Category: 2025

Moving towards a more circular economy by prioritizing upstream solutions, including reuse and repair

The Green Budget Coalition appreciated the commitments in Budget 2024 to a “right to repair to increase product durability and repairability” and, since fulfilled, to launching consultations in June 2024 to develop a right to repair framework, focused on durability, repairability, and interoperability.

In 2020, Canada had a circularity rate of only 6%. As efforts and funding are primarily directed to recycling, priority circular economy strategies— including reuse and repair—lack financial support, especially for larger-scale reuse initiatives.

Funding to support reuse initiatives are vital to successfully deploying reusable alternatives that reduce the demand for single-use items, particularly in the food and grocery sectors. While the plastics challenge launched in 2022 was intended to achieve this goal, its short duration and the ineligibility of not-for-profit companies are hindrances to the success of this federal funding.

Additionally, while in 2021, Canadian households spent $2,177 per year on household appliances and electronics,48 only 19% of those surveyed had their last broken appliance repaired. A repair fund like France’s, launched in 2022, would allow people with broken appliances, no longer under warranty, to obtain a discount at the time of the repair.

Recommended Investments:

  • $87 million over three years, followed by $87 million per year, ongoing, to implement a repair fund to reduce the cost of repairing electronics and appliances. [ISED, FIN]
  • $100 million over three years to establish a reuse fund to support businesses and organizations developing reusable container and packaging solutions as alternatives to single-use plastics, followed by $35 million per year, ongoing, until the effective implementation of reusable containers and packaging in Canada. [ECCC, ISED]
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Canada’s industrial carbon pricing system, and complementary mechanisms

Canada’s industrial carbon pricing system is intended to reflect the cost of pollution, ensuring that industrial emitters pay for the costs of emissions. It provides price signals needed by industry to invest in significant decarbonization projects. Its stability and predictability is key to stimulating investment in clean technology and large scale projects, which often take years to evaluate and implement. Established in 2022, the Canada Growth Fund can complement and supplement the industrial carbon pricing system in facilitating the significant investments required to decarbonize all sectors. The fund is also meant to serve as the principal federal entity to issue Carbon Contracts for Difference (CCfDs), or carbon credit offtake agreements, to de-risk investments.

Recommendations [ECCC, FIN, NRCan]:

  • Driving emissions reductions through strong industrial carbon pricing is smart fiscal policy, and Budget 2025 needs to commit to a fulsome assessment of the federal output-based pricing system (OBPS) and by extension, equivalent provincial systems, to ensure the long-term integrity of credit markets. This assessment is set to conclude in 2026, and should begin in 2025. Ensuring adequate demand in credit markets, and controlling for oversupply, is key to driving continuous improvements in emissions performance, but also to ensuring against undue public liability from the market guarantees inherent in CCfDs.
  • Now that the Canada Growth Fund is increasing its momentum, Budget 2025 should set more aggressive targets for the Fund to deliver on its objectives and benefit the Canadian economy. Those investments are urgently needed in 2025 and beyond, and should be utilized to the greatest extent possible to help get Canada on track to achieving its 2030 climate targets, competing with the US to grow its low-carbon industry and supply chains, and supporting long-term sustainable jobs and prosperity for Canadians while ensuring returns for the fund’s investors. We caution that if the OBPS review does not produce the conditions for long-term integrity of credit markets, then the possibility of a government backstop of certain CCFD liabilities of the Canada Growth Fund, as highlighted in 2024 budget, may become essential, though they may represent undue risk to taxpayers.
  • To reduce public liabilities for carbon contracts and ensure industrial carbon pricing continues to drive economically efficient emission reductions in the Canadian economy, federal and provincial carbon pricing systems must make credit prices public information, and their stringency- tightening rates must predictably align with Canada’s commitment to net-zero emissions by 2050. Engagement on post-2030 OBPS design should begin in late 2024, and transparent processes should be developed to monitor and make recommendations on credit market management, such as a national carbon credits exchange commission.
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Transparent elimination of domestic public finance and subsidies for fossil fuels

Canada has introduced policies to end domestic subsidies and international public financing for fossil fuel projects. To build on this progress, Canada should publish a policy to end domestic public finance for fossil fuels, as it has committed to do most recently in Budget 2024. This policy is critical to supporting the energy transition, particularly considering that Export Development Canada and other Canadian crown corporations provided at least $7.6 billion to $13.5 billion annually to the fossil fuel sector over 2020-2022. A substantial portion of public finance in recent years has supported the Trans Mountain Pipeline project.

With a strong and transparent approach, Canada can become a global leader in shifting financial flows away from fossil fuels as a key lever to support the energy transition.

Recommendations:

1. Publish a policy to end domestic public financing for fossil fuels by fall 2024 [FIN, ECCC]

a. Introduce a strong policy to end public financial support for fossil fuels domestically, including the full scope of financial instruments, such as loans, equity, grants, guarantees, and insurance. The policy should cover financing for all fossil fuels across their entire life cycle, including support for decarbonization. It should also include a plan to phase out existing public finance and direct government investments. A recent report has a full list of recommendations for a strong policy.

b. Direct public financial institutions (PFIs) to increase transparency by publishing transaction-level data, including company, project name, description and location, amounts disbursed, instrument type, co- investors or syndicate members, any other activities or roles undertaken by the PFI, and any performance or impact expectations (e.g., environmental, social, governance, and any sustainable development goal alignment, full life-cycle emissions for projects or projected dollars per tonne of emissions reductions).

2. Ensure centralized and transparent reporting for all fossil fuel subsidies and public financing [FIN, ECCC, PMO, PCO, NRCan, ISED]

a. Publish the results of Canada’s long-overdue subsidies self-review immediately, including a full inventory of all federal fossil fuel tax and non-tax subsidies and supports (such as the 128 measures identified in the inefficient fossil fuel subsidies framework), and analysis and rationale for any deemed ‘efficient’. [FIN, ECCC]

b. Create a central mechanism for transparency, accountability, and enforcement of policies to ensure they are upheld across departments. The mechanism could include a central database of departmental reports on potential fossil fuel supports and any rationale for exemptions under current policies. An enforcement body should assess information and analysis reported and ensure full enforcement of all policy conditions. [FIN, ECCC]

c. Develop and publish guidelines for federal departments to implement the inefficient fossil fuel subsidies framework. These guidelines should advance a narrow interpretation of exemptions under the policy, ensuring no further support for ‘abated’ oil and gas production, including through carbon capture and storage. [FIN, NRCan, ISED, ECCC]

For related recommendations, please see also Subsidy reform: Aligning investments with halting and reversing biodiversity loss by 2030 and Sustainable finance: Aligning Canada’s financial system with climate and biodiversity commitments, elsewhere in this document.

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Canada’s international climate and biodiversity finance contributions

Recommendation Summary

The collective action of the world will determine how great the impact from climate change will be and how much biodiversity we will lose before we solve the inter- related biodiversity and climate crises. In facing this challenge, nothing is more important than increasing finance flows to lower-income countries for climate action and nature conservation.

The payback from these investments could be enormous, including avoiding much harm to human well-being and nature.

Recommended Investment (with important consideration to how these funds are allocated) [GAC, ECCC]:

  • International Climate Finance: $3.5 billion in 2025-26 followed by $20 billion over five years (2026-31), with 40% applied to adaptation, 40% to mitigation, and 20% to loss and damage
  • International Biodiversity Finance: $1 billion per year, ongoing, from 2025-26

Please note that a more detailed version of this recommendation is available at https://icfcanada.org/docs/ GBC_Intl_Climate&Biodiversity_Finance_draft-1d.pdf.

Climate Finance

Globally, annual climate finance flows reached almost USD $1.3 trillion in 2021-22, a figure that must now increase at least five-fold to avoid the worst impacts of climate change and a doubling of economic losses due to climate change—losses that greatly exceed the finance needs. Despite the large potential for climate action in developing countries, less than 3% of the global finance mobilized in 2021-22 went to or within least developed countries, while just 15% went to or within emerging markets and developing economies excluding China. A five-fold increase in international climate finance would mean a commitment from developed countries of USD $500 billion or more annually. Canada’s share, according to an analysis in 2021, is 4.153%. Applying this percentage to USD $500 billion, Canada’s share is CAD $28 billion annually (from public and private sources).

Scaling up from Canada’s current commitment of $5.3 billion over five years will take time. The Green Budget Coalition took this into account in making its recommendation.

Priorities in Applying Climate Finance:

  • Least-developed countries and vulnerable populations
  • Adaptation
  • Agriculture, forestry and other land use, and industry
  • Indigenous people (who face severe threats to their lands and are important allies in reducing tropical deforestation and loss of other natural ecosystems)
  • A higher proportion as grants vs. loans
  • Climate Loss and Damage Fund: a substantial contribution is needed from Canada

Climate and biodiversity finance should not be done at the expense of other forms of development assistance but should be administered as a distinct allocation in a transparent International Assistance Envelope.

Biodiversity Finance

Target 19 of the Kunming-Montreal Global Biodiversity Framework commits Parties to provide at least USD $20 billion a year to developing countries by 2025, increasing to at least USD $30 billion a year by 2030.

To apportion responsibility, a study assessed each developed country’s fair share based on three factors: (i) each country’s historic responsibility for biodiversity depletion measured by ecological footprint over the past 60 years, (ii) capacity to pay, measured by gross national income, and (iii) population.

Based on a pool of 28 countries that are members of the OECD Development Assistance Committee, the report assesses Canada’s share at USD $1.24 billion annually, or 6.18% of the total. The report gives a figure for Canada of 3.78% if the United States (which is not a Party to the Convention on Biological Diversity) is included. The Green Budget Coalition bases its recommendation on the latter figure.

Priorities in Applying Biodiversity Finance:

  • Directing funds to local organizations: Most of Canada’s biodiversity aid is multilateral. Canada could complement this by funding highly cost-effective conservation action by locally based conservation organizations who lack the capacity to obtain grants from multilateral agencies. This can be done by funding conservation charities that specialize in working with such organizations.
  • Meeting finance needs for existing protected areas: The widespread and serious problem of “paper parks” can be addressed through contributions from Canada to finance mechanisms for public protected areas such as the Legacy Landscapes Fund and the Fondation pour les Aires Protégées et la Biodiversité de Madagascar.
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Sustainable finance: Aligning Canada’s financial system with climate and biodiversity commitments

The global economy will suffer US$178 trillion in damages over the next fifty years if we fail to take action on climate change. In Canada, the failure to address climate transition risks could lead to US$100 billion in stranded fossil fuel assets by the year 2036, and by the end of this century, the cost of inaction could reach $5.5 trillion. The average citizen can expect to see rising home insurance prices, price volatility, and increasing inflation rates due to extreme heat and weather events. Adapting the economy to confront climate change will harness emerging economic opportunities in sectors like clean energy, which is projected to create 2.2 million jobs in Canada by 2050. For the energy sector alone, a rapid transition to green energy could save the global economy up to $12 trillion. The government alone cannot bear the full burden of providing the required funds to realize this unprecedented transition, private finance will be necessary to meet the goal and is one of the only sectors with no reduction goals in Canada. Regulating the financial sector is the missing piece of Canada’s climate policy.

Bill S-243, the Climate-Aligned Finance Act (CAFA), tabled by independent Senator Rosa Galvez, was developed in collaboration with dozens of national and international experts. The Act aims to close gaps in climate policy and governance of the financial system, while strengthening clean growth and biodiversity preservation and upholding the rights of Indigenous peoples in alignment with the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) in Canada and everywhere federally regulated entities conduct business.

The bill would strengthen Canada’s economic resilience and its ability to achieve national and international climate commitments by legislating the entire field of federal jurisdiction over financial regulation, without extending the powers and duties of federal institutions. It will do so by:

  1. Establishing a duty for directors, officers and administrators to align entities with climate commitments;
  2. Aligning the purposes of federally regulated entities, crown corporations and the financial regulator, with climate commitments;
  3. Requiring the development of transition plans, targets and progress reports on meeting climate commitments through annual reporting requirements and increasing and transparency by making them public and freely accessible;
  4. Ensuring climate expertise on certain boards of directors and avoiding conflicts of interest;
  5. Making capital adequacy requirements proportional to microprudential and macroprudential climate risks generated by financial institutions;
  6. Requiring a government action plan to align all financial products with climate commitments; and
  7. Mandating timely public review processes on implementation progress to ensure iterative learning.

Recommendation:

Implement a coherent legislative framework that will enable the financial sector and federally regulated entities to align their activities with Canada’s international commitments and nationally legislated targets, as defined by Bill S-243 Climate Aligned Finance Act. [FIN, ECCC]

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