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IF Insights: Canada changes to second gear on the climate front, needs to do more

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As per the 'Budget 2023', Canada will be investing USD 40 billion in clean electricity while deploying credits to enable job-creating investments in clean technologies

In June, we witnessed the Justin Trudeau government introducing Canada’s much-awaited ‘Sustainable Jobs Bill’, thus preparing the country’s transition into a lower-carbon economy. The bill arrived despite opposition from Alberta, Canada’s main fossil-fuel-producing province.

Canada, which is the world’s fourth-largest oil producer and sixth-largest natural gas producer, has aimed for a 40% to 45% reduction in emissions by 2030, followed by becoming ‘Net Zero’ by 2050.

What Is There In The Bill?

The bill pitches for a partnership council to advise the Canadian government on job creation and supporting workers, apart from publishing an action plan every five years and establishing a sustainable jobs secretariat to ensure coherent policies across the nation’s federal departments.

The legislation will also hold the future governments accountable, when it comes to supporting Canada’s workers by putting in place structures, guidelines, and industrial accountability mechanisms.

PM Justin Trudeau promised such legislation in 2019, but faced criticism in Alberta whose Conservative Party Premier Danielle Smith accused the government of seeking to phase out the traditional regional sector.

In 2022, the Trudeau government launched the Regional Energy and Resource Tables to establish partnerships with provinces, along with stitching collaboration with indigenous partners, labour and industry to identify, prioritize and pursue opportunities for sustainable job creation and economic growth in Canada’s energy, resource and resource-enabled sectors through the development of regional plans.

‘The interim Sustainable Jobs Plan’, part of the ‘Sustainable Jobs Interim Action Plan’, has outlined federal measures like establishing the ‘Sustainable Jobs Secretariat’, creating a ‘Sustainable Jobs Partnership Council’, developing economic strategies through the ‘Regional Energy and Resource Tables’, introducing a sustainable jobs stream under the ‘Union Training and Innovation Program’, ensuring advance funding for skills development toward sustainable jobs, promoting indigenous-led solutions and a ‘National Benefits-Sharing Framework’, improving labour market data collection, tracking and analysis methods, motivating investors and drawing in industry leaders to support workers, collaborate and lead on the global stage and last but not the least, establishing legislation ensuring on-going government engagement and accountability.

The bill will ensure the formation of a ‘Sustainable Jobs Partnership Council’, which will be tasked with providing perspectives and recommendations to the government while engaging with Canadians, such as workers and communities, to ensure there is a clear mechanism for them to contribute to Canada’s sustainable jobs approach over time.

Also, the government will have to publish ‘Sustainable Job Action Plans’ on a five-year basis to ensure that it continues to be transparent and accountable to Canadians on the green economy front. To ensure further transparency, a ‘Sustainable Jobs Secretariat’ will be tasked to support the implementation of the proposed Act, apart from backing the ‘Sustainable Jobs Partnership Council’ and coordinating work across federal departments.

Government Switches Into The Action

Immediately after the Trudeau government placed the ‘Sustainable Jobs Bill’, Ottawa’s provincial government tabled the Canadian Sustainable Jobs Act, thus implementing the measures the federal government outlined in the interim sustainable jobs plan released in February 2023.

The 2022 Fall Economic Statement, presented by Canada’s Finance Minister Chrystia Freeland, has already provided USD 60 million for a three-year period, starting from 2023–24, to create new supplemental supports to existing programmes.

As per the ‘Budget 2023’, Canada will be investing USD 40 billion in clean electricity while deploying credits to enable job-creating investments in clean technologies. The federal government has also invested in skills programming for sustainable jobs.

Through climate plans like the ‘2030 Emissions Reduction Plan’, the country has been earmarking over USD 120 billion for its climate actions since 2016.

The Possible Roadmap

Over one-third of new spending has been allotted for investments in clean-tech industries, mostly investment tax credits to drive the private sector in clean electricity, hydrogen production, critical minerals, and the electric-vehicle supply chain.

Over the next 12 years, the government is likely to spend over USD 80 billion on investment tax credits for clean technology and renewable energy.

As per a report from Corporate Knights, to make its buildings more comfortable, affordable and energy-efficient, Canada needs to spend USD 57 billion a year on retrofitting and electrifying 10 million homes, plus USD 22 billion on commercial buildings. This includes phasing out old heating and lighting systems for modern, efficient systems with smart energy management.

The country also needs to spend USD 16 billion per year for building an extensive EV charging network, apart from creating an additional 2,000 kilometres of bike lanes.

Also, the global lithium-ion batteries market is expected to grow to USD 135 billion by 2031, and Canada has all the minerals needed to make EV batteries. It needs to cut emissions from heavy industries like cement and steel by 50% by 2030. To realise the goal, the country needs to spend at least USD 5 billion per year.

Canada Needs To Do More

The nation has announced green investment tax credits worth some C$35 billion (USD 26 billion), but it is nowhere near the massive uncapped incentives provided by Washington for clean energy investments under the Inflation Reduction Act (IRA) in 2022. The IRA reportedly has the ability to offer over USD 1 trillion to cleantech investors in the United States.

While Canada’s investment tax credits help companies make one-time capital expenditures, the US has upped the game by offering production tax credits that also cover operational costs.

Another headache is Canada’s reported inability to produce ‘critical minerals for EV batteries’ like Lithium, nickel, cobalt, manganese and graphite in large amounts.

The International Energy Agency (IEA) has even urged Canada to ramp up production of these critical minerals.

Steve Suarez, a partner in the Toronto office of Borden Ladner Gervais LLP, has suggested in a ‘Bloomberg Tax’ article that the Trudeau government should amend its tax regime to make it less risky and costly for companies to build mines whose primary output will be the above-mentioned critical minerals.

Final Verdict

Canada and much of the developed world will face climate catastrophes if they don’t drastically reduce greenhouse gas emissions by 2030, according to a United Nations report released on March 20.

The Justin Trudeau government has done a good job with the Sustainable Jobs Bill, apart from announcing an investment of up to USD 40 billion in clean electricity sources. However, the roadmap has blockages, which need to be quickly addressed by the country, if they want beneficial results within a short span of time.

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