Fiscal update more than a missed opportunity for climate action

For years, federal climate policy has been dogged by — if not defined by — missed opportunities.

A regulated phaseout of coal power that spurred a boom in fossil gas power. A carbon pricing system that included loopholes for oil and gas production. A “sustainable jobs” plan that did not guarantee new green jobs.

For climate advocates, these missteps have been endlessly frustrating. But in each of these cases and others, at least the federal government was taking a swing at the problem. It could fairly be said that for every step backward, the government was taking two steps forward.

That era of progress, inconsistent and incomplete as it was, now appears to be on thin ice.

Tuesday’s fall economic update — the latest edition of the government’s annual “mini-budget” — marked a strategic shift for the feds. While not a complete turn toward austerity, this update signals a new era of fiscal restraint.

In total, the update included only $3.5 billion per year in net new spending. That’s a pittance for a federal government with a half-trillion-dollar budget. It also marks a major departure from the government’s last few budgets and fiscal updates, each of which included significantly more new spending.

Instead of investing new public money to solve the biggest problems facing Canadians, such as housing affordability, the government has instead opted to repurpose existing programs, to offer loans in place of direct investments, and to promise new plans and policies at some point in the future. Basically, anything to avoid spending money right now.

Bay Street and the federal Conservatives have long called for the government to cut back on spending, despite Canada’s enviable fiscal position relative to our peers and, perhaps more importantly, despite the federal government’s strong fiscal position relative to the provincial governments who will be called on to pick up the slack. Nevertheless, the feds have taken the bait and shied away from strong public leadership at this critical juncture.

That abdication of responsibility is all the more remarkable given the public’s evident discontent with the current Liberal government. This fiscal update was an opportunity — another missed opportunity — to make ambitious investments that would be both impactful and popular on a number of files.

Which brings us back to the climate issue.

The crux of the problem is that the Canadian economy is drastically underspending on climate action. Depending on who you ask, we need to be investing $50 billion to $100 billion more per year to achieve a fully decarbonized economy by 2050.

To its credit, the federal government is already spending more than $10 billion per year on that front, but it’s simply not enough given the urgency of the crisis. And while it is not the federal government’s sole responsibility to make up that enormous investment gap, there is no doubt it has a key role to play.

And that’s precisely why this turn toward “fiscal restraint” is so dangerous. The government has not yet achieved a level of climate spending that permits it to rest on its laurels. We need significantly more money now and into the future to shift the economy away from the production and consumption of fossil fuels — and to do so in an equitable way.

For example, this fiscal update could have included a big push on energy-efficiency retrofits. Fronting the full cost of electric heat pumps for low-income households across the country would cut emissions from gas and oil heating, create a boom in installation jobs, and save those households money on their energy bills. All we got were details on a previously announced, and much more limited, program to help households in some parts of the country get off heating oil.

We could also have seen a scaling up of support for public utilities to build vital renewable electricity infrastructure, perhaps with ambitious federal equity stakes to help get more interprovincial transmission projects off the ground. Instead, the government extended its clean tech investment tax credit to systems that burn waste biomass, which is, at best, a marginal climate policy and hardly a structural solution for our long-term power and heating needs.

In the wake of yet another record-breaking wildfire season, you would be forgiven for expecting more climate urgency from this government.

We did get a price tag for the various subsidies the federal government has doled out to companies in the electric vehicle supply chain over the past six months. In total, the feds will hand out about $1.4 billion per year over the next few years. That’s the kind of industrial policy we need more of, though the details matter. Many of those agreements are no-strings-attached subsidies that may simply pad corporate profits, as opposed to public ownership stakes that pay back over time.

All in all, this fiscal update was more than just another missed opportunity. It reflects a government that feels it has done enough on climate change already or, at least, one that doesn’t feel like it can afford to do more.

Neither of those things is true. And as we turn our attention toward Budget 2024, let’s hope the government figures it out.

Hadrian Mertins-Kirkwood is a senior researcher with the Canadian Centre for Policy Alternatives.