Chapter 4 - A Clean Growth Economy

Introduction

Protecting the environment and growing the economy go hand in hand. Countries around the world are looking for new ways to expand and green their economies and create opportunities for their citizens. The global clean technology market is growing rapidly, presenting Canadian businesses with an immense opportunity to showcase their ingenuity and support sustainable prosperity for all Canadians.

At the recent United Nations Climate Conference (COP21) in Paris, alongside 194 other participating countries, Canada agreed to take steps to support the transition to a global low-carbon economy by limiting the global temperature increase to less than 2 degrees Celsius above pre-industrial levels. The Government also announced its participation in Mission Innovation, a public-private initiative to dramatically increase global investments in clean energy. Acting on these commitments, in partnership with provinces and territories, the Government is now developing a pan-Canadian Framework on Clean Growth and Climate Change. Pricing carbon emissions will drive Canada's transition to a stronger, more resilient, low-carbon economy and help Canada address the global climate change challenge.

Supporting a clean economy will help position Canada to take advantage of opportunities in the new global economy by diversifying the economy and opening up access to new markets, while reducing emissions and generating well-paying jobs for Canadians. The investments made in Budget 2016 are just the start and additional actions will be coming.

Investing In Clean Technology

Clean technologies are a key component of the Government's approach to promoting sustainable economic growth and will play a critical role in Canada's transformation into a low-carbon economy. The global clean technology market presents a promising opportunity for Canadian businesses, a source of new clean jobs for the middle class and a driver of prosperity for all Canadians.

As a first step, Budget 2016 proposes to provide early strategic funding for clean technology projects to take advantage of this growth opportunity and enhance environmental performance, which are outlined in the following sections.

To support future investments, Budget 2016 proposes to provide over $1 billion over four years, starting in 2017–18, to support clean technology, including in the forestry, fisheries, mining, energy and agriculture sectors. Further details about the allocation of this funding will be provided in the coming months as part of the implementation of the Government's Innovation Agenda.

Accelerating Clean Technology Development

Investing in the research, development and demonstration of new clean technologies accelerates the innovation required to bring these technologies closer to commercialization. This will help meet climate change objectives, increase the productivity and competitiveness of Canadian firms, and create clean jobs.

Budget 2016 proposes to provide over $130 million over five years, starting in 2016–17, to support clean technology research, development and demonstration activities:

• $50 million over four years, starting in 2017–18, to Sustainable Development Technology Canada (SDTC) for the SD Tech Fund. These resources will enable SDTC to announce new clean technology projects in 2016 that support the development and demonstration of new technologies that address climate change, air quality, clean water, and clean soil.
• $82.5 million over two years, starting in 2016–17, to Natural Resources Canada to support research, development and demonstration of clean energy technologies. These resources will accelerate the innovation required to bring clean energy technologies closer to commercialization, reducing the environmental impacts of energy production and creating clean jobs.

Investing in Electric Vehicle and Alternative Transportation Fuels Infrastructure

Early action is needed to support the transition to low-carbon transportation fuels, as vehicle choices made today will determine the mix of technologies on the road in 2030. Budget 2016 proposes to provide $62.5 million over two years, starting in 2016–17, to Natural Resources Canada to support the deployment of infrastructure for alternative transportation fuels, including charging infrastructure for electric vehicles and natural gas and hydrogen refuelling stations. The Government will advance these objectives by working with provinces and territories, municipalities and the private sector. These resources will also support technology demonstration projects that advance electric vehicle charging technology.

Expanding Tax Support for Clean Energy

The income tax system encourages businesses to invest in clean energy generation and energy efficiency equipment by providing accelerated capital cost allowance (CCA) rates. CCA Classes 43.1 and 43.2 include a variety of equipment that generates energy by using renewable energy sources or fuels from waste, or conserves energy by using fuel more efficiently. Budget 2016 proposes to expand eligibility for accelerated CCA in two important emerging areas: electric vehicle charging and electrical energy storage.

First, the incentive will be extended to include electric car charging stations, with the most generous treatment provided to chargers that provide enough power for long-distance travel. Electric vehicles and stationary renewable energy generation are complementary technologies; providing an incentive for both helps to maximize the potential environmental benefits of renewable energy generation.

Second, the range of stationary electrical energy storage equipment eligible under CCA Classes 43.1 and 43.2 will be clarified and expanded to explicitly allow a much broader range of equipment ancillary to eligible generation equipment. In addition, stand-alone electrical energy storage property will be included in Class 43.1 when the round trip efficiency of the energy storage is greater than 50 per cent. Electrical energy storage helps displace fossil-fuelled power generation and facilitate the integration of a higher proportion of intermittent renewable electricity generation into the electrical grid.

The deferral of tax associated with these measures is expected to reduce federal revenues by $19 million over the 2016–17 to 2020–21 period.

Investing in World-Leading Researchers in Clean and Sustainable Technology

Research is the starting point for new technologies and approaches that will help Canada to become a low-carbon economy.

The Canada Excellence Research Chairs Program strengthens Canada's ability to attract and retain world-leading researchers in areas of strategic importance to Canada. Canadian universities receive up to $10 million over seven years for each Chair hosted at their institution.

Budget 2016 proposes to provide $20 million over eight years, starting in 2018–19, to create two additional Canada Excellence Research Chairs in fields related to clean and sustainable technology. These Chairs will be selected, in addition to the anticipated 20 new Chairs, as part of the upcoming competition to be launched in the spring of 2016.

Increasing Federal Support for Clean Technology Activities in All Regions

Canada's six Regional Development Agencies support economic and community development by leveraging local networks and capabilities. The Agencies' combined support to clean technology activities amounted to $50 million in 2015–16. Budget 2016 announces that the Regional Development Agencies will double their annual aggregate support for clean technology to $100 million per year, from existing resources, starting in 2016–17.

Advancing Regional Electricity Cooperation

Significant investment in Canada's electricity sector will be needed over the next 20 years to replace aging infrastructure and meet growing demand for electricity. Budget 2016 proposes to provide $2.5 million over two years, starting in 2016–17, to Natural Resources Canada to facilitate regional dialogues and studies that identify the most promising electricity infrastructure projects with the potential to achieve significant greenhouse gas reductions. This initiative will help shape future investments to maximize economic and environmental benefits.

Developing Cleaner Oil and Gas Technologies

Developing Canada's hydrocarbon resources in cleaner, more sustainable ways will be critical to enable the sector's continuing contributions to Canadian prosperity.

Budget 2016 proposes to provide $50 million over two years, starting in 2016–17, to Natural Resources Canada to invest in technologies that will reduce greenhouse gas emissions from the oil and gas sector.

Improving Data on the Clean Technology Sector

Comprehensive, regularly published data on Canada's clean technology sector will support efforts to monitor the contributions this sector is already making to the Canadian economy.

Budget 2016 proposes to provide $2.1 million over two years, starting in 2016–17, to Natural Resources Canada to enhance clean technology data, in collaboration with Statistics Canada and Innovation, Science and Economic Development Canada. This funding will result in a statistical framework that provides regularly published information on the clean technology sector's economic contributions to the Canadian economy and help the Government track progress towards clean technology objectives.

Securing a Cleaner, More Sustainable Environment

Protecting the environment and growing the economy are not incompatible goals. A clean environment and a strong economy go hand-in-hand. The Government is committed to leaving future generations of Canadians a sustainable and prosperous country. To this end, Budget 2016 proposes to provide $3.4 billion over five years, starting in 2016–17, to address climate change and air pollution, protect ecologically sensitive areas and restore public trust in the environmental assessment processes.

Addressing Climate Change and Air Pollution

The Government has committed to provide leadership as Canada works towards reducing greenhouse gas emissions and improve air quality. There is recognition that a collaborative approach between provincial, territorial and federal governments is important to reduce greenhouse gas emissions and enable sustainable economic growth. Canada is moving towards a pan-Canadian Framework on Clean Growth and Climate Change that will meet or exceed Canada's international greenhouse gas emissions targets. Pricing carbon will be a key element to transition Canada to a stronger, more resilient low-carbon economy while also improving our quality of life.

At the First Ministers' Meeting on March 3, 2016, the Government, along with provincial and territorial partners, agreed to work together to create the Vancouver Declaration on Clean Growth and Climate Change. The Declaration is the first step in developing a concrete plan to achieve Canada's international commitments to reduce greenhouse gas emissions and build on the momentum of the United Nations Paris Agreement.

Budget 2016 proposes to provide almost $2.9 billion over five years, starting in 2016–17, to address climate change and air pollution issues. This funding will:

• Support the development of the pan-Canadian Framework, including a Low Carbon Economy Fund;
• Help ensure that Canada meets its international obligations;
• Take action to reduce emissions from Canada's largest sources—transportation and energy;
• Advance science and programming activities to better understand and adapt to the changing climate; and
• Enable evidence-based decisions to address air pollution.

Supporting the Pan-Canadian Framework on Clean Growth and Climate Change

In the context of the pan-Canadian Framework on Clean Growth and Climate Change, the Government has committed to create a Low Carbon Economy Fund. Budget 2016 proposes to provide $2 billion over two years, starting in 2017–18, to establish the Low Carbon Economy Fund. The Fund will support provincial and territorial actions that materially reduce greenhouse gas emissions and are incremental to current plans, and achieve significant reductions within the period of Canada's nationally determined target. Resources will be allocated towards those projects that yield the greatest absolute greenhouse gas reductions for the lowest cost per tonne.

Budget 2016 also proposes to provide $109.1 million over five years, starting in 2016–17, to Environment and Climate Change Canada to continue to advance the Government's domestic climate change objectives. The resources will be used to undertake actions in four interconnected areas: science, data reporting, policy and regulations. Sustained action on climate change, framed by sound science and driven by transparent reporting of results and ambitious policy and regulatory measures, will support the transition to a low-carbon economy in Canada.

Moving to a Cleaner Transportation Sector

The transportation sector represented 23 per cent of Canada's greenhouse gas emissions in 2013, and is the second largest source of emissions in Canada. It is also a significant source of air pollution.

Budget 2016 proposes to provide $56.9 million over two years, starting in
2016–17, to Transport Canada and Environment and Climate Change Canada to support the transition to a cleaner transportation sector, including through the development of regulations and standards for clean transportation technology. Funding will also support Canada's continued participation in the development of international emissions standards for emissions from the international aviation, marine and rail sectors, including through the International Maritime Organization and the International Civil Aviation Organization.

Supporting Energy Efficiency and Renewable Energy Development

Energy efficiency and clean energy policies increase the uptake of clean technologies, reduce the environmental impact of energy use and can provide cost savings for Canadians. These measures are essential for the transition to a low-carbon economy. Budget 2016 proposes to provide $128.8 million over five years, starting in 2016–17, to Natural Resources Canada to deliver energy efficiency policies and programs, and maintain clean energy policy capacity. These resources will support improved energy efficiency standards and codes for products, buildings, industry and vehicles, and further the development of a legislative framework for offshore renewable energy projects.

Budget 2016 also proposes to provide $10.7 million over two years, starting in 2016–17, to Indigenous and Northern Affairs Canada to implement renewable energy projects in off-grid Indigenous and northern communities that rely on diesel and other fossil fuels to generate heat and power. First Nations will also benefit from proposed new funding for the First Nations Infrastructure Fund (see Chapter 3—A Better Future for Indigenous Peoples), which will support a range of community infrastructure investments, including energy systems.

Adapting to Climate Change Impacts

Canada will also need to adapt our public infrastructure to a changing climate and strengthen the resilience of our communities to the impacts of climate change. Budget 2016 proposes to provide $129.5 million over five years, starting in 2016–17, to seven federal departments and agencies to implement programming focused on building the science base to inform decision-making, protecting the health and well-being of Canadians, building resilience in the North and Indigenous communities, and enhancing competitiveness in key economic sectors.

Budget 2016 also proposes to provide an additional $40.0 million over five years, starting in 2016–17, to integrate climate resilience into building design guides and codes. The funding will support revised national building codes by 2020 for residential, institutional, commercial and industrial facilities. Guides integrating climate resiliency into the design and rehabilitation of public infrastructure will also be ready for adoption by 2020.

Ensuring International Environmental Cooperation

Climate change and air pollution are international issues that require international cooperation to find solutions. Budget 2016 proposes to provide $61.3 million over five years, starting in 2016–17, to Environment and Climate Change Canada, Natural Resources Canada and Global Affairs Canada to continue international environmental engagement to advance Canada's climate change and air pollution objectives. This funding will ensure Canada continues to play a leadership role in international environmental organizations, such as the United Nations Framework Convention on Climate Change, and will allow Canada to work toward a North American clean energy and environmental agreement with the United States and Mexico.

Reducing Air Pollution

Air pollution harms the environment and the health of Canadians, and gives rise to economic costs. While progress is being made to address air emissions from domestic sources (i.e., industry and vehicles) and from transboundary sources, air pollution remains a concern.

Budget 2016 proposes to provide $345.3 million over five years, starting in 2016–17, to Environment and Climate Change Canada, Health Canada and the National Research Council to take action to address air pollution in Canada. The funding will allow these organizations to conduct research on and monitor air pollution sources as well as health and environmental impacts; report to Canadians on air pollution sources and on local, regional and national air quality; continue to implement the Air Quality Management System jointly with provinces and territories; administer and enforce existing regulatory and non-regulatory instruments to reduce air pollution; and maintain the economic and policy capacity to develop new policy approaches and regulatory instruments to improve air quality.

These efforts will be complemented through advances in Canadian clean technology, providing air pollution reduction solutions alongside economic opportunities, and contributing to sustainable, inclusive prosperity for Canadians.

Tax Treatment of Emission Allowance Regimes

Several provinces have introduced or are in the course of introducing emissions trading regimes. Budget 2016 proposes specific income tax rules to clarify the income tax treatment of emission allowances and ensure the appropriate tax treatment of transactions under these regimes.

Protecting and Restoring Canada's Ecosystems and Natural Heritage

Canada's national parks, national marine conservation areas and marine protected areas provide outstanding examples of our country's natural landscapes, generate economic activity by attracting visitors from Canada and abroad, and provide Canadians with access to our natural heritage.

From coast to coast to coast, Canada has unparalleled ocean and freshwater resources. Actions to protect water quality and ecosystem health are critical to the lives and livelihoods of all Canadians.

Budget 2016 proposes a number of measures to support the further enhancement and expansion of protected areas; to improve evidence-based decision-making through increased funding for ocean and freshwater science; to protect the quality of water in Canada's lakes and oceans; and to reduce risks to human health and the environment by taking action on federal contaminated sites.

Providing Free Access and Expanding the National Park System

Canada's national parks belong to all Canadians. The Parks Canada Agency is responsible for protecting and presenting nationally significant examples of Canada's natural and cultural heritage. Through its broad network of national parks, marine conservation areas and national historic sites, Parks Canada connects Canadians with their heritage.

The Government is committed to expanding the national parks and national marine conservation areas systems to ensure each of Canada's distinct natural regions is protected. It is also committed to developing and expanding programs and services so that more Canadians can experience our national parks and learn about our environment and historic sites.

Budget 2016 proposes to provide up to $142.3 million over five years, starting in 2016–17, to the Parks Canada Agency and Natural Resources Canada to deliver on these commitments:

• $42.4 million over five years, starting in 2016–17, to continue work on developing new national parks and national marine conservation areas, including the Lancaster Sound National Marine Conservation Area, Nunavut and Thaidene Nene National Park, Northwest Territories;
• Up to $83.3 million over five years, starting in 2016–17, to provide free admission for all visitors to national parks, national marine conservation areas and national historic sites operated by the Agency in 2017, the 150th anniversary of Confederation, and to provide free admission for all children under 18 years of age, beginning in 2018; and
• $16.6 million over five years, starting in 2016–17, to expand the Learn to Camp program, develop new programming to tell Canada's stories, and encourage Indigenous story-telling and eco-tourism opportunities.

Protecting Marine and Coastal Areas

Canada is a signatory to the International Convention on Biological Diversity. In 2010, members of the convention adopted the Aichi Biodiversity Targets, which included a target to conserve 10 per cent of coastal and marine areas by 2020. To achieve this, Canada needs to conserve an additional 525,000 km2, an area roughly equivalent to the size of all of the Atlantic provinces.

In Canada, marine and coastal areas are protected through a variety of measures, including the designation of Marine Protected Areas under the Oceans Act, National Marine Conservation Areas and National Wildlife Areas. Approximately 1 per cent of Canada's marine and coastal areas have already been protected.

Budget 2016 proposes to provide $81.3 million over five years, starting in 2016–17, to Fisheries and Oceans Canada and Natural Resources Canada to support marine conservation activities, including the designation of new Marine Protected Areas under the Oceans Act. Parks Canada will also continue efforts to develop new National Marine Conservation Areas. Together these actions are designed to achieve the target to protect 10 per cent of Canada's marine and coastal areas by 2020.

Investing in Ocean and Freshwater Research

Oceans and waterways are vital to Canada's economy. They connect us with global markets and are a resource for coastal and Indigenous communities. Scientific evidence is the foundation on which the Government develops policies around the management and protection of the oceans, coasts, waterways and fisheries to ensure that they are healthy, sustainable and profitable for future generations.

Budget 2016 proposes to provide $197.1 million over five years, starting in 2016–17, to Fisheries and Oceans Canada to increase ocean and freshwater science, monitoring and research activities and to provide support for the Experimental Lakes Area in Northwestern Ontario. Funding will support new and expanded research activities that will promote the health of fish stocks and sustainable aquaculture, enable more comprehensive monitoring of the impacts of aquatic pollution, and enhance our knowledge of freshwater ecosystems.

Improving Great Lakes Water Quality and Ecosystem Health

Millions of Canadians live and work along the shores of the Great Lakes. Protecting water quality and ecosystem health in the Great Lakes is vital to ensuring that Canadians can continue to depend on this rich ecosystem for their drinking water, for recreation and for jobs.

To date, phosphorus levels in Lake Erie have been measured and reduction targets have been established. To help preserve the Great Lakes as a valuable resource, Budget 2016 proposes to provide $3.1 million in 2016–17 to Environment and Climate Change Canada to continue to improve nearshore water and ecosystem health by reducing phosphorus and the resulting algae in Lake Erie. With these resources, the focus will shift from setting phosphorus targets to achieving them, including developing a domestic action plan, and monitoring and reporting on progress. Lessons learned from phosphorus reduction in Lake Erie could be applied to the other Great Lakes.

Managing Transboundary Water Issues

Canada and the United States share 20 per cent of the world's freshwater in the Great Lakes alone, and jointly manage countless other lakes and rivers. The International Joint Commission is the binational body that manages these Canada-U.S. transboundary waters. These waters are of great economic, environmental and symbolic value to Canadians, and how we manage them is of utmost importance. In recent years, flooding, variable water levels and water quality have affected four important water basins that straddle the Canada-U.S. border—the Upper Great Lakes, Lake Champlain and the Richelieu River, Lake of the Woods and the Souris River.

Budget 2016 proposes to provide up to $19.5 million over five years, starting in 2016–17, to the International Joint Commission to enable Canada to match U.S. funding to study these issues in order to protect the local environment and communities.

Addressing the Threat of Pollutants From the Manolis L

The Manolis L, which sank to a depth of more than 80 metres in 1985 off the coast of Newfoundland and Labrador, lay dormant until April 2013 when cracks in the hull, coupled with a powerful storm, allowed some fuel oil to reach the surface. Since then, the Canadian Coast Guard has installed an oil containment system.

Budget 2016 proposes to provide $6 million in 2016–17 to the Canadian Coast Guard for a technical assessment of the wreck, a critical next step in developing a permanent solution to addressing the threat of pollution from the vessel.

Strengthening Canada's Environmental Assessment Processes

Robust environmental assessment processes support evidence-based decision-making for major projects. Canadians look to the Government to ensure that these processes take full account of the environmental, social and economic considerations surrounding new projects. Budget 2016 proposes measures to rebuild trust in Canada's environmental assessment processes, provide the Canadian Environmental Assessment Agency with the necessary resources to deliver on its responsibilities, and increase and sustain capacity for evidence-based decision-making for projects in the North.

Restoring Trust in Environmental Assessment

In the Speech from the Throne, the Government committed to review federal environmental assessment processes as part of efforts to restore public trust and support the renewal of the relationship with Canada's Indigenous peoples. The Government has further committed to ensure that decisions on projects undergoing federal environmental assessments will be informed by scientific evidence and that Indigenous peoples will be more fully engaged in reviewing and monitoring major projects.

On January 27, 2016, the Government announced the following interim principles to guide environmental assessments for major projects as the first part of a broader strategy:

1. Project reviews will continue within the current legislative framework and in accordance with treaty provisions.
2. Decisions will be based on science, and traditional knowledge of Indigenous peoples.
3. The views of the public and affected communities will be sought and considered.
4. Indigenous peoples will be meaningfully consulted, and where appropriate, impacts on their rights and interests will be accommodated.
5. Direct and upstream greenhouse gas emissions linked to the projects under review will be assessed.

Budget 2016 proposes to provide $16.5 million over three years, starting in 2016–17, to the National Energy Board, Natural Resources Canada and Transport Canada to implement the interim approach. This funding will support public and Indigenous participation in enhanced consultations in projects undergoing reviews by the National Energy Board and to support Crown consultations with Indigenous people. Funding provided to the National Energy Board will be fully cost-recovered from industry.

Supporting the Canadian Environmental Assessment Agency

The Canadian Environmental Assessment Agency is the main authority responsible for federal environmental assessments. It conducts environmental assessments, advises the Minister of Environment and Climate Change in establishing project review panels, and supports the panels in their work. The Agency also supports the Minister in fulfilling her responsibilities under the Canadian Environmental Assessment Act, 2012, including the development and issuance of enforceable environmental assessment decision statements. In addition, the Agency administers a Participant Funding Program that provides support for individuals, non-for-profit organizations and Indigenous groups to participate in federal environmental assessments.

Budget 2016 proposes to provide $14.2 million over four years, starting in
2016–17, to the Canadian Environmental Assessment Agency to support the Agency in fulfilling its responsibilities under the Canadian Environmental Assessment Act, 2012. These resources will support activities, such as increasing Agency capacity to undertake consultations with the public and Indigenous groups, and will support compliance and enforcement.

Taking Stock of the Arctic Environment

The Arctic is a vast and dynamic ecosystem as well as a place of tremendous natural resource potential upon which northern communities rely for their livelihoods. The Government is committed to early engagement of Inuit people on potential offshore oil and gas activity in the Arctic and to ensuring that decision-making regarding the management of resources is evidence-based and considers possible impacts to the unique environment and wildlife.

Budget 2016 proposes to provide $19 million over five years, starting in
2016–17, to Indigenous and Northern Affairs Canada to collaborate with researchers and Inuit communities to gather existing research and traditional knowledge of the Arctic environment and conduct new research where gaps in knowledge exist. This work will help assess the potential environmental impacts of future oil and gas activity in three regions of the Arctic—the Beaufort Sea, Baffin Bay and Davis Strait, and Kivalliq, Kitikmeot and the Arctic Islands of Nunavut—and inform whether oil and gas activity should proceed in these regions.

Improving Regulatory Review Processes for Major Projects in the North

Large resource development and infrastructure projects are primary drivers of the northern economy, creating employment and business opportunities, and generating tax revenues that benefit Northerners and all Canadians. Since 2010, the Northern Projects Management Office has played a vital role in coordinating the participation of federal departments and agencies in the regulatory review processes of proposed major resource projects and infrastructure projects in the North, including environmental assessments, coordinating federal Crown consultations, and tracking the progress of these projects in the North.

The Canadian Northern Economic Development Agency supports development initiatives in the territories and is the regional delivery agent for the Northern Projects Management Office. Budget 2016 proposes to provide $10.1 million over four years, starting in 2016–17, to the Canadian Northern Economic Development Agency to continue the Agency's leadership role in the Northern Projects Management Office in improving the timeliness, predictability and transparency of northern regulatory review processes.