December 14, 2018

By William Scott

Yesterday, the Canadian Chamber of Commerce released a report entitled ‘A Competitive Transition: How smarter climate policy can help Canada lead the way to a low carbon economy’. The Chamber, which represents 200,000 businesses of all sizes in all sectors of the economy, recognizes that the world is moving towards a low-carbon economy and Canada has the potential to be a global leader. The question this report seeks to answer is not whether Canada should act, but how to act in order to maximize Canada’s economic and environmental advantage.

The report rightly emphasizes that carbon pricing is the best way to reduce emissions at the lowest cost and stimulate innovation. It highlights broad support across industry including the Chamber, Canadian Association of Petroleum Producers, the Mining Association of Canada, the Canadian Electricity Association, Canadian Manufacturers and Exporters, and the Business Council of Canada. The Chamber calls for provincial and federal governments to work together on carbon pricing while protecting vulnerable parts of the economy including Canada’s north and emissions-intensive, trade-exposed sectors.

The Chamber also warns that the regulatory burden of layering additional policies on top of carbon pricing may negatively impact competitiveness, a point that was stressed by the recent reports from the Federal Economic Sector Strategy Tables. Ensuring policies are complementary and well-designed is a critical issue in designing the suite of policies to help Canada transition to a clean economy. However,  we have a tendency to overestimate the cost of environmental regulations, and smart policy design principles including flexibility, predictability, and stringency can lower the cost of regulations and stimulate clean innovation. It should also be noted that the recent Fall Economic Statement took some steps to address pressing competitiveness issues, including announcing a new Centre for Regulatory Innovation. This centre aims to improve the efficiency and nimbleness of our regulatory system, in order to help businesses reduce emissions while staying globally competitive.

The Fall Economic Statement also announced 100% first-year depreciation for capital investment in clean energy and manufacturing technologies to stimulate investment and improve environmental performance. Encouraging private investment is another pillar of the Chamber’s report and will be critical to driving the shift to a low-carbon economy. The recent interim report from the Expert Panel on Sustainable Finance outlines some ways that Canada’s strong financial sector can play a leading role.

The report notes that ‘getting innovation right’ and ‘getting trade right’ are key components of getting the transition right. Accelerating clean innovation in Canada requires a suite of policies to push, pull, grow, and strengthen technology development across the innovation ecosystem. Fortunately, Canada is already developing a wide-range of promising innovations that can improve our environmental and economic performance across the economy. Helping those companies scale and get their products to international markets will help Canada become a globally recognized brand for sustainable, high-quality products and services.

The Canadian Chamber of Commerce and Smart Prosperity Institute agree on this: we are in the early stages of a major economic transition to a competitive, low-carbon economy - and with smart policy design, Canadian businesses can lead the transition.

William Scott

Research Associate