This article was written by Adam Radwanski and was published in the Globe & Mail on June 24, 2022.
A major Canadian industry group is sounding the alarm about companies’ readiness to reduce their greenhouse gas emissions, and is calling on the federal government to develop more focused industrial polices to support that transition.
On Thursday, the Canadian Manufacturers and Exporters (CME) association released a survey of its members that suggests only about one quarter of them have set a goal of net-zero emissions by 2050 – the national target to which Ottawa has committed, and an increasingly common one for the private sector. Less than half of respondents said they are even tracking their current emissions.
Asked about the biggest obstacles to pursuing net-zero, the most common response was lack of resources, which was cited by nearly half of respondents. And fewer than one in 10 agreed that “governments are doing enough to help my company transition to a net-zero economy and remain competitive.”
The survey has a rather small sample size, with responses from 96 of the association’s approximately 2,500 members.
But an accompanying report published by CME the same day includes further evidence of current emissions-reduction commitments falling well short. It states that Canadian manufacturers are currently investing only about $1-billion per year on emissions-reducing technologies – a far cry from the $6-billion annually that it estimates would be required to achieve net-zero.
While the survey and report seemingly call into question the environmental commitment of the organization’s own members, they also highlight increasingly familiar concerns about Ottawa’s strategy to help Canadian industry compete in a decarbonizing world.
One of those concerns is that, while the federal government has recently committed large sums toward promoting lowemissions manufacturing, it has done so in a very broad-based way, with little by way of focused sectoral strategies.
“We need to have a strategy, because we probably can’t do everything for everyone,” Dennis Darby, CME’s president and CEO, said in an interview. “So how do we focus?”
The primary funding vehicle for industrial decarbonization that Ottawa has rolled out in recent years, the $8-billion Net Zero Accelerator, is an envelope for all manner of climate-related investments – including both to help existing industry reduce emissions, and to attract manufacturers of low-emissions products, such as electric vehicles.
It’s not yet clear how another mechanism that is supposed to leverage public dollars to stimulate clean-technology investment – the $15-billion Canada Growth Fund promised, with few details, in this year’s federal budget – will be structured. But to date, the government has not crafted an industrial strategy that specifically identifies barriers to sectors’ emissions-reduction goals – either in terms of specific capital challenges, or regulatory obstacles – and seeks to remove them in a targeted way.
A concern highlighted even more by CME, though, is a current lack of decarbonization support for small and medium-sized enterprises, which according to its survey are currently much less likely than larger ones to be pursuing net-zero strategies.
“SMEs especially don’t have the resources to do this,” Mr. Darby said.
Supports that Ottawa currently provides for clean-economy transition, especially through the Net Zero Accelerator, are geared primarily toward larger industry. That’s at least partly a deliberate strategy to achieve significant megatons of emissions reductions with relatively few commitments.
The effect is seemingly to exacerbate a lack of capital flowing into emissions reduction by SMEs, which account for over 40 per cent of Canadian exports, compared with bigger players. So in its report, CME calls for “an effective and targeted SME net zero transition strategy, with a specific focus on education and global supply chain competitiveness.”
An additional concern raised in the CME report is around the need to vastly expand Canada’s supply of clean electricity for manufacturers to have a reliable energy supply that’s compatible with net-zero goals. That’s a subject that the federal government has recently been publicly identifying as a priority, although it’s challenged by power grids mostly being a matter of provincial jurisdiction – underscoring the importance of Ottawa’s promised federal-provincial national grid council that quickly taking shape and proving effective.
The CME survey does contain some encouraging indicators for existing federal policies. Most notably, 44 per cent of respondents indicated support for carbon pricing, while only 27 per cent said they oppose it. (The rest were neutral or did not know.)
It also indicates a desire for carbon border adjustments – a form of tariff that protects domestic manufacturers competing against companies from other countries that don’t have comparable carbon pricing systems. The federal government has expressed interest in that mechanism, but has struggled with the implications of doing so when the United States, by far Canada’s biggest trading partner, does not have a national carbon price.
But the biggest takeaway, on Thursday, was that neither industry nor government are doing anywhere near enough to get Canadian manufacturing onto a net-zero trajectory.
Like many other countries, Canada has in recent years begun to inch back toward more interventionist industrial policy. But Ottawa will seemingly have to go further down that path, in a more strategic way, if it’s serious about meeting the goals it has set out.