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Capital Plan for Clean Prosperity: Transport

 With files from Aleena Naseem and Toby Heaps

The urgency of transitioning to a low-carbon economy is becoming clearer by the day with the best science calling for increasingly drastic emissions reductions to help head off catastrophic climate change impacts. While a daunting task, the economic, social and environmental opportunities of transitioning into a low-carbon economy are significant. An aggressive clean stimulus program to implement decarbonizing technologies at scale could bring Canadians substantial economic benefits, including GDP growth and hundreds of thousands of new jobs. The entire program would require investing a little less than 2% of GDP over the next six years. It would also enable Canada to emerge as a serious actor in the growing low-carbon technology market.

To demonstrate the economic prospects of various sector-specific targeted clean stimulus measures, Corporate Knights worked with industry, government and academic experts to develop The Capital Plan for Clean Prosperity. The plan has been divided into five sectors that have the biggest carbon and economic footprints in Canada: buildings, transportation, electricity, oil and gas, and heavy industry. Based on our calculations, “greening” the transportation sector could generate up to 257,000 new jobs and increase cumulative GDP by up to $56 billion from 2020 to 2025 (inclusive). In this analysis, transportation includes personal transit, public transit and freight. The transportation sector produces approximately 23% of Canada’s greenhouse gas emissions. Investing in reducing the sector’s emissions can make a significant environmental impact and help move more freely and safe lot of money at the pumps.[1]

With the federal election rapidly approaching, parties are introducing various pathways to reduce emissions from the transportation sector:

  • The Conservatives are proposing to introduce a Green Patent Credit that would encourage the industry to develop, for example, more efficient electric vehicle (EV) batteries. The party also suggests regulatory changes for freight vehicles passing over the Canadian border to improve efficiencies.[2]
  • The Liberal Party has committed to investing $51 million to expand their current zero-emission vehicles (ZEV) rebate to include used ZEVs.[3] They have also proposed earmarking $700 million to electrify transit and transportation and installing 5,000 EV charging stations. The party would require that new federal investment in public transit be used to support zero-emission buses and rail systems. The Liberals also promise an additional $3 billion per year in funding for urban transit in addition to enhancing Canada-wide transit networks.[4]
  • The NDP calls for a large portion of federal transportation funds to be directed towards low-carbon transit projects. The party’s goal is to electrify all transit and municipal fleets by 2030 and have all new car sales be ZEVs by 2040. The federal ZEV incentive would be expanded, and the sales tax for ZEVs would be waived. EV charging networks would be expanded. The party also wants to start building a path to fare-free transit and expand rail and bus services into rural regions.[5]
  • The Green Party would ban the sale of internal combustion engine vehicles by 2030, and ZEVs would become exempt from the federal sales tax. The party aims for all public transit to be zero-carbon across Canada by 2040. Public transportation connections would be extended into rural and remote communities. The EV-charging infrastructure would be expanded. A Green Freight Transport program would fund rerouting tracks for freight and rail yards away from populated areas.[6]

While commendable, these policies lack ambition, detail or firepower.

We conducted extensive calculations based on data from sources such as Statistics Canada, the International Council on Clean Transportation and the Insurance Bureau of Canada. These calculations point to a higher level of ambition, one that could be realized with a mix of policy, charging infrastructure and, most critically, a large chunk of change ($40 billion over six years) paid out from the public purse. Our calculations project that a clean stimulus of this scale could produce the following benefits:

  • raise GDP between $47 and $87 billion,
  • add 82,000 to 257,000 full-time jobs,
  • increase tax revenues by $15 to $28 billion,
  • drive direct monetary savings of $64 billion from 2020 through 2025,
  • and reduce emissions from 168 megatonnes (mt) CO2 equivalent (CO2 e) in 2016 to 146 mt of greenhouse gases (GHGs) by 2025 (equivalent to taking 4.6 million cars off the road for a year).

 

The range in the figures is due to the use of different multipliers from different data sources.[7]

 

The policies that would bring us these numbers are the following[8]:

  • Implementing a Quebec-style zero-emissions vehicle sales quota, rising to 15.5% by 2025 for passenger vehicles; total cost: $4.6B
  • Closing the public transit funding gap; total cost: $22.5B
  • Ensuring that all new public transit buses are ZEV starting in 2020; total cost: $2.5B
  • Developing a nation-wide EV-charging infrastructure; total cost: $0.5B
  • Establishing a federal grant system to allow for 50% of new freight trucks to be ZEV; total cost: $14.4B

 

Public investment needs

Implementing the aforementioned policies would require public financing of close to $40 billion over the next six years, of which $25.5 billion would be invested in public transit and $14.4 billion to cover the incremental costs of making half of new freight trucks zero emission. The first policy, ZEV quotas, mimics the policy in Quebec, which mandates that ZEVs need to be a certain percentage of all new vehicle sales. In our calculations, we scaled Quebec’s target (15.5% of all vehicle sales to be ZEVs by 2025) to be Canada-wide. The second policy, closing the public transit funding gap, would mean a total investment of $22.5 billion dollars over six years to improve public transit networks across Canada. The third policy would ensure that all new public-transportation bus investments are zero-emission, the incremental cost of which would total $2.5 billion. The fourth policy is to develop a sophisticated and extensive EV-charging infrastructure with a total investment cost of $500 million. This is an important way to increase EV adoption by limiting, for example, range anxiety. The fifth policy would be to establish a federal grant system to enable freight truck fleet operators to cover the incremental cost of making new vehicle purchases zero-emission.

 

The financing of these policies (excluding passenger vehicles) would be executed by establishing a federal fund, the Zero-Carbon Vehicle Fund. The fund would be financed by federal green bond issuances to raise the required $40 billion.

 

Economic and environmental benefits

 

Job creation: 82,000 to 257,000 jobs

The jobs created with these policies would be new, full-time jobs. Based on our calculations, 11,600 to 16,100 new jobs would be created in the personal transport sector, 46,100 to 191,000 new jobs in the public transit sector, and 24,800 to 50,000 new jobs in the freight industry, in sectors such as manufacturing, travel and tourism, and professional services.[9]

Increase in GDP: $47 to $87 billion

If the suggested policies were implemented, the GDP increase from 2020 through 2025 could range from $4.9 to $12 billion in personal transport, from $27.1 to $38.2 billion in public transportation and $15.3 billion to $37.3 in the freight industry. For the average Canadian, an increase in GDP could mean higher average income levels and lower unemployment numbers nationwide, including in well-paying blue collar factory and public transit jobs

Fuel and maintenance cost savings: $64 billion

Lower fuel costs and lower lifetime maintenance costs for EVs could save car owners $9 billion in total from 2020 through 2025. The public transport sector would save $1.3 billion also in fuel and maintenance costs, opening up the possibility to redirect these funds to finance a more extensive and reliable transportation network. The freight industry would save $53.8 billion in fuel and maintenance costs.

 

Increased tax revenues: $15 to $28 billion

By implementing the policies mentioned above, Canadian governments could receive $15.4 to $28.4 billion more revenue in taxes from 2020 to 2025. These increased tax revenues could offset at least a third of the cost of the programs.

Emissions: 13% reduction in the transportation sector

Currently, transportation represents approximately 24% of Canada’s total greenhouse gas emissions. When examining the sector’s emissions today, our recommended policies could reduce emissions by 22 mt CO2e by 2025, or a 13% reduction from 2016 levels. As a total, these policies would achieve nearly 12% of the emission reductions needed to fulfill Canada’s commitments to the Paris Agreement.[10] This would be equivalent to taking 4.6 million cars off the road for a year.

These figures show that implementing these five policies could push Canada along its path to a low-carbon economy and bring substantial benefits for the Canadian economy in addition to environmental gains. The policies also could have indirect social benefits, for example a revived vehicle manufacturing sector and providing Canadians in rural areas and Northern Canada with more affordable transportation options.

Several Canadian organisations, including the Government of Canada, Clean Energy Canada, Energy Efficiency Canada, Pembina Institute and Smart Prosperity Institute, have explored the economic implications of investing in the low-carbon economy. Similarly, they found sizeable economic benefits (job creation, GDP growth, energy savings etc.) associated with a similar scale of investment across the sectors included in the Capital Plan for Clean Prosperity.

Corporate Knights is committed to providing the public and decision makers with information about the intersection of business, environment and society. Learn more about the rest of our Capital Plan for Clean Prosperity addressing buildingselectricity, oil and gas , and heavy industry on our website. You can find an overview of the plan here.

 

Clean transportation 2020–2025

 

Transportation mode Projected

Business-as-Usual Investment

Potential Incremental Clean Investment (ICI)* Benefits Associated with ICI Increased GDP** Jobs Created Direct Savings***
Passenger $608.4 $4.6B $4.9B–$12.0B 11,600–16,100 $9.0B
Public transit $47.6 $25.5B $27.1B–$38.2B 46,100–191,000 $1.3B
Freight $96.2 $14.4 $15.3B–37.3B 24,800–50,400 $53.8B
Total $751.1 $44.5 $47.4B–$87.5B 82,500–257,500 $64.0B

 

*Driven by defined decarbonization policies.

** The wide range for the GDP estimate results from application of multipliers with varying degrees of conservatism.

*** Resulting from reduced energy costs.

 

[1] https://www.tc.gc.ca/eng/policy/transportation-canada-2018.html

[2] https://arealplan.ca/ARealPlan.pdf

[3][3] ZEVs produce no tailpipe emissions. Transport Canada considers the following vehicles to be ZEVs: battery-electric, plug-in hybrid electric, hydrogen fuel cell https://www.tc.gc.ca/en/services/road/innovative-technologies/zero-emission-vehicles.html?wbdisable=true&wbdisable=true

[4] https://2019.liberal.ca/wp-content/uploads/sites/292/2019/09/Forward-A-real-plan-for-the-middle-class.pdf

[5] https://action.ndp.ca/page/-/2019/Q2/2019-06-19_Commitments-Doc_EN.pdf

[6] https://www.greenparty.ca/sites/default/files/platform_2019_web_update_oct_6.pdf

[7] These calculations are based on best available models and are meant to be suggestive. The differences between multipliers depend on, for example, the state of the economy, the location of the manufacturing (in Canada or in a foreign country), interaction with demand for other sectors and exchange rates.

[8] We recognize that there are barriers to implementing some of these policies. For example, lack of charging infrastructure and dealer preference for selling higher maintenance internal combustion cars can be solved by charging infrastructure investments and quotas.Leasing rates require readjustment so that they do not penalize EVs and fuel cell vehicles.

 

[9] The jobs mentioned include direct, indirect and induced jobs. These numbers are not “net jobs,” and the creation of these jobs could be at the expense of other industries, depending on a host of factors.

 

[10] https://www.pbo-dpb.gc.ca/en/blog/news/closing-gap-carbon-pricing-paris-target

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