Trying to find a silver lining in the current COVID crisis is not easy, but there is a growing realization around the world that the place to look is in the transition to a greener economy.
The European Union is well out in front on this issue, recently unveiling a €1 trillion ($1.57 trillion Canadian) plan to reach carbon neutrality, create more sustainable and resilient communities and create a “circular economy” with less waste of both resources and energy. Half of this spending is expected to come directly from the EU budget; the the rest will come from member state contributions, financing from the European Investment Bank and investments by the private sector. EU President Ursula von der Leyen has described the plan to slash carbon emissions by more than 50% by 2030 and to reach carbon neutrality by 2050 as Europe’s “man on the moon moment.” Except that instead of a quest for geopolitical bragging rights, this moonshot is about planetary survival right here at home.
Democratic presidential candidate Joe Biden also seems to have grasped both the need and the opportunity around bold climate action, significantly upping his game with a US$2 trillion ($2.6 trillion Canadian) four-year plan that includes achieving a zero-emissions power sector by 2035.
So where’s Canada? Still talking the good talk, with the Liberal government promising a binding carbon-neutral national mandate for 2050, but still not walking the walk. In its 2019 budget, the federal government committed less than $64 billion to all infrastructure development over the next four years. The government also earmarked $435 million to help Canadians switch to electric vehicles and invited the auto industry to “access” its $800 million Strategic Innovation Fund. Then there is $1 billion dedicated to helping municipalities and the institutional sector improve energy efficiency and $35 million for a Just Transition Fund for workers in coal mining communities. So Canada has, at best, just cracked the $1.5 billion mark, while its peers are planning to spend trillions.
Sure Canada is a smaller country with a population roughly 10% that of the U.S. and about 8% of the EU’s. But to match the level of ambition in the EU and Biden plans, we should be spending in the hundreds of billions, not just billions in the single digits. We are currently off by orders of magnitude when it comes to what it will take to both rebound our economy and address the climate crisis. Even if we just compare the EU’s direct budget spending plan – roughly $617 billion directly from EU and member budgets – Canada is still lagging significantly.
This matters not just because we desperately need to get our climate house in order, but also because weak ambition could be very costly. The EU has made it clear that it plans to tax goods entering its massive market from climate laggards and has additionally hinted at restrictions on agricultural products that are not sustainably produced. Of course, what is also at stake is leadership in new services and industries, whether it is innovative “bundled project” financing for building retrofits, artificial intelligence for buildings and transport, or the manufacturing of electric cars.
Canada recently joined the “3% Club,” a group of countries, companies and institutions committed to achieving 3% annual increases in energy efficiency. That would be a big step up for a country that has been averaging an unimpressive 1% annual improvement in energy efficiency over the past 15 years. Even more importantly, the commitment came with no specific mechanisms or budget attached, including no commitment to the sort of national building retrofit program that is central to both the Biden and EU plans.
And while Canada’s commitment to help workers affected by its coal phase-out plan is laudable, it is again almost laughably small compared to EU and Biden commitments. The EU, for example, is earmarking €100 billion to a Just Transition Fund for vulnerable sectors, while the Biden plan commits 40% of its infrastructure and energy spending to disadvantaged communities.
In this regard, the Biden plan is simply recognizing the stark realities revealed by the COVID crisis and the linkages between poor air quality and other pollution, poverty and poor health outcomes. Climate change, of course, is only going to exacerbate the impact on vulnerable communities, with hotter weather promising to stir up an even thicker stew of pollutants.
And that’s the real message behind the EU and Biden plans: these initiatives do not represent some sort of wild spending spree – they are exactly what is needed if we want to see our economies grow rather than shrink. The EU plan, for example, reflects projections that warming of more than 3 degrees Celsius could trigger GDP losses of 2 to 8%, with southern countries hit the hardest by flooding, droughts and heat-related mortality. On the other hand, the EU estimates that carbon neutrality will boost GDP by 2% and create millions of jobs. There is an important lesson in this for Canada, where warming is happening at twice the global average rate.
This is a case where modest Canadian incrementalism simply isn’t going to cut it. We need to be bold. And green.
Rick Smith is the executive director of the Broadbent Institute.