"The Goodale Budget and Canadian Competitiveness in a Sustainable Economy" Ottawa March 2, 2005 Check against delivery The Goodale Budget of 2005 marks a turning point for Canada: it launches the country well on the road to competitiveness within a sustainable economy. This budget does more than inject $5.2 billion (including 3 billion in new, incremental funding) into federal environmental policy. It sends a clear message: in order for Canada to succeed in this new industrial revolution – the sustainable economy – our environmental and economic signals must both point in the same direction: one which moves us forward to a better quality of life for our people, a more competitive and prosperous economy, and enhanced protection of our natural environment. This is what I want to talk about today before such a prestigious audience as the Toronto Board of Trade, whose mission, since 1845, has been to put Toronto and Canada “ahead of the competition”. Well, my friends, it is organizations like yours – that helped Canada reach the forefront of competitiveness during each industrial revolution, from the development of the steam engine to the emergence of the knowledge economy – that must now work hard to help Canada succeed just as brilliantly in the new sustainable economy. We know the most profitable technologies are also increasingly the least polluting and the least wasteful of resources. We realize that the intensive search for environment-friendly production methods has given rise to a new leading-edge entrepreneurship and a very dynamic market. We cannot ignore that our very abundance of natural riches has led us to tolerate too much waste, compared to many other industralized countries that compete with us. And we know that our businesses must respond to increased consumer demand for products that are healthy and more respectful of nature. We know all this. So let us act accordingly. Let us discard the old mentality that sees protection of the environment as a hindrance to economic development. Let us firmly link environment and economy. This is the message of the Goodale budget, this is the vision of our Prime Minister, the Right Honourable Paul Martin, a vision shared not only by the Cabinet but also by the entire Liberal caucus. This osmosis between environment and economy is also the philosophy that inspires our refined plan to meet our Kyoto objectives, a plan that updates the 2002 Climate Change Plan and that the Government of Canada will soon make public. I would like to review some of the environmental initiatives contained in the Goodale Budget to illustrate how beneficial they will be for our economy. I will start with the measures that affect the environment in general, then deal with those related to climate change. I will conclude with some comments on one innovation – the creation of a climate fund that will help us achieve our Kyoto targets. 1. The environment and the economy Since I am here in Toronto, I will start with the Great Lakes. The Goodale Budget devotes $40 million to improving the ecological integrity of the Great Lakes ecosystem. This is, of course, good news for the environment, but let’s not forget that Canada’s very competitiveness is linked to the quality of this great ecosystem, which, from the Great Lakes to the Gulf of St. Lawrence, includes 55 per cent of the Canadian population, 16 of our 30 largest cities, 75 per cent of our manufacturing industry and 25 per cent of our agriculture. Think about the economic consequences of the threats to this ecosystem: possible out-of-basin water diversions would reduce water availability for industry and hydroelectric power generation; decreasing water levels would affect the $6 billion marine transportation industry; bacterial and chemical contamination threaten commercial and recreational fishing. In the same way, by investing $85 million in a strategy to combat invasive alien species, such as the sea lamprey, the zebra mussel or the Asian longhorn beetle, the Goodale Budget defends our economy as much as it defends our natural environment. The cumulative cost associated with 16 of these invasive species is estimated to be between $13.3 to $34.5 billion per year, affecting private property, forestry, fisheries, agriculture, wildlife and industry. The same reasoning applies to the $28 million that the Goodale Budget devoted to the first phase of the government’s Oceans Action Plan: this is as necessary for the economy as it is for the environment, as Canada’s oceans-related industries contribute significantly to the gross domestic product. The Goodale budget allots $269 million in additional, much-needed funds to our National Parks. This is good news for the preservation of our natural environment, and good news for our economy. Parks Canada administers $7 billion in national assets, ranging from canal locks to buildings to exhibits to monuments. Our National Parks are not only magnificent, they also contribute $1.2 billion to Canada’s GDP - the equivalent of 38,000 full time jobs - and are an essential source of revenue for our tourist industry, for many of our communities, and for Canada’s aboriginal people. As science is an obvious link between environmental policy and economic policy, both our environment and our economy will benefit from the $60 million that the Goodale budget has set aside for geographic information, the $111 million devoted to the development of a new generation of remote radar sensing satellites, and the $200 million allocated to the development of a Sustainable Energy Science and Technology Strategy. Another significant measure in the Goodale Budget is the transfer to municipalities of $5 billion from the gas tax. This transfer targets support for environmentally-sustainable infrastructure projects such as public transit, water and wastewater treatment, community energy systems and the handling of solid waste. This too, is good for the environment and good for the economy. Added to the $300 million the budget invested in the Green Municipal Funds, this New Deal for cities and Communities is itself a green plan that will raise our quality of life and make our cities and communities more attractive and competitive. In addition, the strong emphasis on the development of public transportation will contribute to reducing our greenhouse gas emissions and help us reach our Kyoto objectives. 2. Climate change and the economy The Goodale Budget devotes $4 billion, of which 2 billion is new money, to reducing our greenhouse gas emissions. Here again, I can demonstrate that this great environmental endeavor is also a wonderful opportunity to improve our economy. I am convinced that the Kyoto Protocol, which requires signatory developed countries to reduce their greenhouse gas emissions, is not only an ecological necessity aimed at reducing changes in climate due to human activity. Kyoto is an opportunity to transform – for the better – our economy and our way of life. In the search for the most practical ways to reduce the emission of gases like methane and CO2 we find an additional incentive to make our economy less wasteful, more efficient, and based increasingly on renewable energy sources. We have had a plan to meet our Kyoto objectives since 2002. Prime Minister Martin committed to Canadians in the two most recent Speeches from the Throne that we would review this plan carefully, refine it and implement it, and he wants it to be made public very soon. This improved plan will ask each of us to do our share. It will assign targets to the large companies that produce high levels of emissions. But these targets will be realistic and designed to generate greater energy efficiency. The Government of Canada will also do its share. Between now and 2012, the plan will provide for the injection of billions of dollars into sustainable development and economic productivity. I can guarantee that these climate change-related investments will make the economy more resource- efficient and productive, and that they will help position Canadian companies to compete in the emerging carbon-constrained global economy. Through this improved plan, the Government will stimulate investment in traditional and new sources of energy and will support innovative technologies to ensure the long-term competitiveness of the Canadian economy. The plan will allow us to meet our Kyoto targets in a way that will lead to further and deeper results while building a more prosperous economy. It will position Canada as a world leader in energy efficiency, renewable energy and the conservation of nature. The plan we have devised to reach our Kyoto objectives will be beneficial for the Canadian economy. The Goodale Budget is proof of this. All the measures devoted to climate change will benefit our economy. Thanks to the Goodale Budget, Canadian households will save money by reducing their energy consumption. In fact, an additional $225 million will help quadruple the number of households who take advantage of the very popular Energuide for Homes Retrofit Incentive Program. With the new funding, it will reach 500,000 homes by 2010. Thanks to the Goodale budget, the use of clean, renewable energy will be encouraged: as well as committing the funds necessary to quadruple wind energy production, the budget creates a new Renewable Power Production Incentive to stimulate other sources of renewable energy such as small hydro, biomass and landfill gas. Do I even need to point out, here in Toronto, how much events like the Blackout of summer, 2003 underscore our interdependence and the serious consequences of cascading power outages for both the economy and the security of our population? Through enhanced incentives for renewable energy, the Government is moving to support the diversification of our power system. Another important measure in the Goodale Budget is the creation of a partnership fund that is expected to grow to $2 or $3 billion over the next few years. This fund is aimed at helping the Government of Canada and the provincial and territorial governments to co-finance their common priorities with regards to climate change. It is not hard to imagine many projects with clear environmental and economic benefits. I am sure that the Toronto Board of Trade would be pleased if this fund were to help create an east-west electricity transmission grid that would ensure the safety of electricity supply in Ontario. While the Government will continue to rule out the use of a carbon tax, the Goodale Budget opens the door to the use of the tax system to support the achievement of environmental objectives. It begins with bold fiscal measures that will allow entrepreneurs to amortize more quickly their investments in energy efficiency and renewable energy, such as cogeneration plants, wind turbines or the capture of biogas from landfill sites. Additionally, the Finance Minister has committed to study how other tax measures could simultaneously promote both economic and environmental objectives. I invite the Toronto Board of Trade to join this discussion on a topic so fundamental to our economic future; a discussion that will be led by the National Round Table on the Economy and the Environment. But it seems to me that the Goodale Budget’s greatest innovation is the creation of a new kind of fund, with an initial contribution of $1 billion. This will be a climate fund; and from now on, this is what it will be called. Acting as a sort of investment bank, it will purchase reductions in greenhouse gas emissions resulting from concrete projects. For Canadians, opportunities will be available in all sectors of the economy. Potential examples of who could benefit from this fund include farmers who adopt low-till practices; forestry companies that engage in state-of-the-art forest management practices; property developers who include district heating and renewable energy elements in their plans for new sub-divisions; businesses that develop innovative ways to reduce emissions through recycling and energy efficiency; municipalities that capture landfill gas and use it to generate electricity; or courier companies that retrofit their fleets. I am convinced that this new instrument of transformation, the Climate Fund, will be the distinguishing feature that marks the greatest difference between our new approach to fighting climate change and previous ones. This market-based approach will be critical to integrating climate change considerations into the day-to-day decisions of Canada’s citizens and businesses, and unleashing the power of innovation for the good of our environment and our economy. For that reason, I am convinced that we will be in a position to meet most of our Kyoto target through emission reductions achieved here in Canada. But it will also be in our interest to act offshore, not only to serve an environmental cause that knows no borders, but also to expand our economic networks. The Climate Fund will be able to purchase international emission reduction credits tied to specific projects in other countries, but only when such projects truly reduce greenhouse gas emissions. To qualify, a project will have to have at least one of the following characteristics: apply Canadian technology, improve Canada’s international competitiveness or otherwise advance our national interest. Our businesses will benefit from this opportunity to develop their expertise in the fields of environmental technologies and services and to deploy it around the world. They will seize the opportunity to win new market shares in emerging economies and economies in transition. Conclusion In one sentence, David Runnals, President of the International Institute for Sustainable Development, has summarized the gist of my remarks today. Of Budget 2005, he said: “It is not just a bunch of money for environmental programs. There are lots of different incentives to do good things that make the economy greener.” (Toronto Star, 2-24-05). I believe I have shown that the vision in this budget is that of a Canada actively working towards economic success based on a healthy environment. In my view, the most significant remark in Mr. Goodale’s Budget is this: “Our great challenge – and our primary responsibility – is to bring the same focus, the same determination, and the same iron will to the protection and enhancement of our environment as we devoted to restoring the health of the nation’s finances. Canadians do not want to mortgage their children`s future, nor do they want a heavy environmental debt to be the legacy of this generation to the next.” It’s quite something when, as Paul Martin’s Finance Minister, you refer to the battle we fought and won against the deficit. Yes, Canada commits itself -- more than ever -- to the fight so that we can also bequeath to our children a healthier environment and a more prosperous economy. It will take more than one budget to win this battle. It will require a truly long-term effort. The winners of the 2004 Nobel Prize for Economics, Professors Edward Prescott and Finn Kydland, have said : perseverance in the pursuit of clear objectives is essential for an economic policy to be successful. Let us all work to reconcile our environment and our economy, for ourselves, and for the greater well-being of future generations.
