Earlier this week the government delivered Canada’s Fall Economic Statement. While the overarching themes of the Deputy Prime Minister’s address were affordability and inflation, the Fall Economic Statement reiterates that climate action is core to economic prosperity and Canada is committed to investing in shifting our economy to net zero.
The Statement provides a much-anticipated timeline for delivering new clean investment tax credits, outlines tactical action to deliver climate policy certainty for businesses and investors, and progresses measures to leverage private capital to advance clean projects and clean technology.
Maintaining momentum on climate action is critical to compete globally in an economy where our peers (notably the US and EU) are making massive investments to succeed in a future clean economy.
These are our top three takeaways from the Fall Economic Statement:
1. The Government is advancing efforts to safeguard carbon pricing from policy change:
- Capital has been allocated to issue Carbon Contracts for Difference (CCfD). CCfD are a means to de-risk major investments in climate projects by requiring the government to compensate companies if the future carbon price is not what is written in regulation today. This action provides investment certainty to businesses looking to invest in net zero in Canada and makes Canada a more attractive investment environment. The Canada Growth Fund will be the federal entity to issue CCfDs and up to $7 billion (almost half) of its capital will be allocated to issuing contracts and agreements.
- The Statement also mentions the government will consider “additional ways” to provide predictability to businesses on the future price of carbon, which could include legislative approaches. This will be an item to watch and we are keen to see more specifics on this.
2. Housing investments present an opportunity to tackle affordability while simultaneously addressing climate change.
- A main priority of the Statement is “building more homes, faster,” and “building more affordable housing.” We didn’t see any mention of constructing these homes to be net-zero ready or climate resilient, and housing investments represent a huge opportunity to tackle two challenges together. Homes built now will still be here and occupied in 2050. Building homes net-zero ready today will reduce household energy costs and avoid future costly retrofits while contributing to emissions reduction. Similarly, funding for EV charging infrastructure or heat pumps would also support dual goals of affordability and climate action.
- Investments in housing that incorporate climate-ready provisions presents an opportunity to transform and up-skill the construction workforce to be net-zero, as revealed through the recent Green Retrofit Economy Study, a collaboration between Delphi and Canada Green Building Council.
3. Continued momentum on sustainable finance and climate disclosure will support aligning private capital with net-zero:
- The Statement announces that the Department of Finance; Innovation, Science and Economic Development Canada; and Environment and Climate Change Canada will develop options for mandatory climate disclosures by private companies. This action will improve transparency around climate risks and opportunities and assist with mobilizing private capital to align with net-zero. This would position Canada with other leading countries when it comes to sustainability and climate disclosures as only a few countries worldwide are moving towards wide-sweeping climate disclosures in line with ISSB & TCFD recommendations.
- Additionally, the Statement allocates $1.5 M in funding for the Department of Finance to work with ECCC and NRCAN to develop a net-zero by 2050 taxonomy. This is in line with recommendations from the Sustainable Finance Action Council’s Taxonomy Roadmap Report. Consistent and transparent labeling of financial instruments will create consistency in the market to ensure capital flows to projects and businesses that are supporting the transition to a net-zero economy. The timeline for this work is over 2024-2025.
Laura Robertson is a Senior Consultant at Delphi. Contact her at lrobertson@delphi.ca
