The federal government is very keen on giving money to big business to help them decarbonize.
In December, as part of their new climate plan, Prime Minister Justin Trudeau’s Liberals announced a $ 3 billion “net zero accelerator” to subsidize big industry cleantech investments. The response from some of the sectors that could benefit was that it was a good start, but more was needed. So in this spring’s budget, before the program started working, it jumped in size to $ 8 billion.
Now, although details on exactly how the money will be allocated remain unclear to everyone outside of government, Industry Minister François-Philippe Champagne promises to announce funding commitments for projects. specific in a few months. He reaches out to CEOs to encourage them to submit their offers, he said in an interview, with a message to “think big and think fast”.
The urgency is justified. For Canada to meet its new goal of reducing national emissions by at least 40% by 2030, it will need to rapidly decarbonize heavy industry – manufacturing, natural resources – where the costs to do so can be prohibitive without the support. public. This support is probably also necessary in the context of a “global competition”, as Mr Champagne said, since trading partners are already moving faster with interventionist clean economy policies. And as he said, the economic recovery from COVID-19 is the perfect time for this type of spending.
But now would be a good time for the Liberals to (quickly) take a deep breath, as it looks like there is still work to be done to determine exactly what this agenda is supposed to achieve: which sectors and which technologies should be prioritized, as a question of both emission reduction and economic value, and how to go about it.
While the NZA is touted as a strategic fund for industry, it is not yet a focused industrial strategy like the one other countries are pursuing. For now, this looks more like an envelope for all kinds of climate-related investments, provided they involve big companies, with little clarity on how the proposals will be judged against each other.
This means there is a risk of wasting perhaps Ottawa’s largest total investment in this decade in moving Canadian manufacturing and natural resources towards a more sustainable future. There is also a risk that it will turn into some kind of slush fund that leads to political scandals, which in this case could discredit much-needed green spending in general.
The scale of the program is reflected in the fact that, based on explanations from Mr. Champagne and other members of the government, it is supposed to serve two valid but quite different purposes.
The first is to help reduce emissions from hard-to-decarbonize sectors, through investments in emerging technologies – improving the energy efficiency of industrial processes, carbon capture and storage or use – which are not yet economical in themselves. . Manufacturers of building materials such as cement, steel and aluminum are common examples of eligible businesses. Mr. Champagne also focused on the resource sector, including mining, which could prove to be controversial with demands from oil and gas producers.
On the part of these potential beneficiaries, the response to the Liberals’ plans seems very enthusiastic. In an interview, the president of the Canadian Cement Association, Michael McSweeney, said he was among those who informed the government after the initial $ 3 billion pledge that it would not meet demand. ; he said he was “delighted” with the increase to $ 8 billion and was encouraged by the speed with which the government was starting to accept the requests. Equally positive was the president of the Canadian Steel Producers Association, Catherine Cobden.
The second category concerns sectors which are not so much aimed at reducing emissions during production as at producing low-emission products. At the top of this list are electric vehicles, from the extraction and refining of major mineral components to assembly. Mr. Champagne also repeatedly referred to the aerospace industry, where clean technologies are at an early stage.
On this side, the plan was greeted with more skepticism. This week, a Clean Energy Canada report, providing consensus recommendations from leaders and experts in the automotive industry on how to build a national EV battery supply chain, described the NZA as “the wrong mechanism.” financing ”.
Their basic criticism is that such a versatile program will not allow Canada to keep pace with other countries that have funds specifically designed for the production of batteries and electric vehicles. (A related complaint is that the Liberals plan to use the NZA only for grants of at least $ 10 million, which rules out a holistic sector strategy as many small businesses along the supply chain are excluded. )
While one might expect that one sector would prefer not to compete with others for public funds, there are concerns, even among less vested interests, about spending money. money so widely that it doesn’t transform much.
“I’m afraid I’m not spreading too fine peanut butter,” says Robert Asselin, vice-president of policy at the Business Council of Canada.
Mr. Asselin also stressed the concern that having so many different types of businesses seeking funding, which he called a potential “lobbyist’s dream”, could be “very prone to capture. Politics”.
While the NZA appears to be driven by political need, the process surrounding it offers little hermetic protection against the partisan considerations that take hold, especially as it begins to deploy during what could be a period of time. election year.
Using the umbrella of the Strategic Innovation Fund (a hitherto much smaller pre-existing program subsidizing all kinds of technology investments), a group of bureaucrats within Mr Champagne’s ministry are to make recommendations for the bids. to be accepted, with a reduction in projected emissions and jobs. creation among the considerations. But then it will be up to the minister – or, in the case of the most important requests, the Cabinet Treasury Board – to make the final decisions on each expenditure.
Unless you create a new independent agency (which would have its own drawbacks, including the lack of urgency the Liberals want to show), there is no realistic way to make this type of program completely apolitical.
But it underscores the need for the Liberals to be as explicit as possible up front – with industry, the general public, and themselves – about what they are trying to build here.
They could still choose to prioritize more explicitly certain sectors in which they see the greatest potential for environmental and economic gains.
They could also adjust the program to allow more agile strategies for these sectors, including removing the $ 10 million minimum for grants.
Right now the Liberals probably feel little pressure to change anything. Come when all eyes are on the pandemic response, in a budget with more compelling commitments like a national child care program, the Accelerator has received minimal public scrutiny for a spending commitment from its cut.
But at the end of the day, there will be a responsibility for how much of the transition to a clean economy that all this money will buy us.
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