This blog was originally published in the toronto star.
This may not be what you expect to hear from someone who spends his days working to improve domestic climate change policy: the biggest drivers of Canadian climate policy in 2024 and beyond will come not from Ottawa, but from Washington and Brussels .
That's right: as the United States and the European Union set the pace with two major policy initiatives, Canada has no choice but to keep pace. And in both cases, Canada already has an answer at hand: robust industrial carbon pricing.
The first of these policies, the U.S. Inflation Reduction Act of 2022, is monumental legislation that is boosting the clean economy and reducing climate pollution south of the border. Along with two other bills that passed with bipartisan support (the Bipartisan Infrastructure Agreement and the CHIPS and Science Act), it is fundamentally reorienting the American economy.
America has seen $225 billion in investment in clean growth over the past year, according to Clean Investment Monitor, which follows these developments in detail. This represents a huge increase (up 38 percent from the previous year) and includes tangible investments in every corner of the country to support things like clean energy manufacturing and deployment, electric vehicle adoption and supply chains, the electrification of buildings and more.
This transformation in the industrial strategy of our largest trading partner is very important for Canada's future prosperity: the Canada Business Council calling it a โgame changerโ and a โtectonic shift.โ It adds to a broader global trend that has seen exponential growth in clean sectors around the world. In China, investment in clean energy sectors was almost as large as total global investments in fossil fuel supplies last year, making clean energy the top choice. The greatest engine of economic growth in the country. in 2023.
The second development that is shaping Canada's economic outlook is the arrival of carbon border adjustments in Europe. Carbon border adjustments are basically tariffs on imported goods that do not include the cost of their climate pollution through a carbon price.
The European Union began to gradually apply its carbon tariff Last October, and will eventually apply the carbon price that domestic manufacturers already face on imported goods from places like Canada, unless they have an equivalent carbon price in their country of origin. The UK is also set to follow suit with its own carbon border adjustment. by 2027.
There is even a growing possibility that the United States will implement something similar. In the United States there have already been four laws related to proposed carbon border adjustments for lawmakers to consider. Betting Canada's prosperity on none of these proposals becoming law is a notoriously risky prospect.
The United States is Canada's largest trading partner, and the European Union and the United Kingdom the second and third, respectively. Maintaining and strengthening Canada's industrial carbon pricing system to align with these announcements is an absolute necessity for Canadian competitiveness.
Industrial carbon pricing supports competitiveness on three fronts. First, if designed well, it means that cleaner companies can generate and sell credits, allowing them to compete with the United States. Second, it can keep carbon tariffs out of our exports to our largest trading partners. And third, it has been designed to create incentives for the most polluting companies to reduce their emissions without undermining their competitiveness.
Taken together, these developments make it abundantly clear that for Canada, good climate policy is good economic policy. This is especially true for our large export-oriented industries. The economic case for maintaining strong policies like industrial carbon pricing and other smart regulations, as well as targeted incentives to drive the clean transition here at home, have never been stronger.
Significantly, even given the volatile political winds blowing this year, adjustments to carbon borders in Europe and the UK have significant support from conservative parties. And the US Inflation Reduction Act is unlikely to be dismantled even if Republicans prevail in the November elections.
Here's the bottom line: the die is cast on the global transition to clean energy. Momentum is gaining momentum with businesses demanding access to clean electricity and clean supply chains, as well as essential for investment.
Canada stays behind at its own risk.
