Green Strings

Since the pandemic onset, the Canadian climate and energy NGO community, among other stakeholders, has engaged with and informed governments on how to support economic recovery in a way that maximizes employment, investment, and emissions reductions. To continue to support increased climate ambition and align with Canada’s net zero by 2050 goal, government funding must be tied to green strings (environmental, social, and financial conditions).

To that effect, the recommendations below offer a lens through which to consider all new and ongoing government economic funding programs and other fiscal assistance, including those that may not be “climate-specific”. Given that it represents a sizable share of Canada’s total green economy investment portfolio, particular attention should be given to the application of green strings to access the Net Zero Accelerator fund.

Background

  • The December 2020 enhanced climate plan committed to launching a Net-Zero Challenge to encourage large industrial emitters to develop net-zero plans;
  • The climate plan also introduced the Strategic Innovation Fund – Net Zero Accelerator ($3 billion over five years). This fund has 3 focus areas: 1) development and adoption of clean technology in all industrial sectors (with an emphasis on solutions to help industrial emitters move to net-zero); 2) support clean technology development in aerospace and automobile manufacturing sectors; and 3) support a battery innovation and industrial ecosystem;
  • In Budget 2021, the federal government proposed to invest $17.6 billion towards a green recovery, an amount that included an additional $5 billion for the Net Zero Accelerator fund (over seven years starting in 2022).

Recommendations:

The following recommendations should be implemented by ISED, Finance and NRCan in particular although, depending on the program, other departments may also have an important role in implementing green strings (for example, AAFC).

  • Access to funding, across all streams and programs should be conditional on:
    • A commitment by the recipient to develop a net zero target and develop a plan to meet it based on a robust and agreed upon framework;
      • To increase accountability at the corporate level, corporate net zero commitments should set milestone targets in alignment with, or exceeding, the federal government’s targets. A robust framework must set limits on the percentage of milestones that can be met through offsets and include all emissions scopes.
    • A commitment to disclose climate-related risks based on a robust and agreed upon framework;
      • – Incentivizing the reporting of climate-related financial information based on the standards developed by the Task Force on Climate-Related Financial Disclosures (TCFD) and/or other recognized reporting frameworks would ensure companies are making resilience a key part of their plans while leading to strategic competitive advantage. As such, the federal government and provincial securities commissions should formally adopt TCFD disclosure requirements.
    • A demonstration that the project will lead to job creation or reduce job loss; and
    • A commitment to deploying best in class technology.
  • To provide transparency in how programs are managed and deliver on their intended outcomes:
    • Recipients should have an obligation to disclose information on actual investments made and outcomes achieved in terms of GHG reductions and job creation/ retention (and other environmental benefits);
    • Participation should come with penalties and corrective actions if conditions are not met (e.g., grants are converted into loans if the commitment to net-zero has not been developed within a reasonable time period);
    • The government should make information publicly available on how fund recipients were selected and obligations that were placed on recipients, as well as how those obligations were met; and
    • The government should initiate timely monitoring and evaluation of programs within the first year in order to assess that funds are reaching the right types of applicants and projects to contribute to net-zero goals.
  • We also strongly encourage the federal government to consider the following criteria when establishing funding eligibility and selecting recipients:
    • Establishing prioritization criteria to maximize outcomes:
      • Projects with largest absolute GHG reduction and GHG reduction potential per dollar invested; and
      • Support should be based on a critical assessment of needs for proven solutions to achieve near-term reductions to reach Canada’s 2030 target versus strategically investing in those emerging technologies that makes most sense to reach Canada’s 2050 goal—or safe bets and wild cards as put forward by the Canadian Institute for Climate Choices.
    • Ensuring alignment with robust just transition principles [see recommendation on Just Transition, later in this document] to minimize and address negative impacts to workers.
      • In particular, gaps for Indigenous engagement and inclusion have been identified in current federal climate and energy policies, programs, procurement, and infrastructure investment. Government spending in clean energy programs (such as the Net Zero Accelerator) should leverage opportunities for Indigenous participation and leadership in order to advance reconciliation, as recommended by Indigenous Clean Energy.
  • Considerations per stream of the Net Zero Accelerator and other targeted funding programs:
    • Automobile & aerospace: to accelerate transition to an emissions-free vehicle fleet, funding should be prioritized for zero-emission vehicles, rather than hybrids or plug-in hybrids;
    • Battery innovation: research has shown that the Net Zero Accelerator may not be the best funding for battery supply chain development, including due to project eligibility thresholds and pace of funding availability. Canada will need to take additional measures to promote “clean” battery supply chains, and can look to the EU’s proposed battery regulation for inspiration;
    • If the fund supports fuel switching projects for industrial processes that require high temperature, it should only support projects that adopt best in class carbon capture and storage technology. Coal with carbon capture projects should not be eligible. These investments should be accompanied by investments in renewable heat programs; and
    • Support should not be provided for projects and industries that are clearly incompatible with a net zero trajectory. Support should not create or lock in brown infrastructure, such as new infrastructure that increases capacity for emissions-intensive fossil fuel production.

Contacts

Isabelle Turcotte – isabellet@pembina.org
Vanessa Corkal – vcorkal@iisd.ca