Funding the transition to the green economy with billions of dollars in tax revenues

Funding the transition to the green economy is possible, but it will cost money. First in a series on the economic impacts of the Trans Mountain Pipeline Expansion project. By Don Hauka.

There are a lot of reasons why a new pipeline project has been described as necessary to our shared prosperity as a country, and there is a mass of numbers to prove it.

It's easy to get lost in the intricacies of benefits analyses, federal transfer payments and commodity price forecasts. But the bottom line is, expanding our pipeline capacity will help Canadians pay the bills, pave the way to the green economy and allow us to get a better price for a precious natural resource product.

To appreciate the reward side of risk-reward analysis for the Trans Mountain Expansion Project (TMEP), here are some of the considerations foremost in the minds of decision makers.

Canadians are spending billions of dollars on research and development in new technologies that will help us transition to a green economy and meet our CO2 emission targets. Investing in technologies to increase carbon capture and improve renewable energy sources while getting the most out of our natural resources (thereby reducing our carbon footprint) is expensive. So why wouldn't Canadian taxpayers want an extra $46.7 billion in government revenues to help pay for that?

TMEP's combined impact on government revenue for construction and the first 20 years of expanded operations is $46.7 billion. Canada's share of that is $21.6 billion. That money can help pay for the myriad of programs that the federal government has in place and enable it to create new ones. How much does the federal government spend on green initiatives? The 2018 Federal Budget released on February 27 details billions of dollars in commitments, including:

  • Investing $3.2 billion over the next five years in Canadian science and research, including $2.8 billion for new federal research centres, to bring together government scientists from across departments and fields to look into climate change, ocean protection and health and other issues. There's also $1.3 billion set aside for equipment and technology for university-based researchers.

  • Improvements to the Pan-Canadian Framework on Clean Growth and Climate Change, a $5.7 billion commitment over 12 years, including $2 billion for the Low Carbon Economy Fund to combat climate change.

  • Maintaining  the Low Carbon Economy Leadership Fund, a $1.4 billion investment in projects that generate clean growth and reduce greenhouse gas emissions while creating jobs for Canadians, which includes $162 million for B.C. to support projects including the reforestation of public forests.

  • Tax breaks for businesses to encourage investment in clean energy generation and to promote the use of energy efficient equipment, measures worth $123 million over the next five years.

That's a lot of your money. TMEP can contribute $21.6 billion towards meeting those commitments. It will also give Canadian oil companies more money to put towards similar initiatives. In fact, they're already spending hundreds of millions of dollars on research and development on carbon capture and other technologies to shrink greenhouse gas emissions.

Consider the role of the Board of Emissions Reduction Alberta (ERA), with a mandate to "identify and accelerate innovative solutions that secure Alberta’s success in a lower carbon economy." (Emissions Reduction Alberta 2017 Annual Report).

The ERA has to date funded 122 projects worth $327 million that will reduce greenhouse gas emissions by eight million tonnes by 2020. The bulk of their funding comes from the Climate Change and Emissions Management Fund, set up by the Alberta government to tax industries that exceed the province's greenhouse gas emissions reduction targets. Since 2007, about $740 million has been paid into the fund, much of it by oil producers.

Taxpayer support for innovative green technologies is essential in order for Cleantech and Restech companies to succeed. As noted in Resource Works' report, Healing the Divide: A submission to the Province of British Columbia's Rural Development Strategy, those companies need the provincial and federal governments to work together to increase Scientific Research and Experimental Development (SR&ED) tax credits. They also call for increased federal funding for the federal government to enhance Industrial Research Assistance Program (IRAP). These will help them to get past the startup phase and find customers for their products. An additional $21.6 billion from TMEP to federal coffers (not to mention an additional $5.7 billion in tax revenues to B.C.) would certainly help fund these critical programs.

The choice is stark: expand the tax base and reap the financial rewards offered by the Trans Mountain project, in turn paving the way to the green economy – or risk losing $46.7 billion in government revenues and all the potential good it could do.

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