car could cost only a little more than the “sticker price.” 

Fast forward to today.

Anyone who has tried to lease an EV in Canada has experienced sticker shock. And the shock is not from the price difference between the EV version of a car model and the ICE edition. The incentives mentioned above address most of that gap. The shock is from the cost of financing the vehicle: banks currently have little historical data on what the value of an EV will be at the end of the lease period, so the monthly lease payments for an EV are much higher, because of unrealistic worst-case actuarial assumptions that the EV will experience maximum depreciation over the course of the lease. That means monthly payments for an EV lease are often twice those of its ICE equivalent. Just like when Henry Ford started selling Model Ts, banks don’t yet have sufficient information on the value of an EV in each year of life after purchase, to the end of its useful life. Similar to our deep-retrofit finance proposal, we propose a federal guarantee of EV automotive loans over a period of three years to enable banks to collect data on the real residual value of EVs so that they can be financed in the same way as ICE vehicles are today.

Incentives for carbon-free ride sharing

Electric vehicles are starting to make their way into the Canadian market, but, as stated, we have not been quick off the mark. In 2018, only 1.2% of new motor vehicles registered in Canada ran completely on batteries, with no reliance on an internal combustion engine. That was a near doubling of sales from 2017, but we are a long way from the market share penetration of battery electric vehicles (BEVs) in another cold, sparsely populated, oil-producing economy: the market penetration of BEVs in Norway was 25 times higher than ours in 2018, at 29.5% of all registered cars. And in Canada, the up-take is much higher in some provinces than others, with 97% of EVs registered in 2018 in three provinces: Quebec, Ontario and British Columbia. 

One way to make progress fast is through car-sharing services such as EVO and Communauto, which have grown in popularity. These services enable us to access a  fleet of shared cars when we need it. They are hugely popular in cities like Paris, where many people have forgone the financial burden of owning, maintaining and insuring a car and the hassle of finding and paying for parking. Instead people are opting to use the EV fleet operated on behalf of the city of Paris. These EVs are parked next to charging stations in hundreds of prime locations designated by the city. 

Ride-hailing services such as Uber and Lyft have also grown quickly. Like car-sharing services, these are part of the growing category referred to as “mobility as a service” (MaaS). They have proven to be popular, but today, more than 50% of vehicle kilometres travelled (VKTs for short) are with no passengers in the vehicle. This has led researchers to conclude that ride-hailing services produce 69% more emissions than the trips they displace. That’s a steep price to pay for the convenience of instant mobility when the cars that provide that service are powered by ICEs. So to make ride hailing more economical for drivers and lighten these services’ environmental and health impacts, converting these cars to electric vehicles is a priority. For this reason, we propose that the existing federal zero-emissions vehicles program be extended to include ride-sharing and ride-hailing fleets (and that these incentives be available upfront rather than after purchase). Because BEVs cost less to operate than ICE vehicles, this program puts money in the pockets of drivers within one year.

On your marks, get ready, install more EV charging stations

Charging stations, either at home or on the way to and from our destinations, need to be available for us to be able to use our EVs – just as is the case with ICE cars and gas stations. In light of the slow growth in EV use in Canada, it’s not surprising that Canada’s position on EV charging stations also needs a big boost. 

With 5,004 charging stations, Canada’s ratio of charging stations to 100,000 inhabitants is 13.4, which is 35% that of France, 41% that of Germany, 47% that of the UK and only 7% of that of Norway (which has 186 charging stations per 100,000 inhabitants!).   The current focus of the federal Zero Emission Vehicle Infrastructure Program (ZEVIP)*, targeted at owners and occupants of multi-unit residential buildings (MURBs), is primed and ready to support the installation of charging stations within the year. But more could be done to speed up the deployment of charging stations where people live and work.

The ZEVIP program has $130 million in funding over five years and covers 50% of the cost of charging installation for eligible transit, workplace, fleet, on-street and multi-unit residential projects.  To accelerate the stimulus impact of installation jobs over the next 12 months, this program could be expanded to cover 100% of the expense of installing charging infrastructure (80% grant, 20% loan guarantee), with a focus on fleets and professional drivers to help reduce business costs during the economic downturn. The program could also be expanded to enable transit operators to prepare to operate electric buses and for the next 12 months – as we have recommended for EV purchase incentive– should be based on delivering funding in advance of the EV installation project, rather than after project completion.

To grow Canada’s EV charging infrastructure to levels approaching those of other advanced economies, this program could include hard targets of 1,500 public fast-charging stations; 10,000 stations for cars, SUVs and pickup trucks; 1,000 for fleet use, including local delivery vehicles; and 1,000 for transit to support bus electrification over the next 12 months. 

On your marks, get set, electrify the Trans-Canada Highway

Public charging stations are a key piece of the puzzle to ensure we get the electric vehicle growth we need. Connecting us from West to East and acting as the backbone for many roads “inland” is the Trans-Canada Highway. But efforts to electrify the Trans-Canada have not been realized, and there are interoperability issues with current charging stations. In some cases, matters are complicated by contractual arrangements for highway rest stops that are physically on Crown land but are governed by long-term leases held by companies that sell gasoline and diesel as well as provide food and services to travellers. With COVID-19, traffic to these rest stops is, and is likely to remain, depressed. 

For this reason, we have proposed the Electrify the Trans-Canada Highway program, which would leverage existing programs to deliver a public alternative in the form of 500 ultrafast charging stations, each containing 10 slots to charge passenger vehicles in five minutes and two slots for heavy freight haulers ultrafast charging. This would do for electrified transportation what the National Dream did for rail. 

Leveraging Canada’s EV supply chain to create an EV manufacturing hub

Our last proposal is to be ready to seize the opportunity to attract investment to establish a competitive Canadian supply chain for electric vehicles. Canada has a number of companies today that are making and assembling parts for electric buses and light freight trucks. It also has tier-one automotive manufacturers, as well as world-class nickel resources, which are key minerals for electric batteries. 

As part of a low-carbon recovery, Canada can build on this advantage to establish an EV manufacturing hub to harness the economic benefits of the growing global market for ZEVs. Creating an EV manufacturing hub could be accomplished with a dedicated industrial development strategy to identify potential clusters of expertise for expansion. Stimulus could play a part in this through a federal incentive of 50% for the cost of new facilities that create jobs (half grant, half loan guarantee). Ensuring that Canadians have the benefits of our move to zero-carbon transportation requires us to be competitive and ready to attract the industrial infrastructure for carbon-free vehicles and trucks. 

Building Back Better Transportation

The Opportunity

Tens of thousands of jobs could be created over the next 12 months with programs to support the electrification of transportation and construction of new cycling infrastructure. Many of the investments, such as those in charging infrastructure, facilitate and leverage much larger investments in the electrification of the transportation sector. Incentives for companies that are manufacturing EV components can help put Canada on a low-carbon recovery pathway and create good jobs. Transportation currently accounts for 25% of Canada’s emissions. These investments could reduce GHGs by at least 12 Mt CO2e per year by 2030, improve air quality, save drivers money and benefit people’s health by making active and public transportation more accessible. 

The Proposal

Stimulus investments to create jobs

The Government of Canada has made commendable progress over the last five years in the establishment of programs to increase the number of zero-emission vehicles (ZEVs) on Canada’s roads. To stimulate jobs over the next 12 months, these programs need to be turbocharged in a time-limited way, including:

1. Active and Safe Mobility Fund: Cycling and other modes of active transportation are important for reducing congestion and GHG emissions in cities, and can provide economic opportunities for tourism in smaller communities. Many municipalities have a roster of cycling infrastructure projects awaiting funding. Federal funding for projects that can begin construction in the next 12 months could create construction jobs, enhance cycling infrastructure and improve the health and safety of residents.Cost: $2 billion
2.  Free and Safe Transit Fund: This proposal would ensure that people have free access to transit throughout all of Canada’s municipal transit systems for one year.  Funds would flow through existing programs It will also provide the cash needed to enable transit authorities to hire additional staff to clean the surfaces of vehicles and cars.

Cost: $6 billion

3. Installation of charging infrastructure (national): The current Zero Emission Vehicle Infrastructure Program (ZEVIP) and Electric Vehicle and Alternative Fuel Infrastructure Deployment Initiative (EVAFIDI) cover 50% of the cost of charging installation. To kickstart installation jobs in the near-term, the government could launch new fast-track requests for proposals (RFPs) and would provide the financing in advance for any proponents able to complete projects over the next 12 months and ensure the program is sufficiently funded to support eligible projects. A loan guarantee should be provided for the additional cost for proponents that need it.

To have the desired job-creation impact in the near-term, the delivery of the program funding will need to be streamlined and efficient, using financial institutions to speed delivery if needed. The priority should be placed on projects that help fill gaps in the current Trans-Canada network and improve interoperability. 

4.Installation of charging infrastructure (local): To kickstart installation jobs in urban areas, federal support for the cost of installation and electricity upgrades could be provided to building owners, homeowners, municipalities, utilities and other businesses. This should include DC and Level 2 chargers and be in the form of 50% grant and 50% loan guarantee for projects that can be completed over the next 12 months. Electric vehicles can also provide distributed storage and peak management services to the new electricity system that is emerging, but only if the charging infrastructure is “vehicle-to-grid” ready. 

5.Incentives for ZEV fleet purchase: The current iZEV program provides a point-of-sale rebate for the purchase of a ZEV up to $5,000 per vehicle. Over the next 12 months, passenger fleets could be further incentivized to purchase ZEVs by: doubling the incentives from $5,000 to $10,000 for fleet vehicles

• doubling the incentives from $5,000 to $10,000 for fleet vehicles (for 12 months)
• providing a loan guarantee for the remainder of the vehicle cost, secured by the government;
• simplifying the process for consumers with a one-window approach for the loan and rebate at the time of purchase; and 
• removing the cap on the number of vehicles per business for “mobility as a service” companies such as car sharing, taxi companies and ride hailing to support uptake among those for whom the current tax incentive does not apply.

This could help these businesses and drivers save an estimated $6,000 to 8,000 per year per vehicle on operating costs and support businesses that manufacture ZEV components. In addition, a new rebate should be available for heavy duty vehicles to support the conversion of delivery truck fleets. This rebate should significantly help close the gap between the cost of purchasing fossil fuel vehicles compared to ZEVs.  

  Recovering with zero-carbon transportation jobs

6. Creating an EV manufacturing hub: Canada already has businesses with expertise in batteries, auto-parts manufacturing, assembly, autonomous vehicle technology and materials. As part of a low-carbon recovery, Canada can build on this advantage to establish an EV manufacturing hub to harness the economic benefits of the growing global market for ZEVs. This could be accomplished with a dedicated industrial development strategy to identify potential clusters of expertise for expansion and a federal incentive of 50% for the cost of new facilities that create jobs (half grant, half loan guarantee). 

7. ZEV Mandate: Canada can send a strong signal to ZEV suppliers by adopting a federal ZEV mandate that ensures Canada meets its targets for zero emissions light duty vehicles of 10% by 2025, 30% by 2030 and 100% by 2040. A mandate for manufacturers would ensure that Canadians have access to ZEVs and create additional incentive for the establishment of an EV manufacturing hub. 

As was the case with our proposals for green buildings and green power, the same kinds of “new normal” innovations have been making their way into the mobility sector for some time – changing how we access transportation services. These big changes are coming to the array of ways we rely on to access our workplaces, to see friends and family, for freight delivery to bring the food we eat to nearby stores, to deliver parcels and all of the millions of moving parts in the transportation system that keeps the economy going.

*Program name corrected.

To learn more, explore our transport calculator:

CK Transport 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 Gilliean McEachern,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.

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