All of the above: Canada reveals $15 billion plan to accelerate decarbonization

13 minute read
17 December 2020

On Dec. 11, 2020, the federal government unveiled its latest comprehensive plan to address climate change (the "Climate Plan"). Entitled "A Healthy Environment and a Healthy Economy", Canada's federal Climate Plan comprises 64 policies, programs, and investments[1] intended to support post-pandemic economic recovery while accelerating Canada's climate goals. The Climate Plan aims to exceed Canada's 2030 emissions reduction target and achieve a net-zero emissions economy by 2050.[2]

Containing $15 Billion in investments, the Climate Plan offers significant opportunities for a variety of industries. When considered together with the Canadian Infrastructure Bank's (the "CIB") recently-released Growth Plan, the Climate Plan is especially good news for Canada's clean energy sector.

Informed input needed

Although some of the Climate Plan's features will be put into action right away, others will require stakeholder consultation. As a consequence, industry and community stakeholders need to stay carefully tuned-in and be ready to engage as plans and policy choices evolve.

As suggested in our previous piece, The Perfect Storm and the Silver Lining, the opportunity to continue the national transition to a cleaner energy future presents a broad landscape of technological and smart investment opportunity. Highly creative and well thought through policy solutions will be needed to drive energy system transition while simultaneously taking care of those impacted by change. To accomplish this, and avoid pitfalls, the Government of Canada will need active and informed industry sector information and advice.

Investments in clean energy

When it comes to clean energy, the Climate Plan sets out four major commitments.

First, the federal government will invest $964 Million over four years to advance smart renewable energy and grid modernization projects. This includes support to increase renewable energy generation capacity, such as wind and solar, and to deploy grid modernization technologies, such as power storage, smart metering, demand response and power system optimization through artificial intelligence. Among other benefits, this will help jurisdictions across Canada minimize their reliance on fossil fuel-fired electricity generation.

Second, the federal government commits $300 Million over five years to ensure that rural, remote, and Indigenous communities that currently rely on diesel fuel can make the shift to lower costs, more environmentally sustainable energy solutions by 2030. The Climate Plan notes that the number of clean energy projects in remote communities has nearly doubled in the past five years, but that there are still over 200 remote communities in Canada that rely on diesel for electricity.

Third, the Climate Plan reiterates the federal government commitments previously set out in the CIB's Growth Plan. Released in October 2020, the Growth Plan earmarks $2.5 Billion over the next three years to facilitate the development of interprovincial electricity transmission or "interties", clean power, and storage. Shortly after the release of the CIB's Growth Plan, the federal government's 2020 Fall Economic Statement also identified strategic interprovincial interties as an important part of Canada's recovery from the COVID-induced recession.[3] In fact, discussions are presently underway between the federal government, the CIB, and regional partners to advance Canada's "Atlantic Loop" intertie project -a massive transmission undertaking which would allow hydroelectric power from remote Labrador and Quebec to help displace coal use in the Atlantic provinces.

To further support intertie development, the Climate Plan commits $25 Million in 2021-22 to help some proponents complete engineering assessments, community engagement, and environmental and regulatory studies. This work is intended to help inform and complement the CIB's efforts to identify and address development finance gaps in the intertie projects.

Fourth, the federal government will launch a Small Modular Reactor ("SMR") Action Plan by the end of 2020. Following on the SMR Roadmap released in 2018, this new Action Plan would lay out the next steps for developing and deploying nascent SMR technologies in various jurisdictions across Canada.

Investments in clean tech and innovation

Another major component of the Climate Plan is the federal government's investment of $3 Billion over five years in the Strategic Innovation Fund – Net-Zero Accelerator. The goals of this fund are to rapidly expedite decarbonization projects with large emitters, scale-up clean technology, and accelerate Canada's industrial transformation across all sectors.

The Strategic Innovation Fund – Net Zero Accelerator will have three key areas of focus:

  • support for the development and adoption of clean technology solutions in all industrial sectors;
  • support for clean technology development in Canada's aerospace and automobile manufacturing sectors; and
  • support for the development of a Canadian battery innovation and industrial ecosystem.

In addition, the Climate Plan commits $750 Million over five years to continue to support Sustainable Development Technology Canada. This investment would help both start-up and scale-up companies demonstrate the feasibility of pre-commercial clean technologies, and support early commercialization efforts – something of critical importance to Canada's energy innovation ecosystem.

Investments in cleaner and low-carbon fuels

Recognizing that Canada's energy transformation is multi-faceted and will take time, the Climate Plan commits $1.5 Billion to a Low-carbon and Zero-emissions Fuels Fund targeted at increasing the production and use of low-carbon fuels (e.g. hydrogen, biocrude, renewable natural gas and diesel, cellulosic ethanol). This Fund is intended to complement federal carbon pricing and regulatory efforts like the Clean Fuel Standard.

On the topic of the Clean Fuel Standard (the "CFS"), the Climate Plan reveals a notable change in policy. Instead of covering liquid, gaseous, and solid fuels as initially proposed in 2016, the scope of the CFS has been narrowed to cover only liquid fossil fuels, like gasoline, diesel, and oil. For context, the CFS is a proposed regulation that would require a reduction of carbon content in domestically used fuels.[4]

Beyond those funding measures and the change to the CFS, the federal government will introduce Canada's Hydrogen Strategy before the end of the year. This will pave the way for integrating low-emitting hydrogen across the Canadian economy, something which several provinces has already begun to support.

Investments in zero-emission vehicles (ZEVs) and charging infrastructure

Given that transportation is the second-largest source of greenhouse gas emissions in Canada,[5] the federal government will invest an additional $287 Million over two years, starting in 2020-21, to continue the Incentives for Zero-Emission Vehicles program until March 2022. The program provides a rebate of up to $5,000 on a light-duty ZEVs, which includes battery-electric, plug-in hybrid electric, and, notably, hydrogen fuel cell vehicles.[6]

The Climate Plan also heralds the investment of an additional $150 million over three years in charging and refueling stations across Canada, as previously announced in the 2020 Fall Economic Statement.

Investments in retrofits and new builds

Faced with thousands of aging municipal community centres, sports facilities, and cultural spaces across Canada, the Climate Plan commits $1.5 Billion over three years for greener community buildings through retrofits, repairs, and new construction. At least 10% of this funding will be allocated to projects serving Indigenous communities.

Moreover, the CIB's Growth Plan includes $2 Billion to finance the upfront capital costs of commercial and large-scale building retrofits. The Climate Plan reiterates this commitment without offering any additional funding.

Under the Climate Plan, homeowners are also in luck. Starting in 2020-21, the federal government will allocate $2.6 Billion over seven years to provide up to 700,000 grants of up to $5,000 each to help homeowners make energy-efficient home improvements. Sensing the need for affordable financing to make home energy retrofits attractive, the Climate Plan also hints that details will be released in the coming months regarding a low-cost loan program that integrates and builds on available energy audits and grants. This will come as good news to Canada's HVAC and home heating industry.

A renewed commitment to carbon pricing

The Climate Plan proposes to raise the price of carbon significantly over the next decade. The federal carbon price, first introduced in 2019, is currently sitting at $30 per tonne and set to increase by $10 per tonne per year, up to a maximum of $50 per tonne in 2022. The Climate Plan now doubles down on that committed trajectory. Starting in 2023, the Plan would increase the price of carbon by $15 per tonne, per year, rising to $170 per tonne by 2030.[7]

This one has legs

More than a funding package, the Climate Plan fits into a broader legislative agenda that includes the Greenhouse Gas Pollution Pricing Act (the source of the federal carbon price) and the recently tabled Bill C-52, which had its first reading in the House of Commons in November.

Bill C-52 aims "to promote transparency and accountability" in climate action, by mandating emissions plans and progress reports from Parliament, the Minister of Environment and the Minister of Finance. The timing of Bill C-52 alongside the Climate Plan signals that the feds mean business when it comes to decarbonizing the economy.

When can we get started?

As for when the money committed in the Climate Plan will start flowing, the answer is not yet clear.

For funding measures that were also featured in the 2020 Fall Economic Statement, the federal government states that "actions will begin swiftly". These would include interprovincial intertie development, as well as other projects involving northern and Indigenous communities.

For other funding measures, the federal government states that action will be taken following consultations.[8] Canadians should therefore pay careful attention to forthcoming government announcements and calls for input and be ready to become actively engaged with use-able recommendations and up-to-date research and analysis, as the government hints that these consultations will begin immediately "in order to ensure additional climate actions are launched in 2021".

[1] The Climate Plan, p. 9.

[2] Backgrounder; the Climate Plan at p. 60-64 and p. 77.

[3] See 2020 Fall Economic Statement, p. 90-91.


[7] The Climate Plan, p. 25-26.

[8] The Climate Plan, p. 77.

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