A clean energy cheat sheet for budget 2017

Finance Minister Bill Morneau tabled his second budget last week, and we saw a lot to like in its pages.

The headline we took from this year’s edition is that Ottawa is not backing off on climate action. Those who hoped to see Ottawa slow down in the face of Donald Trump’s backward-looking agenda will be disappointed: the Trudeau government still sees clean growth as an essential opportunity for Canada—and is willing to put some of its money where its mouth is.


But there’s always more than the topline message in the thick budget documents Ottawa produces each year. There are details, nuances, even hidden gems. So for those willing to read the fine print, here are 10 clean energy commitments that caught our eye this year.

1. Making clean tech an innovation priority (p. 79, 81, 82, 95–100 and 100–111): This year’s edition was billed as an innovation budget, so it’s no surprise that Ottawa allocated funding for skills, research and more. The good news is that the budget zeroed in on three sectors as innovation priorities, and clean tech got top billing (digital industries and agri-food are the other sectors selected as near-term innovation priorities).

The budget checks off some of the requests on the clean tech sector’s wish list,  starting with “nearly $1.4 billion in new financing, on a cash basis” for clean tech (a mix of equity investments, working capital, and project finance to come from Export Development Canada and the Business Development Bank of Canada.)

There’s also $400 million over five years, starting next year, for Sustainable Development Technology Canada’s very effective SD Tech Fund, and over $400 million (over four years, starting in 2017) to a mix of federal departments for research and development aimed at clean energy, clean transportation and cleaner resource development.

The budget sets aside $14.5 million for clean tech data and $12 million for a government-wide Clean Growth Hub—two small but significant investments. The former should make it easier to track the sector’s progress, while the latter should help clean tech companies navigate the federal government more easily.

Ottawa also consolidated several existing innovation programs into a Strategic Innovation Fund, with total funding of $1.2 billion over five years. Clean tech joins more established innovation priorities, like aerospace and automotive innovation, as an eligible recipient of dollars for business development and job creation via that fund.

2. Getting Canada’s clean tech to world markets (p. 100 and 111): The overwhelming majority of Canada’s clean tech companies export their products and services, so the budget’s commitment of $15 million (over four years, starting next year) to help clean tech companies develop their businesses outside Canada is welcome. Global Affairs Canada will develop and execute this strategy.

3. Targeting infrastructure dollars to clean energy (p. 122 and 149): Last fall, the government included clean energy as potential investments under its $21-billion, 11-year green infrastructure fund—but the list of other options for those dollars was long.

The 2017 budget pulled out $2.8 billion from the fund and earmarked some of that for clean energy priorities, including innovation in smart grids and energy storage, electric vehicle charging and adopting stronger building codes. (Most of the funding—$2 billion—goes to another climate priority, infrastructure for “disaster mitigation and adaptation” in the face of a changing climate.) Targeted allocations ensure that clean power and adaptation investments won’t get lost among competing priorities. And while a few hundred million dollars over 11 years doesn’t stretch very far on its own, Ottawa’s infrastructure funding is typically matched by provincial and municipal dollars.

4. Building climate-friendly infrastructure through Ottawa’s new bank (p. 122 and 266): In another clarification of a 2016 announcement, the 2017 budget commits that “at least $5 billion” (over 11 years) from the forthcoming Canada Infrastructure Bank will go to green infrastructure, including projects that “promote renewable power” or reduce greenhouse gas emissions.

5. Getting remote communities off diesel (p. 81, 122, 127 and 150): It’s been clear for years that relying on diesel fuel for power is bad news: it’s dirty, noisy and expensive. But although cleaner solutions are increasingly available, it’s not cheap to upgrade power infrastructure in remote communities. This budget makes a substantial investment in upgrading away from diesel: $220 million (over 11 years) for communities south of the 60th parallel and $21.4 million (over four years, starting next year) for continuing an existing northern program, and a portion of a new $75 million “challenge” fund aimed at solving clean tech problems through innovation.

6. Your turn, geothermal (p. 100 and p. 6, 19–21 of the budget’s tax measures document): Ottawa provides a pair of tax breaks to businesses that invest in clean energy and efficiency, and it’s become a budget tradition for the Finance Minister to add technologies to the list each year. This year’s budget makes expenses incurred to generate geothermal heat eligible for the deduction—tax support that the government expects to total $9 million for this renewable power source over the next five years.

7. Starting to phase out fossil fuel subsidies (p. 209 of the budget and p. 6, 21–23 of the tax measures booklet): In our view, the biggest gap in the Trudeau government’s first budget was its failure to phase out fossil fuel subsidies. This year’s budget performs better on that score, making two changes to the tax treatment of oil and gas expenses that the government estimates will save all of us $47 million in 2019–20. There are still plenty of fossil fuel subsidies left on the books, but this year saw Ottawa moving in the right direction.

8. Making the Pan-Canadian Framework happen (p. 126–130, 150): The national climate plan that (most) premiers agreed to in December will mean a lot of work for governments. There are regulations to write (and enforce), negotiations to conclude and strategies to develop. The 2017 budget provides funding for Ottawa’s work on some of the Framework’s priorities, including phasing out coal, cleaner transportation, energy efficiency and adaptation. There’s also $135.4 million (over four years, starting in 2018) to the two lead departments, Environment and Climate Change Canada and Natural Resources Canada, for “policy, communications and engagement” for the climate plan. This kind of nuts-and-bolts funding should mean that officials have the resources they need to push the climate plan forward. The catch is that most of the dollars for policy work don’t arrive until 2018 or later—more on that question below.

9. Funding delayed (p. 126 and 150): Last year, Ottawa promise $2 billion over two years, starting this year, for a Low Carbon Economy Fund to support emission reductions efforts by provinces and territories. This year, Ottawa stretched that commitment from two years to five, drawing a sharp rebuke from NDP leader Tom Mulcair in the process.

Courtesy of the Pan-Canadian Framework, we now know the kinds of things provinces and territories would like to spend that funding on: each signatory jurisdiction listed its priorities in individual annexes included in the document. And while some of those investments are almost certainly ready to go today, others would probably benefit from a longer timeline for funding. For example, a company that does building retrofits—one of Ontario’s stated priorities—is probably more willing to hire new staff when governments can commit to several years of funding, even if the rate of spending in each of those years is lower.

But 2019 is the next federal election year, so we’ll be watching to see whether funding agreements are signed well ahead of that date, locking in agreements that should be hard for any future government to undo.

Meanwhile, the most important thing to us is that the Pan-Canadian Framework on Clean Growth and Climate Change moves from a plan to an on-the-ground reality. And although dollars are one way to generate that kind of momentum, they’re not the only way.

Back-loading the funding isn’t cause for concern if Ottawa continues to roll out agreements with provinces, adopt new regulations and laws, and make clean growth a priority. On the other hand, the funding delay would be very worrying if progress starts to stall for lack of resources.

It’s too soon to tell what the delay really means, so this is one area to watch in the months ahead.

10. Spelling out the next steps on carbon pricing (p. 127): A good illustration of movement without dollars: while the budget doesn’t allocate any funding for carbon pricing specifically, it does map out the way Ottawa plans to move ahead on its highest-profile climate commitment. The budget re-states Ottawa’s goal—a national price on carbon across the country in 2018—and says to expect a paper outlining “the technical details of the proposed federal carbon pricing backstop mechanism” in the coming months.

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