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Morneau’s Pre-Election Budget Boosts ZEVs and Energy Retrofits, Extends New Fossil Subsidy

Bill Morneau/Facebook

Canadian Finance Minister Bill Morneau tabled a pre-election budget yesterday that included a 2040 deadline to phase out new internal combustion vehicle sales, major new funds for building energy retrofits, and a budget boost for municipal infrastructure, but introduced a new fossil fuel subsidy while doggedly claiming a fossil subsidy phaseout is still on the government’s agenda.

“Subsidizing the very industries responsible for carbon pollution undermines the government’s efforts to put a price on carbon,” said [1] Oil Change International analyst Alex Doukas, in a release on behalf of the four-member Stop Funding Fossils Initiative. “If Prime Minister Trudeau is serious about climate action, his government must end subsidies to the fossil fuel industry, yet instead the government is increasing its handouts” to the industry.

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Elements of the budget include:

• A 2040 deadline for all new vehicle sales to be zero-emission (ZEVs), with interim sales goals of 10% by 2025 and 30% by 2030;

• A C$5,000 purchase incentive for electric or hydrogen fuel cell vehicles that sell for less than $45,000, plus faster tax write-offs to support business investment in ZEVs;

• $130 million over five years for ZEV recharging and refuelling infrastructure;

• Just over $1 billion over the next year to boost energy efficiency in residential, commercial, and multi-unit buildings through the Federation of Canadian Municipalities’ Green Municipal Fund, including financing for local home retrofit incentives, Property Assessed Clean Energy (PACE) programs, efficiency and onsite generation in affordable housing, and support for cities and non-profits to retrofit large or demonstration buildings;

• $2.2 billion in federal gas tax revenues that will be directed to municipal infrastructure projects, without passing through provincial governments;

• $150 million in infrastructure funds to support economic diversification in communities affected by the federal coal phaseout, plus $35 million the government had already committed over five years for the worker transition centres recommended [3] earlier this month by the federal just transition task force;

• $15.2 million over five years for Statistics Canada to establish a virtual Canadian Centre for Energy Information;

• $251.3 million over for three years to “extend existing innovation and diversification programs” in the forest sector;

• $100 million over four years in a new “innovation” subsidy to the fossil sector, coupled with a promise to “continue to review measures that could be considered inefficient fossil fuel subsidies with a view to reforming them as necessary.”

(h/t and thanks to Shaughn McArthur, policy and influence lead at CARE Canada, for a quick, comprehensive summary of the climate-related items in the budget.)

The budget appeared a day after CBC obtained [4] a March 15 letter from Morneau, saying the Trudeau government would soon confirm its commitment to explore Indigenous “economic participation” in completing the controversial Trans Mountain pipeline expansion.

Canadian climate hawks were pleased with the new investment but gave the budget decidedly mixed reviews overall.

“At a time when the world is more keenly aware than ever of the need for urgent action to address the escalating climate crisis, this budget is a tepid response to a house on fire,” Climate Action Network-Canada wrote [5]. “Business as usual policy is no longer acceptable to respond to the climate crisis and the level of climate action that citizens, students, workers and communities are urgently demanding.”

CAN-Rac welcomed the $1 billion in energy retrofit funding, but noted the budget made no mention of continuing the work of the just transition task force, or the hundreds of millions in funding the task force recommended for transition activities through 2030 and beyond.

As well, “one year out from the 2020 deadline for donor countries to mobilize US$100 billion of international climate finance in support of the Paris Agreement, Budget 2019 does nothing to ensure Canada is contributing its fair share of support.”

Efficiency Canada Executive Director Corey Diamond said [6] the $1 billion for municipal energy initiatives will help communities reduce energy waste and cut energy costs for homes, schools, hospitals, and social housing.

“Energy efficiency is a job creation powerhouse, capable of creating more than 118,000 jobs annually,” he said, adding that “you probably know someone in your community who does this work.” Energy efficiency investments “directly lead to strong, local job creation for small businesses in cities across Canada,” while “the announcement of a financing mechanism to enable Canadians to make their homes more efficient is the most effective way to keep energy affordable. This can move us towards deep retrofits, capable of cutting household energy costs by 50%.”

“We hear it everywhere we go,” Diamond added. “Canadians are prepared to chip in, if it’s easy for them to access the capital and services to help them save energy. Today’s announcement creates a simple way for that to happen.”

Équiterre Government Relations Director Annie Bérubé welcomed [7] the ZEV incentives as a “good first step” toward an internal combustion phaseout, but warned that limited supply will still make it tough for would-be EV buyers to find the models they want. “The federal government will absolutely have to address the lack of available vehicles in the market if it wants to reach its ZEV sales targets,” she said.

The $2.2 billion top-up in federal support for municipal infrastructure doesn’t have an explicit green or low-carbon tint, but still answers cities’ call for a funding tool to address local priorities, CBC reports [8]. “For communities of all sizes, growing this transfer means better roads, bridges, transit, recreation centres, and more. This is about empowering local governments to do what they do best,” said Federation of Canadian Municipalities President Vicki-May Hamm.

“This is kind of a means for the federal government and municipalities to have a more direct relationship,” added Sahir Khan, executive vice-president of the Institute for Fiscal Studies at the University of Ottawa.

The Stop Funding Fossils Initiative—which includes Oil Change, CAN-Rac, Équiterre, and Environmental Defence—noted that Canada “remains the largest provider of fiscal support to oil and gas production in the G7 relative to the size of its economy,” despite “moderate progress” in Morneau’s 2017 budget.

“Other governments are moving away from the financial and climate risks associated with oil and gas,” the coalition states. But “the Government of Canada has doubled down on fossil fuels by introducing billions of dollars in new subsidies in the past year.” Past fossil funding similar to the $100 million in Budget 2019 “has failed to deliver concrete and significant greenhouse gas reductions from the sector, as the carbon intensity of oil and gas production in Canada has not decreased,” the release notes, adding that “none of this funding should be allocated to support new oil and gas exploration and development.”

“Earlier this month, Prime Minister Trudeau wrote that ‘there is no issue more important to our future than climate change,’” said CAN-Rac Executive Director Catherine Abreu. “If he truly believes that, he needs to keep Canada’s promise—originally made a decade ago—and end fossil fuel subsidies.”

Green Party leader Elizabeth May called [9] the climate commitments in this year’s budget “pathetic”, contending the Trudeau government has failed to show climate leadership. “There’s about $1.4 billion over five years, compared to spending $4.5 billion on a leaky pipeline,” she said, and “we have the same climate target that we had under Stephen Harper.” In his March 15 letter to a B.C. First Nation involved in consultations on the Trans Mountain pipeline expansion, Morneau said an announcement “in the coming days” would address Indigenous communities’ financial participation in the project if it goes ahead. “The letter said equity or revenue-sharing arrangements ‘in any form would tie to the project’s in-service date,’” CBC reports [4]. “Revenue sharing or equity arrangements would be separate from mutual benefit agreements that have already been signed or will be signed by First Nations with Trans Mountain Corporation on the project.”