Budget 2021: Investing in clean industry is the right call

It’s easy enough to imagine what the energy transition will look like in your city or neighbourhood: electric cars and buses rolling through the streets, more people walking and biking, solar panels covering every roof, perhaps a spinning wind turbine or two cresting a hill on the horizon.

But much like the universal symbol for climate change — an iceberg — there is much more to the energy transition than what appears on the surface.

This is why the new federal budget’s focus on clean industry is the right one. Canada is one of 127 countries (together responsible for 63 per cent of global emissions) that have adopted or are considering net-zero targets — and put simply, we cannot create a net-zero world without the materials to build it.

Budget 2021 recognizes Canada’s economic future relies less on fossil fuels and more on exports aligned with this net-zero world. The same could be said for our economic present, as our largest trading partners, including the U.S., the EU, the U.K. and Japan, on Thursday announced increased climate targets for 2030. Canada also increased its emission reduction target from 30 per cent below 2005 levels to between 40 and 45 per cent.

Even the International Energy Agency has concluded that, to keep global warming to less than 2 C, oil supply will need to peak in 2022 and gas in 2025 before declining indefinitely. For a 1.5 C target, there’s even less time.

In a number of ways, the federal budget largely reflects this reality. Of the $17.6 billion dedicated to climate and environmental initiatives, $5 billion will go to the Net Zero Accelerator to help heavy industries like steel and cement decarbonize, and consequently grow their competitiveness, in a global market seeking cleaner materials.

Having said that, the funding should be spent strategically and where it can make the most impact, which isn’t in oil and gas.

Also worth noting in the budget is the $37 million for advancing critical battery mineral and processing and refining expertise, on top of $10 million dedicated to setting up a Critical Battery Minerals Centre of Excellence.

Battery development has been recognized both by the federal government and our American trading partners as a major opportunity for Canada. We have the natural resources and skilled workers to not only manufacture the batteries and vehicles they’ll go into, but also to source the metals and minerals needed to build them. This uniquely Canadian opportunity is sometimes referred to as the “mines to mobility” supply chain.

This isn’t just a nice idea, either. The supply chain is already coming together, helped by early government action. Agreements with the Ford Motor Company and Stellantis (formerly Fiat Chrysler) to build electric vehicles in Ontario alongside the recent announcement of a new battery manufacturing facility by Quebec’s Lion Electric illustrate what is possible when industry and governments collaborate.

What’s more, Canada is well-positioned to capitalize on what’s been called the green economy supercycle, where sustainably produced energy and mineral prices soar.

This is largely because Canada has a secret weapon: its 83 per cent emissions-free electricity grid, meaning a number of operations are competitively clean when connected to it.

The production of certain minerals could increase by nearly 500 per cent over the next three decades to meet growing demand for clean technologies, according to the World Bank Group. Global steel demand, meanwhile, is projected to increase by up to 55 per cent by 2050; Canadian steel and aluminum are among the world’s cleanest and could be cleaner.

Mining companies such as Vancouver-based Teck are also global leaders in copper production, while Canada is the world’s fifth-largest nickel producer — both key metals for electrifying transportation. In Alberta, companies like E3 Metals and Summit Nanotech are finding ways to recover lithium from old oil and gas wells.

Of course, heavy industry also represents a challenge in need of a solution: 11 per cent of Canada’s emissions come from heavy industry, and that’s excluding oil and gas (which by itself represents just over a quarter of all emissions in Canada). As outlined above, these other heavy industries (including steel, cement, mining, chemicals, fertilizers, and pulp and paper) already employ more Canadians than oil and gas and will continue to exist — and even thrive — as they underpin the energy transition.

That means they also need to get cleaner.

Some parts of our economy are harder to decarbonize than others, and many heavy industries comprise what’s been called the “toughest third” of emissions. Investing in them now will not only make us more competitive in the near term, it will help us achieve our tougher climate ambitions beyond 2030.

A focus on “greening procurement” — or as it’s sometimes called, “buying clean” — also makes an appearance in the federal budget. This is a good step, but not the last one. We look forward to the federal government updating its procurement policies and encouraging all levels of government to buy the cleanest products and building materials, many of which are made here in Canada.

Such “buy clean” measures leverage the targeted funding provided by the Net Zero Accelator and other programs that help our heavy industries evolve. Think of it as the perfect dance partner, creating a bigger market for the solutions we’re supporting. Given the size of our economy (at least compared to that of our neighbour), having access to government buyers at home will help innovative companies and solutions scale and ultimately compete.

So let’s take a lesson from the proverbial iceberg: let’s ensure we’re tackling climate change and also seizing the opportunities beneath the surface.

Sarah Petrevan is the policy director and Mark Zacharias is a special adviser at Clean Energy Canada, a program at Simon Fraser University’s Centre for Dialogue.