Liberals can’t shrug off the oilsands

The federal budget is usually delivered before the start of the new fiscal year on April 1.

This year might be an exception. No date has been announced and the uncertainty created by the coronavirus means it might be a good idea if Bill Morneau saves his breath to cool his porridge.

Former finance minister John Manley said on CTV Power Play that he would be inclined to delay the budget until we have a better sense of how severe the impact of the virus is going to be.

When it comes, it may bear little resemblance to the spending plan Morneau thought he was going to deliver. The first emergency rate cut by the U. S. Federal Reserve since the financial crisis is a stark reminder of the risks the virus poses to economic activity.

But unless Morneau needs to act to avert a meltdown, the expectation is that the budget will be more transitional than transformative.

The finance minister does not have much fiscal room, given the deficit is already forecast to come in at $ 26.6 billion this year.

Veteran Liberal MP Wayne Easter said that the budget recommendations made by members of the finance committee he chairs were conscious of Morneau’s spending constraints. “Everybody — well, most — tried to avoid big ticket items,” he said.

The finance committee’s pre- budget report, tabled last week, is generally a good barometer of government thinking, even in a minority parliament.

It was telling that the first piece of advice the committee gave to the finance minister was that he adopt the recommendations of the expert panel on sustainable finance, which delivered a report that landed on cat’s paws last summer and has scarcely been mentioned since.

However, it sounds as if the report has been lifted off the dusty shelves in the department of Finance and will form the narrative backbone for a budget that talks about the co- operation between government and financial institutions to fight climate change.

The Liberals asked former senior deputy governor of the Bank of Canada, Tiff Macklem, Royal Bank director, Andy Chisholm, Caisse de dépôt et placement du Québec executive vice-president, Kim Thomassin, and Ontario Teachers’ Pension Plan chief risk and strategy officer, Barbara Zvan, to make suggestions on policies that might encourage the financing of innovation, clean electricity, building retro-fits and climate- resistant infrastructure.

It will be a major surprise if Morneau does not follow up on a number of their suggestions.

The thrust of the report is that the climate change debate should be presented as an opportunity, rather than a burden.

The government should provide more clarity about the capital investments that are needed to meet Canada’s 2030 emissions targets and the role it sees for the private sector, the authors said. The report cited the U. K.’s offshore wind market as an example of a government articulating a long-term policy framework and working with industry to achieve its goals. The British government identified a market and targeted barriers to offshore development, established institutions to foster the technology and designed a capacity auction for the power generated. The result is that the U.K. now hosts 40 per cent of globally installed capacity.

Another report recommendation urged government to create financial incentives to encourage Canadians to invest in climate conscious financial products through registered savings plans and defined contribution pension plans.

There were a suite of technical recommendations, such as the call to clarify the scope of fiduciary duty in terms of climate change — governments and corporations have been sued for having taken insufficient action to mitigate or adapt to climate incidents.

Many of the recommendations were perfect for Morneau — green initiatives that sound modern and transitional but don’t have major spending implications.

But the report was less inspiring when it came to suggestions to transform the oil and gas sector into a low-emissions industry.

“Its footprint puts high-intensity segments at heightened risk of market displacement in sustainability- conscious markets,” the authors said. That has become apparent, as the drive toward sustainable finance that the report’s authors are cheerleading has seen some of the world’s largest financial institutions pull out of oil production in Alberta.

As the panel pointed out, the trend toward capital flight has been exacerbated by perceptions of regulatory uncertainty, high compliance costs and long lead times, with the result capital spending in the oilsands in 2018 was only one third the investment level of 2014.

The report might perhaps have made some recommendations to address the political factors at play but instead it focused on variations of clean technology solutions that are already being attempted such as the Clean Resources Innovation Network, a group of resource industry professionals and academics trying to accelerate commercialization of low-carbon technology.

It all sounds like so much lip-service.

Not that Morneau will be worried unduly. This government wants to be seen to be supporting the oil and natural gas sector but were “market- displacement” to take place, then no great mischief.

For the government of a country that may be on the brink of recession to shrug its shoulders at the demise of its largest export industry — more than twice the value of auto shipments and three times that of base metals — does not suggest stellar leadership, particularly when the integrity of the country itself may be at stake.