Canada can compete with the United States’s extensive new green incentives without major new spending if it acts quickly, according to the Business Council of Canada. Goldy Hyder, the organization’s chief executive officer and president, says Ottawa needs to refocus many of the federal climate and innovation policies it has announced but not fully launched.
Mr. Hyder sent a detailed letter to Finance Minister Chrystia Freeland this week outlining key recommendations for the 2023 budget. He also discussed the group’s suggestions in an interview Wednesday with The Globe and Mail.
The Business Council of Canada represents the country’s largest businesses and regularly provides policy advice to governments based on feedback from its members.
Mr. Hyder hosted a gathering of about 120 CEOs and council members earlier this week in Toronto, providing him with a fresh perspective on how corporate leaders view the year to come.
As has frequently been the case in advance of recent budgets, the Finance Minister faces considerable uncertainty when it comes to economic forecasts for the year ahead. A series of Bank of Canada interest rate hikes over the past year appear to be having the desired impact, with the inflation rate easing to 6.3 per cent in December, down from a recent peak of 8.1 per cent in June.
While policy-makers and economists express hope for a “soft landing” in which monetary policy effectively cools inflation back down to target with limited economic pain, the Finance Minister must also take into account the risk of a deeper slowdown in 2023.
“I don’t think any of my members really believe a soft landing is possible,” Mr. Hyder said. “There is going to be a bumpy landing. The question is how many bumps, and can you limit the bumps?”
One of the biggest challenges facing Ms. Freeland is the need to craft federal policies that will keep Canada competitive with the U.S. in light of that country approving extensive new incentives for green energy and emission reductions in last year’s sweeping Inflation Reduction Act (IRA).
A Nov. 30 report by Credit Suisse noted that figures from the Congressional Budget Office identified more than 60 provisions in the IRA related to climate and energy initiatives, which add up to more than US$400-billion in spending over the next 10 years. It said the CBO figures are likely a significant underestimate and the total could be more than US$800-billion, with the power sector in line to receive the most new investment.
Mr. Hyder said given that Canada’s population is about one-tenth that of the U.S., the cost of its response should be in a similar proportion. At the high-end estimate of an US$800-billion plan, a proportional response would be $108-billion Canadian over 10 years.
His letter says that without an ambitious Canadian response, the country will be at risk of losing valuable human and financial capital. But that does not mean matching the U.S. dollar-for-dollar with new spending, it adds.
Instead, Ottawa could focus on streamlining project approvals, positioning Canada as a key global provider of critical minerals and introducing a predictable set of tax credits to encourage green investments.
“We hasten to add that none of these recommendations would require significant new federal spending,” the letter states. “Rather, the government could reallocate previously announced funding by rationalizing a wide range of existing clean-technology support programs.”
Recently announced and budgeted programs such as the Canada Growth Fund and the Strategic Innovation Fund have similar goals to the IRA and add up to a comparable scope to what the U.S. is planning, Mr. Hyder told The Globe.
He said CEOs expressed strong concern in this week’s meeting that Canada is not acting fast enough in areas such as mining critical minerals for clean energy or moving to meet global demand for liquefied natural gas (LNG) as a way to displace the use of coal or Russian oil.
“I just can’t stress enough the sense in the room was we may miss our moment. We may have already missed the LNG moment in the minds of some.”
Prime Minister Justin Trudeau and his ministers have been attempting to show in recent weeks that they get the message. Federal Environment Minister Steven Guilbeault announced federal approval this week for a new lithium mine in Quebec, while Mr. Trudeau visited a rare earth element processing plant in Saskatoon and then promoted electric vehicle manufacturing during a Tuesday stop in Windsor, Ont.
The tour continued Wednesday at an EV charger facility in Shawinigan, Que., where Mr. Trudeau talked up the country’s advantage in green resources.
“Canada is able to offer the full package, from the raw materials drawn on responsibly and environmentally consciously to the finished product made with some of the cleanest steel and aluminum in the world,” he said.
The Business Council letter also called for the 2023 budget to include a credible fiscal plan, action to alleviate skills shortages and support for economic security by responding to state and non-state actors that “are constantly seeking to disrupt vital supply chains, steal intellectual property and compromise critical infrastructure.”
-With a report from Robert Fife