The Hamilton Spectator

Freeland’s thorny budget challenge


Canada is about to get a FOMO budget.

“Fear of missing out” is driving both Finance Minister Chrystia Freeland and the private sector alike to clamour for the most productive ideas to make sure Canada has a solid piece of the global economy when all is said and done.

And while FOMO is usually shorthand for superficia­l envy that leads to flimsy decision-making, this is a healthy fear.

U.S. President Joe Biden is heading our way, even as he has half a trillion dollars in his back pocket to lure regular people and big multinatio­nals alike to invest in his vision of a green economy. He and Prime Minister Justin Trudeau will talk about common initiative­s, but the competitio­n between our two economies for new investment in the clean economy runs thick.

China is dominant in so many of the markets Canada has its eyes set on, especially critical minerals.

Meanwhile, the European Union has buried the trade-related hatchet with the United States and is now inside the American tent when it comes to selling climate-friendly goods and services into that huge market south of our border.

You can argue that we should have foreseen this leapfroggi­ng of our climate ambition coming our way, and that we should have had a wellentren­ched industrial policy in action already. And the federal government did indeed dabble in previous budgets.

But now, faced with big money and even bigger markets in the United States and Europe, anyone who was thinking of expanding or investing in Canada in anything related to energy, natural resources or clean tech is doing a double-take.

On the other side of the ledger, the recent announceme­nt that Volkswagen is going to set up a multibilli­on-dollar shop in St. Thomas as its first “gigafactor­y” of electric vehicle battery manufactur­ing is an early win in Canada’s nascent government-driven industrial strategy.

So is the recent federal and provincial stamp of approval for Cedar LNG, a $3-billion Indigenous-led natural gas project near Kitimat, B.C., on condition it is carbon-neutral by 2050.

The budget will aim to replicate those initial victories in the hopes of turning Canada’s toehold in a decarboniz­ing global marketplac­e into a full-fledged footprint.

But soothing our competitiv­e fears with subsidies and tax policy is not enough to address the $100billion-a-year investment gap in clean energy.

For sure, a budget that finances and fine-tunes a more aggressive and focused strategy to draw investment­s pushing us toward netzero emissions is crucial.

There are many public policy tools that can enhance investment prospects for companies that are waffling about where the best growth opportunit­y lies. And we can hope that those measures are knitted together into a coherent strategy that makes the most of Canada’s economic strengths and stands the test of time.

That would mark the maturing of Trudeau’s mantra that the environmen­t and the economy can, and must, go together.

But to be successful, the budget framing needs more than fear to propel our economic direction. It also needs to proactivel­y define our clear advantages, and then find large amounts of net-zero electricit­y to underpin all that manufactur­ing and growth. And, more crucially, it needs public buy-in.

The electricit­y will require federal and provincial collaborat­ion, new financing arrangemen­ts as well as private-sector investment — especially if higher prices for consumers are to be avoided. The budget should help in that respect, but it won’t be the full answer without provincial participat­ion.

Public buy-in will be just as tricky, although not nearly as costly to the bottom line.

It’s mainly a political challenge. Billions spent now on pushing companies to choose Canada over the United States won’t reap their full economic benefits for years to come, and there are many competing budget priorities that are far more immediate and appealing to Canadian voters feeling the pinch of inflation, shoddy health care systems and persistent affordabil­ity problems, especially in food and shelter.

There’s a solution for this: transparen­cy, a clear picture of the benefits, and a sharp explanatio­n for what would happen if we don’t jump in with both feet.

If Canadians could see exactly where government revenues are going, what they should expect in return and when, the public would be more willing to add their voice to the confidence-boost that is needed here. If Canadians could see the counterfac­tual — what would happen to business investment and industrial efforts to go green without a well-reasoned and well-financed industrial strategy — the public would be less complacent.

That would be a healthy FOMO in action.

 ?? SEAN K I L PAT R I C K THE CANADIAN PRESS FILE PHOTO ?? Heather Scoffield discusses how Chrystia Freeland’s upcoming budget will be about a transition­ing economy and the risks of Canada not taking part fully.
SEAN K I L PAT R I C K THE CANADIAN PRESS FILE PHOTO Heather Scoffield discusses how Chrystia Freeland’s upcoming budget will be about a transition­ing economy and the risks of Canada not taking part fully.
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