Economy
Ottawa’s new ‘climate disclosures’ another investment killer
From the Fraser Institute
By Matthew Lau
The Trudeau government has demonstrated consistently that its policies—including higher capital gains taxes and a hostile regulatory environment—are entirely at odds with what investors want to see. Corporate head offices are fleeing Canada and business investment has declined significantly since the Trudeau Liberals came to power.
According to the Trudeau government’s emissions reduction plan, “putting a price on pollution is widely recognized as the most efficient means to reduce greenhouse gas emissions.” Fair enough, but a reasonable person might wonder why the same politicians who insist a price mechanism (i.e. carbon tax) is the most efficient policy recently announced relatively inefficient measures such “sustainable investment guidelines” and “mandatory climate disclosures” for large private companies.
The government claims that imposing mandatory climate disclosures will “attract more private capital into Canada’s largest corporations and ensure Canadian businesses can continue to effectively compete as the world races towards net-zero.” That is nonsense. How would politicians Ottawa know better than business owners about how their businesses should attract capital? If making climate disclosures were a good way to help businesses attract capital, the businesses that want to attract capital would make such disclosures voluntarily. There would be no need for a government mandate.
The government has not yet launched the regulatory process for the climate disclosures, so we don’t know exactly how onerous it will be, but one thing is for sure—the disclosures will be expensive and unnecessary, imposing useless costs onto businesses and investors without any measurable benefit, further discouraging investment in Canada. Again, if the disclosures were useful and worthwhile to investors, businesses seeking to attract investment would make them voluntarily.
Even the government’s own announcement casts doubt that increasing business investment is the likely outcome of mandatory climate disclosures. While the government says it’s “sending a clear signal to corporate boards and shareholders, at home and around the world, that Canada is their trusted partner for putting private capital to work in the race to net-zero,” most investors are not looking to put private capital to work to combat climate change. Most investors want to put their capital to work to earn a good financial return, after adjusting for the risk of the investment.
This latest announcement should come as no surprise. The Trudeau government has demonstrated consistently that its policies—including higher capital gains taxes and a hostile regulatory environment—are entirely at odds with what investors want to see. Corporate head offices are fleeing Canada and business investment has declined significantly since the Trudeau Liberals came to power. Capital per worker in Canada is declining due to weak business investment since 2015, and new capital per-Canadian worker in 2024 is barely half of what it is in the United States.
It’s also fair to ask, in the face of these onerous polices—where are the environmental benefits? The government says its climate disclosures are needed for Canada to progress to net-zero emissions and “uphold the Paris climate target of limiting global warming to 1.5°C above pre-industrial levels,” but its net-zero targets are neither feasible nor realistic and the economics literature does not support the 1.5 degrees target.
Finally, when announcing the new climate disclosures, Trudeau Environment Minister Steven Guilbeault said they are an important stepping stone to a cleaner economy, which is a “major economic opportunity.” Yet even the Canada Energy Regulator (a federal agency) projects net-zero policies would reduce real GDP per capita, increase inflation of consumer prices and reduce residential space (in other words, reduce living standards).
A major economic opportunity that will increase business investment? Surely not—mandatory climate disclosures will only further reduce our standard of living and impose useless costs onto business and investors, with the sure effect of reducing investment.
Author:
Dale Swampy, founder of the National Coalition of Chiefs. Photograph for Canadian Energy Centre
From the Canadian Energy Centre
National Coalition of Chiefs founder Dale Swampy says Canada needs a more sustainable strategy for reducing emissions
The head of the National Coalition of Chiefs (NCC) says Ottawa’s proposed oil and gas emissions cap couldn’t come at a worse time for Indigenous communities.
Dale Swampy says the cap threatens the combined prospect of higher costs for fuel and groceries, along with fewer economic opportunities like jobs and revenues from involvement in energy projects.
“Any small fluctuation in the economy is affected on our communities tenfold because we rely so much on basic necessities. And those are going to be the products that increase in price significantly because of this,” says Swampy, who founded the NCC in 2016 to fight poverty through partnerships with the natural resource sector.
He says that of particular concern is the price of fuel, which will skyrocket under the emissions cap because it will force reduced Canadian oil and gas production.
Analysis by S&P Global found that meeting the cap’s requirements would require a production cut of over one million barrels of oil equivalent per day (boe/d) in 2030, and 2.1 million boe/d in 2035.
“Production gets reduced, and the cost of fuel goes up,” Swampy says.
“Our concern is that everything that has to do with both fuel for transportation and fuel to heat our homes is amplified on First Nation communities because we live in rural Canada. We live in isolated communities, and it costs much more for us to operate our daily lives because we have to travel much further than anybody in a metropolitan area. So, it’s going to impact us greatly.”
Indigenous communities are already stretched financially, he says.
“What you could buy in 2019 terms of meat and produce is almost double now, and even though the inflation rate is trending downwards, we still haven’t gotten over the impact of what it costs for a bag of groceries these days,” Swampy says.
“In our communities, more than half are under the age of 21, so there’s a lot of bigger families out there struggling to just get food on the table.”
The frustrating timing of the cap is that it comes amid a rising tide of Indigenous involvement in Canadian oil and gas. Since 2022, more than 75 Indigenous communities in Alberta and B.C. have agreed to become part owners of energy projects.
Three major projects – the Trans Mountain Pipeline Expansion, Coastal GasLink Pipeline and LNG Canada export terminal – together have spent more than $11 billion with Indigenous and local businesses.
“We’re at a turning point right now. There’s a real drive towards getting us involved in equity opportunities, employment opportunities, and contracting opportunities,” Swampy says.
“Everybody who didn’t talk to us in the past is coming to our front door and saying, ‘Do you want to work with us?’ It couldn’t come at a worse time when we have this opportunity. The emissions cap is going to reduce the amount of activity, and it’s going to reduce the amount of investment,” he says.
“We’re part of that industry now. We’re entrenched in it now, and we have to support it in order to support our people that work in this industry.”
Economic growth, and more time, is needed to fund development of low emissions energy sources without ruining the economy, he says.
“I think we need more consultation. We’d like to see them go back to the table and try to incorporate more of a sustainable strategy for emission reductions,” Swampy says.
“We’re the only country in the world that’s actually incorporating this type of legislation. Do you think the rest of the world is going to do this type of thing? No, they’re going to eat our lunch. They’re going to replace the production that we give up, they’re going to excel in the economy because of it, and they won’t talk about significant emission reduction initiatives.”
We’ve discussed the housing crisis before. That would include the destabilizing combination of housing availability – in particular a weak supply of new construction – and the immigration-driven population growth.
Parsing all the data can be fun, but we shouldn’t forget the human costs of the crisis. There’s the significant financial strain caused by rising ownership and rental costs, the stress so many experience when desperately searching for somewhere decent to live, and the pressure on businesses struggling to pay workers enough to survive in madly expensive cities.
If Canada doesn’t have the resources to house Canadians, should there be fewer of us?
Well we’ve also discussed the real problems caused by low fertility rates. As they’ve already discovered in low-immigration countries like Japan and South Korea, there’s the issue of who will care for the growing numbers of childless elderly. And who – as working-age populations sharply decline – will sign up for the jobs that are necessary to keep things running.
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The odds are that we’re only a decade or so behind Japan. Remember how a population’s replacement-level fertility rate is around 2.1 percent? Here’s how Canadian “fertility rates per female” have dropped since 1991:
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Put differently, Canada’s crude birth rate per 1,000 population dropped from 14.4 in 1991, to 8.8 in 2023.
As a nation, we face very difficult constraints.
But there’s another cost to our problems that’s both powerful and personal, and it exists at a place that overlaps both crises. A recent analysis by the Parliamentary Budget Officer (PBO) frames it in terms of suppressed household formation.
Household formation happens when two more more people choose to share a home. As I’ve written previously, there are enormous economic benefits to such arrangements, and the more permanent and stable the better. There’s also plenty of evidence that children raised within stable families have statistically improved economic, educational, and social outcomes.
But if households can’t form, there won’t be a lot of children.
In fact, the PBO projects that population and housing availability numbers point to the suppression of nearly a half a million households in 2030. And that’s incorporating the government’s optimistic assumptions about their new Immigration Levels Plan (ILP) to reduce targets for both permanent and temporary residents. It also assumes that all 2.8 million non-permanent residents will leave the country when their visas expire. Things will be much worse if either of those assumptions doesn’t work out according to plan.
Think about a half a million suppressed households. That number represents the dreams and life’s goals of at least a million people. Hundreds of thousands of 30-somethings still living in their parents basements. Hundreds of thousands of stable, successful, and socially integrated families that will never exist.
And all that will be largely (although not exclusively) the result of dumb-as-dirt political decisions.
Who says policy doesn’t matter?
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