By Pierre Sadik

Unfortunately, in many instances there's been much more heat than light in the course of the national discussion about Canada's economy and climate change.

Many Canadians care about Canada's economy or about the environment. Most probably care about both. The two issues are inextricably linked and have become a staple of Canadian politics over the course of the past few decades. Unfortunately, in many instances there's been much more heat than light in the course of the national discussion.

After years of fits and starts Canada again finds itself at a crossroads regarding the economy and climate change and how the two will intersect in the period leading up to 2020. With the Copenhagen negotiations about to commence, and with the process of establishing meaningful climate policies well underway for our major trading partner to the south, a study was released last week in an effort to elevate the debate around the economy and climate to a higher level.

To that end the David Suzuki Foundation and the Pembina Institute, with the financial support of the TD Bank, decided to seek some credible answers to a set of important questions that have left a substantial gap in the Canadian climate/economy policy debate. Pembina and DSF wanted to answer some hard questions for themselves, and for the public, and begin bringing Canadians around to the fact that reducing the carbon intensity of Canada's economy will take more than changing light bulbs.

The leading economic modelling firm of Mark Jaccard and Associates was retained and an advisory committee comprising senior bank economists, federal government and NRTEE officials, and others helped guide the study. Ultimately, the analysis brought forth credible and conclusive answers to how Canada's economy would fare in the face of a science-based emission reduction target by 2020 .

Federal governments have historically held back, due to various concerns, from taking even the first steps to meaningfully address climate change. On one level this is, of course, quite understandable. The perception among politicians is that taking meaningful action on climate change involves huge risk — economic, social, trade related and, of course, political. What's more, the payoff comes only later — perhaps much later — and certainly well after the politicians who took decisive action are no longer in office.

However, contrary to received wisdom, the study shows the following regarding the two big political bugaboos of economic growth and job creation.

Economic growth: Brace yourself. Canada's economy does not collapse like a cheap lawn chair. Instead it grows. In fact, it grows aggressively, well into the double digits nationally and in every single province over the next 10 years — even if our biggest trading partners do not match Canada's carbon price. That's what the study says and that's essentially what every other government and private sector analysis that has been done on this issue have also said. I know, it's hard to believe given all the rhetoric and fear-mongering around tackling climate change. That's why I say more heat than light.

The reasons for this outcome are fairly straightforward and include the fact that over two-thirds of Canada's economy is comprised of the service sector — a very low carbon sector. Most of the rest of our economy comprises industrial activity, which includes the oil patch, but also includes many moderately carbon intensive industries like the auto and aerospace manufacturing sectors.

Even Alberta and Saskatchewan, Canada's two most carbon intensive provincial economies, fare very well under this policy — with double digit GDP growth that is underpinned by coal, oil and gas accompanied by CCS. What's particularly noteworthy is that Albert's growth still remains the strongest in the country, by far.

Job creation: Perhaps not surprisingly, job creation largely mirrors what happens with Canada's GDP; i.e., it grows aggressively. Nationally, job creation continues at a pace of 11 per cent by 2020 which, the study shows, is the same rate at which jobs would grow in the absence of a climate policy. In this instance Alberta and Saskatchewan's employment growth is slightly softer than it otherwise would have been, but jobs still grow 6 per cent and 8 per cent respectively.

The reasons for this are quite interesting, and somewhat more nuanced than those that explain the robust GDP growth. Part of it has to do with a substantial cut in the personal income tax rate, funded by the carbon price revenue, and another aspect is the large-scale introduction of green technologies which, as the Germans, Chinese, Japanese and most recently the American's recognize, creates jobs.

International credit purchases: Alas, every silver lining comes with a cloud. In this instance the cloud is the fact that Canada's policy delay entails a price in achieving a rigorous climate change target by 2020. The analysis shows that we cannot meet a science-based target entirely here at home without forcing an unrealistic rate of capital stock turnover.

Some may baulk at sending up to $6 billion per year overseas to purchase international emission reduction credits (a little more than Canada's present-day ODA). And while it may not make for good populist politics to do so, policy-makers should bear in mind that when it comes to GHGs a tonne removed anywhere in the world is the same as a tonne removed at home. Also, as is the realpolitik of ODA, the purchase of international credits will enable Canada to sell advanced green technology to recipient nations.

If Canadians could have a conversation with their great grandchildren at the end of this century, they would surely tell us that shaving two or three per cent off of Canada's GDP is a mere pittance in return for meaningfully addressing climate change. If nothing else, this study makes that one fact crystal clear.

Pierre Sadik is the manager of government affairs of the David Suzuki Foundation. The opinions expressed are his own.

This column first appeared in The Hill Times in November 2009.

November 10, 2009

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