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The 2024 Canadian Federal Budget was released on April 16th. This year’s budget is focused on affordability, housing, and spending on social programs such as pharmaceutical care, daycare, and dentist care.

Peter and Jackie discuss the budget, including the size of the deficit and the planned increase in capital gains taxes. They also cover energy-related updates from the budget, such as changes to investment tax credit programs (ITCs), adjustments to the green home subsidy, and the announcement of an Indigenous Loan Guarantee Program. They also mention that the Canada Growth Fund, which has pledged $7 billion to carbon markets, now aims to provide more off-the-shelf support for decarbonization projects while continuing to support bespoke opportunities. Environment and Climate Change Canada (ECCC) also plans to collaborate with provinces to improve carbon markets. The budget includes commitments to develop guidelines for investing in green and decarbonization projects (called a taxonomy); it also encourages Canadian pension funds to invest more in Canada, with a working group set up to explore this further. 

Content referenced in this episode: 

• Canada Budget 2024   
• RBC Report on if Canada’s AAA credit rating is at risk
• Trevor Tombe: Why Raising Capital Gains Taxes Make Sense – Yes, Really (April 17, 2024, The Hub) 
• Senior Business Leaders Support Proposal Asking Pension Funds to Invest More in Canada (March 6, 2024, Globe and Mail) 
• Canada Energy Transition Taxonomy Roadmap (September 2022) by the Sustainable Finance Action Council (SFAC). Note that SFAC has submitted this roadmap, and it is not the official position of the Government of Canada.   

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LinkedIn: @ARC Energy Research Institute    

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Episode 238 transcript

Speaker 1:

The information and opinions presented in this Arc Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Speaker 2:

This is the Arc Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.

Peter Tertzakian:

And I’m Peter Tertzakian. Welcome back. So, Jackie, do you listen to the radio when you drive in the morning?

Jackie Forrest:

Half the time. Half the time, it’s energy podcast, but today I listen to the radio, and there was lots of talk about the budget still, which is interesting because usually a week after, it’s kind of died down.

Peter Tertzakian:

Yeah, no, same. I actually usually don’t listen to the radio. I find it nice, quiet time to commune in and out, but I agree with you. Every now and then, I do turn the radio on, like this morning, and of course, people are still talking about the budget from last week.

Jackie Forrest:

And there’s still concerns that the NDP may not support it. That was their initial stance that they weren’t happy with all elements of it, but-

Peter Tertzakian:

Do they have a choice really?

Jackie Forrest:

Well, if they choose not to support it, then we’d be going to an election, and I’m not sure the NDP want that.

Peter Tertzakian:

Yeah, a budget is definitely one of those items that forces an election, I believe, if you don’t support it. I’m not exactly up 100% on my constitutional, which type of bill triggers an election or which one doesn’t, but whatever it is, it’s an important one. And I expect that it will pass, so we want to talk about it and its implication to Canada more broadly, but then what it also means to energy, energy finance, green energy finance, etc.

Jackie Forrest:

Exactly. So it’s called Fairness for every generation, all 430 pages. We’re not going to talk about everything. Of course, energy wasn’t the main focus. It was really focused on things like affordable homes, and they have a goal of seeing another 3.87 million homes in Canada by 2031. There was money for daycare, pharma, dentists. A lot of this was actually talked about before. They want affordable groceries. But because of all this spending, and even with, and we’ll get to it, some tax increases, they’re running a fairly big deficit of about 40 billion in this budget. And they also predict deficits every year out to 2029. It declines to 20 billion by then, but there’s no future scenario where we are not running a deficit. And I think there’s been a lot of concerns about this, and some of the concerns are that that level of debt could make us unsustainable. And I’ll get into that. But the Liberals argue that they think that these deficits are modest and some of their arguments are, “Well, we have a Triple-A rating by two out of three rating agencies.”

Now, I would just say one of those rating agencies, we lost our Triple-A too back in 2020.

Peter Tertzakian:

I think that was Fitch, yeah.

Jackie Forrest:

Yeah. And then RBC issued a report recently that warned that Canada’s Triple-A rating is at risk if the deficit deepens, and that this would raise borrowing costs across the country, probably not be great for our exchange rate either.

Peter Tertzakian:

Yeah. Yeah. I think we should just elaborate on a little bit. When you lose a notch on your credit rating, so you go from AAA to AA, then your borrowing costs for the Bank of Canada and international markets, when they issue bonds and so on, goes up by fraction of a percentage point on interest rate, but it’s meaningful, which then does trickle down into the banking system. And then the banking systems then have to raise their interest rate to consumers. So, there is a causality between this broad macro dynamic of rating agencies right down to the consumer.

Jackie Forrest:

Right. So, there’s a risk there if you get too much debt that it’s kind of… we’re trying to make things more affordable for people, but it could actually make things less affordable. Now, debt is growing, but the Liberals in the document argue, well, the Government of Canada argues that the ratio of debt to GDP is manageable, and they have a chart that compares our ratio to other G7 economies, and it does show we’re quite a bit lower than most other countries. Now, I was listening to an interesting podcast, the C.O.B. Tuesday, one out of Houston, and they had a really interesting speaker on talking about the US debt situation, which-

Peter Tertzakian:

Which is even more.

Jackie Forrest:

We are better off than them, but actually, the US is better than a lot of European countries today. And the guest on that podcast said, “Just because we are the nicest looking horse in the glue factory is not something to brag about.” So basically, just because you look better than a lot of bad people, it doesn’t make you good, right?

Peter Tertzakian:

Yeah. And for us, the metric of concern is growth, isn’t it? Actually, the US is growing more handsomely in the glue factory than Canada is.

Jackie Forrest:

The US is expected to grow their economy 2.7% this year. And according to the IMF, Canada is only predicted to be 1.2%. So that’s a concern, and it’s a concern because a lot of the things in this budget, while they may have been good for individuals, don’t seem focused on growing our economy or increasing our productivity, or things that would help with that ratio.

Peter Tertzakian:

Yeah, 1.2 is really low. Two to 3% is the long-term average, and the 1.2% is something to be concerned about. So, running the ratios on a much slower growing economy is, I think, something to be concerned about.

Jackie Forrest:

Yes. Yeah, especially if we have things like declining productivity and other things.

Peter Tertzakian:

Well, that’s another big deal, yeah.

Jackie Forrest:

That are concerned. So, are you concerned about the debt, Peter? There’s been a lot of commentary around this rating and the level of debt being unsustainable, but we do have some….

Peter Tertzakian:

Well, yeah, I am concerned about it because if you think about what taking on more and more debt does, it basically pushes off the liability to kids and grandkids. And when we think about fairness for every generation, there’s fairness for every generation today, which is what I think this budget is concerned about, especially politically. But when you take on more debt today, you’re really pushing the problem down into future generations.

Jackie Forrest:

Yeah, most of us don’t spend more than we make each year, or we can’t do that for long before there’s real problems, so I think it’s a concern. I’ve always been quite conservative when it comes to debt and things like that. But yeah, I think there’s a concern that those high levels of debt may eventually slowly economic growth and-

Peter Tertzakian:

Well, and I’m going to bring it back to the credit rating, which is really important if there is a trigger that reduces our credit rating. I already talked about the ripple effect to the consumer, but there’s ripple effects to financing big energy projects because it means the cost of financing those projects goes up as well. And every point counts when you think about these projects and whether or not they’re economically viable.

Jackie Forrest:

All right. Well, let’s move on to how we’re going to pay for it, although we still haven’t paid for all of it. There was some incremental new revenue raised through the idea of increasing the tax on capital gains above. So, if you make capital gains above $250,000, either as an individual or a corporation today, you are only taxed on half of that, and they want to move that to two thirds.

And the government argues in the document, this is only targeting wealthy people as they’re mostly the people that make money from capital gains. Very few young people make money. They actually had a stat that only 5% of people under 30 had any capital gains at all. Now, there’s been a lot written that was negative, saying that this reduces our competitiveness at a time when we need to attract capital. And every dollar tax is one that isn’t put back into the economy to grow the economy. But Trevor Tombe put out something, and we’ll put a link to this on the hub, which argued that actually this is an efficient thing to do, because today, there’s an advantage. If a company gives out dividends, they get taxed at a higher rate than capital gains, and this sort of narrows that gap. But he argued that if they’re going to increase that type of tax, you should be decreasing something else like income tax to offset it. But his point was companies should be indifferent to what type of way they pay their investors through dividends or capital gains, and this was more efficient.

Peter Tertzakian:

Yeah. So, I think Trevor’s points are important, and as you said, we’ll post them, and people can look at them. I think the broader thing that Trevor is pointing out that I want to point out is that when you think about taxation and what I call broadly government take, the government has all sorts of channels to take in money, whether it’s the GST, capital gains, income tax, so on and so forth. And then if you extend that into the broader economy, the taxation corporations and the take at different levels of government, federal, provincial, municipal, and so on, that all these things need to be finely tuned. And Trevor’s arguing is that okay, this brings into line to tune it up with other forms of take. I think though, that the broader point that people are making is that the percentage of take is getting to the point where it’s too high, and therefore uncompetitive with other jurisdictions.

And at a time when our GDP growth is low, at a time when our productivity is low, that’s not a good idea. So, there’s two components to it. One is to ask the question, what is the total take? And then there’s this corollary question, okay, what are the forms of taxation? Are they optimized and fine-tuned? Should the GST be raised, and personal income tax dropped and then think about how capital gains fits within all that? And does it incent the right kind of behavior, and does it help incent entrepreneurism and growth or not? And so, I think that the excessive focus on capital gains, it’s a narrow focus that we need to have a conversation in this country about the broader level of take and how competitive is, we are, and whether or not it stimulates the kind of prosperity that we need going forward.

Jackie Forrest:

Right. Well, and it’s expected to raise 19 billion over five years, which when you’re talking about 30 or 40 billion deficits each year, it doesn’t solve that problem either, right?

Peter Tertzakian:

I haven’t dug into it, honestly. 19 billion in five years, that’s like 4 billion a year. That seems really like a lot. I haven’t dug into it, but boy, that’s a lot of money to tax from a very small percentage of the population. So, I mean, I’m not questioning the veracity of the numbers, but I’m doing a bit of a double take and going, okay, that seems like a lot. You can get a lot more potential efficiency from a broader segment of the economy and maybe it wouldn’t impact things quite as much.

Jackie Forrest:

Yeah. Well, a lot of people argue that the best tax is the GST because it doesn’t discourage investments and it’s in consumption. But of course, this is an election budget, and I don’t think we’re choosing the GST-

Peter Tertzakian:

Yeah, well, try to get that across, right? “Hey, we’re raising the GST.” I mean, certainly in Alberta any notion of sales tax starts a riot, but-

Jackie Forrest:

Yeah, especially at a time when people are struggling. The whole theme of this is affordability. I just want to talk quickly about what was missing. I think that’s always interesting. Of course, there was no getting rid of the carbon tax, so I’m sure that disappointed a lot of premiers in this country. And climate change and climate crisis were not a big emphasis. In fact, the word climate crisis was only mentioned one time in this budget. So, this is definitely, to me, the Liberal party through the Canadian government is really moving more towards affordability messaging. And that’s something new, I think.

Peter Tertzakian:

Well, it’s actually not new. This has been an issue for three years, I think. So, it’s due to, in terms of the government’s messaging, I agree with that. And it’s a long time coming because the problem of affordability has been festering for quite a while, and now it needs to be dealt with. It’s not clear to me and to a lot of people whether this budget is going to address that. And then of course there’s the politics of it. Will people even buy into it? But I think that the radio and other avenues of media are not necessarily favorable or not favorable to it.

Jackie Forrest:

Yeah. And here’s a great example. The Green Home Grant, which has run out of money from several years ago, was extended, but the labeling has changed to the Green Homes Affordability. And no longer is it in a climate related section, but it’s in that whole housing and affordability section. So that’s just one example, kind of the change-

Peter Tertzakian:

Yeah. I got to admit. I mean, that sort of gets my back up a little bit to change the labeling. I mean, I know words are important, but the flip side is it’s assuming people are dumb and that you’re going to change their minds and opinions by altering a few words. Look, I-

Jackie Forrest:

Well, it’s actually more than that too. The old one was for everybody. This one is only for people of medium to low-income levels. I don’t know exactly what that means. It’s also a lot smaller. The old one was quite a bit more money. This is only 900 million over six years.

Peter Tertzakian:

So the Green Affordability… so this is like putting solar panels on your roof?

Jackie Forrest:

Yes. Yeah, that same program.

Peter Tertzakian:

Okay.

Jackie Forrest:

And they ran out of money.

Peter Tertzakian:

So, what did you pay to put solar panels on your roof?

Jackie Forrest:

I paid something like $35,000 and got 45,000 back.

Peter Tertzakian:

Right. $5,000 back. So, they’ve extended the $5,000. So, do you think in an age where people are concerned about putting groceries on the table, in this bracket, a social bracket that you talk about, people are going to have 30 grand to shell out whether there’s a $5,000 subsidy or not? I think it’s a bit naive, honestly.

Jackie Forrest:

Yeah. Well, you know what? I went to a conference last week. CanREA had the Renewables Operations Conference, and there was some solar installers there, and this was rumored to come out. And that was their concern. They said the issue is that most people who are putting, in the case of solar panels anyway or upgrading their homes, are not lower income people. So, they wonder if this is going to actually result in any new business for them.

Peter Tertzakian:

Well, and you want, frankly, the upper income levels or above middle-income level to put the solar panels on because they have bigger homes, and you want to give them incentives because they’re the ones that generate the most emissions.

Jackie Forrest:

Yeah. And if you live in an apartment, you can’t put a heat pump in. I mean, it’s not even your assets.

Peter Tertzakian:

Right. Right.

Jackie Forrest:

So yeah, it’s a little bit harder to see. That’s what the feeling was on the trade show floor.

Peter Tertzakian:

Yeah. This is misguided. And I think it brings about an important point, something that I’ve researched quite a bit in the past, and that is that your energy consumption is more than proportional to your income level. In other words, someone who makes $100,000 a year uses more than twice as much energy than someone who earns 50,000. In fact, in other words, your power consumption, your energy consumption goes up mildly, exponentially. And then you get into the$100,000 plus, into the higher affluent levels, and then you’ve got people with second homes who go on longer vacations and so on, which basically means that your carbon emissions go up exponentially with your income. So, the incentives are misguided because people who make $30,000 to $50,000 a year, they don’t produce very much emissions anyway. So, they’re not the ones that need the incentives. The people who need the incentives are the people who emit the most amount.

Jackie Forrest:

Yeah. So, it’s not going to really reduce emissions very much by putting that…

Peter Tertzakian:

No, and this is not the crowd that is going to go, “Wow, $5,000. Where do I find 20 to put solar panels on my roof?”

Jackie Forrest:

Yeah. Yeah. And they’re extending that $40,000 interest-free loan. But again, lower to medium income people, maybe even without interest, taking on more liability is not something they can do as well.

Okay. Well, let’s move into some of the energy related topics. So, investment tax credits, not a lot new there. Of course, we did announce in last year’s budget five different investment tax credits. They did announce one additional one. It’s a fairly small one that gives you a 10% tax credit on the cost of buildings to support EV assembly and battery production, as well as some of the upstream. All of that already had a 30% tax credit. So, this is just giving a little bit more boost for the EV supply chain.

Peter Tertzakian:

That’s quite a bit more of…let’s just back up for a minute. So, investment tax credit that applies to corporations that invest in some green energy project, say a battery plant, a solar farm, what have you.

Jackie Forrest:

That’s right. They get about 30% off their initial capital cost in tax credits and up to 40% if they meet the labour requirements. Now, some of these were announced, like the carbon capture storage one was actually announced two years ago. A few of them are now going through parliament and is as expected they will be law here in June. But the other ones, many of them, they put a schedule out. We will slowly get done over the course of this year.

Peter Tertzakian:

Let’s explore that also because it’s an important point. So, I’m a corporation that decides to sanction a green energy project, so I say, “Okay, I’m going to spend a hundred million dollars on building this project.” That means that 30% of that number or $30 million.

It means there’s less tax intake in future than otherwise would normally have been taken. And therefore, again, the future generations are paying for it.

Jackie Forrest:

Well, and it is estimated in the document that all of these are worth about $93 billion over the 10 years that these are in place. So that’s less tax income. You could argue it may not be that bad because remember, that’s just the corporate tax. So, all the employees that now have jobs because this plant exists, they pay income tax and all the supply chain that supports it.

Peter Tertzakian:

Sure.

Jackie Forrest:

So, you could argue it may actually not be nearly that expensive.

Peter Tertzakian:

Well, you can successfully argue that if it’s optimized and tuned properly. And this is what I was saying earlier on in the podcast, is that you have to look at everything holistically and say, “What are the gives and takes and the forfeit of 30 million.” In my example, if that actually generates more than $30 million of value and government take from other parts”-

Jackie Forrest:

Over decades.

Peter Tertzakian:

… other parts of the economy and a growing multiplier effect of that investment?”

Jackie Forrest:

Yeah. And I think that’s what the Americans are hoping for too. So anyway, the good news is we know more about them. We’ve got some information also that they will be backdated because there were some concerns around that. So, people were actually holding up going forward with their projects because they’re like, “Well, maybe I need to wait for this to come into law, so I’m not going to build my project. If I start now, I may not get that tax credit.” So, there was some details around specific dates for the different ones that even if it isn’t in law, you will still get the credit. So, I think that was important.

What was missing? We still didn’t get those manufacturing tax credits. So, remember we had the CEO of Silfab Solar on, Paolo Maccario, who joined the podcast to tell us why we can’t compete for manufacturing, things like solar panels. We didn’t get that. Also, the biofuels people have been saying they need an investment tax credit or a production tax credit as well, because to compete with projects in the US they need that. And in the absence of that, we’re not going to see investments in Canada. They did get some news about up to 500 million per year from the Clean Fuel Regulations will be used to support Canadian biofuels production. We are going to have a guest on to explain more if that closes the gap because it’s hard to know from that exactly what that means.

Peter Tertzakian:

It’s in a couple of weeks, isn’t it?

Jackie Forrest:

Yeah, so that’ll be a future podcast. I think these investment tax credits more certainty on them is good. Getting them to-

Peter Tertzakian:

I think getting back to the fact that this was not really an energy budget probably explains the lack of emphasis on energy tax credits, whatever form of energy.

Jackie Forrest:

Yeah. I mean last year was quite a big budget, a lot of money spent on energy and they’re still working on implementing that, so it’s probably-

Peter Tertzakian:

Well, implementing it-

Jackie Forrest:

… our existing promises.

Peter Tertzakian:

Yeah, implementing it and then getting the crucial part that we’ve talked so much on this podcast about, getting the private sector investors to follow through on what I’ve long called the seed capital provided by governments, that the amount of capital that is being deployed in the form of tax credits and so on is barely enough to get things going. And that if you really want to get the economy rolling, you have to have the conditions for private investors, foreign investors to come in and build these projects.

Jackie Forrest:

Yes. Yeah. And I think these laws have to be final because without being final, without all the details being certain, it keeps people from spending the money. But once they’re in, hopefully this will be one piece that grows in our economy and adds value.

Talking about money, you talked about foreign capital coming in. The budget also encouraged pension funds in Canada to start investing more in Canadian projects. Now, we first saw this type of message in the fall economic update, and basically the message was in this budget we need more investment in

Canada to raise our productivity and to grow our economy. And they want pension funds in Canada to spend in areas such as infra, airport, AI, digital infrastructure, physical infrastructure. They didn’t mention energy specifically, but I think that would be part of the infrastructure spending. They said that the Canadian pensions hold three trillion in assets, and they want to encourage more money to be spent here. And they are starting a working group who’s led by Stephen Poloz, who actually was a former guest on our podcast.

Peter Tertzakian:

Yes, we’ve had him.

Jackie Forrest:

He’s a former governor of the Bank of Canada, to work with these pension funds to find more investments that can provide returns here in Canada.

So, there’s two sides to this argument. One side is, of course we should do this because we need to get more capital here to grow our economy and our pension funds should be part of that. And Quebec, they’re a big believer in that. In fact, their biggest pension fund or one of their biggest pension funds, CDPQ, and others do have requirements to invest a certain amount of their money in Quebec. They call it a dual mandate. You got to grow the money for your investors, but you’ve also got to grow the Quebec economy. And in general, if you look at CDPQ, their ten-year annual returns are fairly good, and I think comparable to others. But many pension funds argue that they worry that they’re not going to make as good as returns if they have to or are forced into investing Canadians’ money in Canada and that won’t be a good thing for the pensioners.

Peter Tertzakian:

Well, and there’s other considerations, but let’s just back up from it. Certainly, the idea of Canadian pension plans spending money to develop wind farms in the other side of the planet don’t seem to make sense on the surface as compared to spending the money on wind farms or solar farms in Canada. Why are we funding other countries to get to net zero when we can’t even get our own act together, frankly? But then the other side of the argument is these pension funds, what did you say?

Jackie Forrest:

Three trillion?

Peter Tertzakian:

Three trillion, are so big that we want diversification. We want to reduce the risk of being concentrated in one country like our own, that you necessarily have to invest around the world to be able to first again, mitigate against risk and also generate high enough returns so that we all can retire with the comfort of knowing that the money’s going to be there.

So there is this tension between the two. I think that this gets back to the discussion we just had about making sure that the conditions are right for investment. In fact, making sure they are so right that other countries spend and invest their money in Canada. Much as our pensions invest in the other side of the world, we need more pensions in other countries and sovereign wealth funds to come here so that we actually get the amplifier effect. And I think a lot of people would safely say, “Well, I’m not sure those conditions are all in place right now.”

Jackie Forrest:

Right? Yeah. So you’re arguing, “We’re focused on the wrong problem. Let’s just worry about our competitive position, and if we solve that, Canadian and foreign capital will want to come here.”

Okay. I think it’s good. We’ll be interested in that. This has certainly become an issue. I know there was a letter by a lot of prominent CEOs in Canada asking the government to require the Canadian pension plans to invest, so we’ll be interested to hear how this new panel works together and what kind of ideas they come up with. But I think you’re right, address the root cause.

Let’s talk about the Canadian growth fund called the Canada Growth Fund. It was actually announced a couple of budgets ago, more information given last year where it would be a $15 billion fund. Since that time, they’ve deployed about $1.34 billion, that’s what it said in this year’s budget, and $7 billion of the fund is being reserved for contract for differences and carbon markets. And they made some comments about that that I thought were interesting because we all just had Rachel on and talked about some of the issues in capital-

Peter Tertzakian:

From BMO, yeah.

Jackie Forrest:

Yeah. So, they did address some of the things that we raised. They would like to explore ways to broaden the approach and to offer instead of the bespoke solutions as they did with Entropy, they also want to look at more off-the-shelf. So, they still think they need the bespoke solutions, but they want to look for off-the-shelf and they may consider the government backstopping some of these deals so that it doesn’t take so much capital. That would be if by some reason carbon tax just disappears altogether or the price goes very, very low, that the Canadian government would backstop that as opposed to the fund.

Peter Tertzakian:

Right. Well, we’ve had this conversation even with Rachel and even before, is that I am very cautious or skeptical about backstopping anything as a taxpayer until such time as the carbon markets are sorted out, that they are functioning much better.

The good news is, is I think that in recent months there is more and more recognition, and I think we had this conversation with Rachel, there’s more and more recognition that we need to address the markets as a whole, the carbon markets as a whole, and then we start thinking about how best to deploy financial instruments such as backstops, which can be in the financial jargon, anywhere from swaps to puts to callers or whatever, that will then function in a much better liquid market.

Jackie Forrest:

Yeah. Well, and you’ll be happy to know the budget document actually talk… hey, maybe someone listens to the podcast. They talked about how we need to increase our price transparency to unlock more investments. They also talked about the ECCC will work with the provinces to improve the functioning of the credit markets and help unlock more de-carbonization projects. And I hope that also means finding a way to potentially trade across provinces. I know that isn’t an easy problem to solve because as Rachel pointed out, our provinces each have their own systems and they’re not exactly like for like, but maybe we could move to a more uniform system where we would have more ability to trade.

Peter Tertzakian:

Well, we have to. Every province has its different carbon intensities based on the industries they house and so therefore, the strength of having a much broader, deeper, more liquid, transparent market… We have to get there. We can’t have a dozen carbon markets where the credits are not exchangeable with other markets that are not transparent and so on. We’ve talked about this ad nauseam, so I’m glad to see that’s in there. As I said, it is part of the winds of change. I think there’s a realization that private capital is reluctant to invest in clean energy, green energy, even things like carbon sequestration until such time as the vagaries of the carbon markets are sorted out.

Jackie Forrest:

Yeah. Well, we got a goal of price transparency and working with the provinces, so hopefully we’ll get there.

Two more topics I want to cover before we wrap up. There was this age-old topic of getting major projects done more quickly in this country, the big mega projects and why they take so long. As a reminder, in October, Canada’s Supreme Court found the Federal Impact Assessment Act as largely unconstitutional. We had Sander Duncanson on the podcast to talk to us about that at the time, and they committed in the budget to amend the current Assessment Act to make it sound. And they think that that will help reduce some uncertainty for investors and avoid some duplication in the process. Solving that problem is a big one, but it’s still there as a goal.

I think the most interesting part of getting major projects done was the announcement of an Indigenous Loan Guarantee Program of up to $5 billion. And it looks like it’s going to be a lot like Alberta’s Indigenous Opportunities Corporation, which has been really helpful in terms of helping Indigenous groups back the equity portion of these projects. But a year ago we heard how this program was critical, the Alberta one, to the consortium of 23 Indigenous groups by 11% of an Enbridge pipeline. And we also had Matt Jamieson from the Six Nations of the Grand River Development talk about how important this is. Anyway, there’s been a lot of positive coverage. This is one part of the budget that actually there’s been some real constructive articles written on.

I do think one thing that’s really improved in the last few years is how many projects do have indigenous participation, and I think this will help a lot.

Peter Tertzakian:

Right. Yeah. Yeah.

Jackie Forrest:

So, okay, last topic is green and decarbonization taxonomy. Sounds exciting, doesn’t it?

Peter Tertzakian:

Oh, yes. Yeah.

Jackie Forrest:

But as you know, we had John Stackhouse from RBC on, and we talked about the importance of defining what is green in Canada and having a uniform definition. And I would agree with that too. When it comes to reducing emissions from oil and gas operations or high carbon operations, a lot of investors do question, does that fit under something that they should be investing in if they have a green agenda? So I think it’s helpful. As we talked about before, the Sustainable Finance Action Council did put forward a recommendation in September of 2022 of a roadmap of how to get to a taxonomy. Although this is on the government side, it has not been adopted or approved, and that would be the first step to the next step of defining this taxonomy. So the government committed to provide an update on the development of the taxonomy later this year and that this is something they’re going to work on.

Peter Tertzakian:

Yeah. Well, this whole effort is a lot more complicated than it sounds. On the surface, it’s determining whether a project is green or not green. But as we know, as we progress with this transition, there’s 50 shades of green, and so there’s stuff in the middle that is beige and the taxonomy seeks to try and sort that characterization out. I would say that the taxonomy is a worthwhile exercise to the extent that it does not add another layer of bureaucracy, that it does not add another layer of rules, that it is harmonized with existing policies, kept simple, and that organizations like pension plans and other institutions can use it to see whether or not they’re going to invest and see whether or not they can get things like a green bond issued by the companies to forward a project that is deemed to be worthy in the taxonomy. So it’s very complicated.

Jackie Forrest:

Yeah, it is, but I do think it doesn’t have to be something… just a document that allows these investors to say, okay, the Canadian government defines this as green, and the most important, actually green isn’t probably the controversial bit.

Peter Tertzakian:

It’s not about the controversial bit.

Jackie Forrest:

It’s this transition decarbonization bucket. Should we be investing in reducing emissions from oil and gas or from a highly emitting cement plant that uses hydrocarbons? Does that count? So I think more definition in that area, that’s where the greatness is.

Peter Tertzakian:

Yeah. So here’s the green and not green. Is an oil well drilling an oil well, green? No. Is building a wind farm, green? Yes. Is attaching a wind turbine to an oil well to make it low emissions? Is that green, or is it not green? That’s where you start getting into the ambiguities and the complexities of this whole thing.

Jackie Forrest:

Exactly. And then that’s where people start to wonder, well, is that something I should be investing in with a pool of capital that’s supposed to be helping with climate?

Peter Tertzakian:

Right.

Jackie Forrest:

So anyway, I’m looking forward to more news on that this year.

Peter Tertzakian:

Well, great. I think, Jackie, time’s Up. That’s a wrap.

Jackie Forrest:

That’s a wrap. And thank you to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

Speaker 3:

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