Budget 2016 lays down tracks for first ministers’ climate success

Tax measures, NEB modernization and Low Carbon Economy Fund among initiatives

Photo: Roberta Franchuk, Pembina Institute

For clean energy enthusiasts, yesterday’s budget brought lots of good news. From public transit to renewables in remote communities, the budget made investments that support a thriving low-carbon economy. Here are our top highlights from yesterday’s budget:

Tax measures for clean technology

Budget 2016 announced that the federal government’s Accelerated Capital Cost Allowances (ACCA) will extend to electric vehicle (EV) infrastructure and energy storage equipment. The ACCA is a policy tool that allows certain industries to write-off investments in equipment and technologies more quickly than the standard rate provided by government. As such, it supports investment and growth in those industries, making it a very useful tool to apply to climate friendly technologies. This depreciation program will lower costs and risk to investors looking to jump into the energy storage or EV space. Canada needs more clean electricity to fuel its transition to a low carbon economy — and this commitment will enable further clean technology deployment across the country.

Generous tax measures have long been enjoyed by the fossil fuel sector – in fact, the ACCA has existed for oilsands mines and in situ facilities since 1972 and 1996 respectively. While you could make the case that the oilsands was a fledgling industry decades ago, that’s certainly no longer the case. In 2007, the federal government committed to phase out fossil fuel subsidies for exactly that reason. Progress has been stalled — and we encourage the federal government to continue to advance these important G20 commitments.

Electric vehicle charging stations.Further, while it’s encouraging to see the government think seriously about how to embed more zero-emitting electricity into Canada’s electricity grid, and also into our transportation sector, they’ve remained mum on a critical issue: phasing out emissions from coal-fired electricity plants more quickly. Under the former government, regulations were introduced to phase-out coal-fired electricity; but — after being weakened twice, from 40 years to 45 and then to 50 — they were widely panned as capitulation to coal industry pressure. The previous government claimed considerable health savings from the regulations, including at least 900 avoided deaths and 120,000 avoided asthma episodes in the first 20 years alone. Of course, by weakening the regulations, the government actually caused a proportional number of deaths and health events. The Trudeau government can and should do more to accelerate this transition to secure these greater health savings. From our perspective, the government should make it clear they will join the international trend toward phasing out coal. 

Resources to modernize the National Energy Board

Yesterday’s budget saw $16.5 million over three years allocated to the National Energy Board and the bureaucracy to deliver on the government’s interim review process for energy projects.  This is great news: we were supportive of those interim principles when they were announced, and are pleased to see the government put the necessary resources behind it.

An allocation of this size, in addition to review-specific resources already earmarked to this work, should help ensure that Canadians have meaningful opportunities to participate in federal energy project reviews. Further, the money will be spent on Crown consultations — a hopeful signal that the government will work to repair relationships with Indigenous communities impacted by natural resource development across the country.

But much work remains to be done to modernize Canada’s federal energy regulator. Canada’s environment commissioner recently found that the NEB was not providing sufficient oversight on pipeline projects. Further, the NEB’s marquee publication, Canada’s Energy Future, does not consider the implications of continued domestic and international climate action. In order for the Board to become a world-class regulator, it must align its supply and demand modeling with the world’s stated climate policy objective — achieving the deep reductions outlined in the Paris Agreement. Though not perfect, the IEA’s World Energy Outlook 450 scenario is a good place for the NEB to start. 

New funds for the Canadian Environmental Assessment Agency

It may not always be obvious, but industry proponents and environmentalists share a common interest when it comes to environmental assessments. Both camps often advocate for rigorous and fair environmental assessments — and, ultimately, for evidence-based decision-making.

The Trudeau government seems to have received the message that building and maintaining credible environmental assessment processes is in everyone’s best interest. To that end, Budget 2016 proposes to provide $14.2 million over four years to the Canadian Environmental Assessment Agency (CEAA) for consultation, compliance and enforcement activities.

This financial support should support CEAA as they continue to play a critical role in the government’s interim review process for major energy projects. Over the last two months, CEAA has been publishing assessments of the direct and upstream emissions associated with major energy projects. These assessments have been limited to LNG terminals to date, but will soon extend to midstream infrastructure, like oil and gas pipelines.  Judging by methodology released late last week, that work appears to be moving in the right direction. Critically, Minister McKenna and her Cabinet colleagues should review how proposed projects, and their upstream emissions, align with the federal government’s 2020 and 2030 emissions reduction goals and the government’s long-term reduction commitment vis-à-vis the Paris Agreement.

Starting up the Low Carbon Economy Fund

One of the big ticket environmental announcements yesterday was the commitment to provide $2 billion over two years (beginning next year) to establish the Low Carbon Economy Fund. This fund, as promised on the election trail, is designed to catalyze investment in projects that “yield the greatest absolute greenhouse gas reductions for the lowest cost per tonne.” With this mandate in hand, the fund can make strategic investments that support the country’s decarbonization efforts. We’re keen to see how the government designs and implements criteria for investment to ensure the funds are disbursed to achieve those goals.   

The Low Carbon Economy Fund is particularly interesting in the context of Canada’s renewed federal-provincial relationship on climate change. Just a few weeks ago, Canada’s first ministers met to reaffirm the urgent need to invest in a low-carbon economy for Canada.  Their meeting concluded with the release of the Vancouver Declaration on Clean Growth and Climate Change, a document that outlines a new and collaborative approach to tackling emissions reductions across the country.  

Canada’s ability to achieve long-term emissions reductions, consistent with those spelled out in the Paris Agreement, is now in the hands of our prime minister and premiers. It’s essential that those political leaders and their teams have the resources required to implement the Vancouver Declaration. That's why, in addition to the new projects the Low Carbon Economy Fund can enable, we're heartened to see the budget set aside money to implement the pan-Canadian framework. The first ministers and their teams will be busy over the summer with working groups to study the policies required to hit our 2030 goal, and are tasked with reporting back by September 2016. The first ministers need resources to hit the ground running: to call experts, conduct studies, and ensure the best available science is informing those political discussions. What they don’t need are squabbles over who picks up the bill, which the budget allocation handily takes care of.

Since the government’s election last year, Canada has upped its game on climate change. We’ve seen political commitments from the highest levels of federal, provincial, and territorial governments to reduce emissions. And with yesterday’s budget, governments and civil society will now have more resources to do so.

Next, we need the policy ambition required to get Canada on track to meet or exceed its existing climate targets. We’re optimistic Budget 2016 has begun to lay tracks for the ultimate success of the first ministers’ process — and supports the low-carbon economy we’re ultimately working to build.