Conservative climate plan long on technology, short on targets

The Conservative party’s climate plan, released on June 19, was notable for what was missing: Emissions targets, milestones, costs, capital plans and, of course, a carbon tax. Instead, Scheer promised “green technology, not taxes.”

In lieu of a price on carbon, the Conservative plan leads with a Green Investment Standard, which will require industrial polluters that exceed emissions standards to invest in “research, development and adoption of emissions-reducing technology related to their industry,” according to the plan. But the potential impact of that standard—and several other policies designed to accelerate research, development and commercialization of green technologies here in Canada—is difficult to gauge, said Nicholas Rivers, Canada Research Chair in Energy and Climate Policy at the University of Ottawa, in an interview with RE$EARCH MONEY.

“It's really difficult for businesses as well as the government to know whether these investments are going to yield reductions in greenhouse gases or not. There are potentially some dollars there for the research community, but it's not clear at all how much, because there are no details in the plan,” he said.

For example, the Conservatives do not specify emissions limits or how much major emitters will have to invest (per tonne of greenhouse gas) in green technology if they surpass those limits. However, they do provide examples of investments that may be eligible, including paying into industry R&D pools that combine investments in green technology, investments in Canadian cleantech companies, and investments in Canadian university and college programs “that advance the development of green technology.”

“A lot of the discussion in the Scheer climate plan is, you know, ‘We're not going to do a tax. We're going to do investment in technology.’ In my mind, it's a distraction. It's not a one-or-the-other kind of game,” said Rivers. “We need to certainly be deploying the many, many technologies we already have that are cost-competitive to reduce greenhouse gas emissions. And at the same time we should be thinking about investing in the development of new technologies.”

In an interview with RE$EARCH MONEY, Isabelle Turcotte, director of federal policy at the Pembina Institute, a cleantech think tank, said the federal government's existing policies are already incentivizing innovation in the most cost-effective way. “A price on pollution effectively provides that signal to industry and the flexibility to look at what best fits their needs in terms of short-term and longer-term investment horizons.”

“While it is great to talk about research and development, I'm always cautious to see if the proponent is approaching it as a silver bullet,” she added.

A slew of incentives

In addition to the Green Investment Standard, the plan offers a range of climate action incentives. One is a Green Patent Credit to catalyze R&D and commercialization of homegrown green technologies. Modelled on the “patent box” scheme in the United Kingdom and other European countries, it would reduce the business tax rate from 15 percent to 5 percent on income generated from green technology developed and patented in Canada. According to the plan, it is expected to cost $20 million per year, rising to $80 million per year after four years.

The idea has been floated in Canada before; in fact, Quebec has implemented a version to encourage innovation in the province’s manufacturing sector, offering a preferential tax rate of four per cent, instead of 11.8 per cent, on income derived from patents developed there. In Europe, the approach has had mixed results, leading the Organization for Economic Co-operation and Development to issue a set of recommendations around them. A review of the patent box strategy, published in 2017, concluded that Canada should consider multiple approaches to stimulating R&D, including a patent box, alongside the SR&ED tax credit program and direct support for research.

Additional Conservative policy proposals to foster climate innovation include:

• A green technology and innovation fund to support green technology companies, seeded with an initial investment of $250 million;
• An online hub for green technology innovators in the public and private sectors;
• An “expansion accelerator” to encourage Canadian companies to expand rapidly into high-emitting countries around the world, funded with up to an initial $500 million; and,
• An expansion of Export Development Canada’s green bonds program to provide capital for clean tech.

Absent is a clear policy that will shift Canada away from fossil fuels and toward lower carbon fuels, such as ethanol and biofuels, renewable energy sources and technologies. Instead, it states that the Conservatives will work with the provinces and territories to “increase the availability and use of renewable fuels and to decrease the carbon intensity of Canada’s fuel mix," and states that the existing Clean Fuel Standard is too complex, expensive and burdensome.

The Clean Fuel Standard is a pillar of the Liberal’s climate plan. On June 28, following several years of consultations, the government released its proposed regulatory approach to liquid, solid and gaseous fuels.

“For me, that's an important area of innovation because we know that the way that it was designed, the Clean Fuel Standard is the biggest piece of mitigation in our climate puzzle,” said Turcotte. “[Scheer’s plan] implies that the Conservative’s have a desire to further dilute the signal [the standard sends] by providing more compliance flexibility. That would threaten the policy's ability to incentivize innovation."

She also said the cost of change should be assessed: “What’s the impact in Canada of abruptly changing standards and removing systems, like Ontario’s cap-and-trade program?” she asked. “Do we lose the investment environment in which it makes sense to invest in energy efficiency and innovation? One-hundred and eighty-nine countries have signed the Paris Agreement and are now doing their best to take their piece of the $26 trillion-dollar low-carbon economy. We'd best make sure that we have a conducive policy environment for these opportunities to flourish here.”

R$