Under the banner "Growing the Middle Class", the Government of Canada delivered a budget that was firmly rooted in demand-side economics; based on the premise that investment will lead to greater confidence, which in turn will stimulate economic growth.
From a policy perspective the 2016 Budget was presented under five themes:
- An Inclusive and Fair Canada
- An Innovative and Clean Economy
- Canada in the World
- Open and Transparent Government
- Strengthening the Middle Class
On Innovative and Clean Economy, the Budget earmarked $2.1 billion in 2016-2017 and $4.9 billion in 2017-2018 for programs related to clean growth. This represents 2.5% of the $83.9 billion operating budget for 2016-2017 and 5.8% assuming the same baseline for 2017-2018. Over two years, $4.4 billion of these funds will be for public transit ($0.8 billion in 2016-2017 and $1.7 billion in 2017-2018) and to repair water infrastructure ($0.7 billion in 2016-2017 and $1.2 billion in 2017-2018) and an additional $1.0 billion for climate and environmental protection.
In addition, $0.7 billion was earmarked for Indigenous People's Green Infrastructure including both Water ($0.6 billion over two years) and Waste Management for First National Communities ($0.1 billion over two years).
The Budget also proposed that the Government would invest $5 billion over the next five years in infrastructure "that protects communities and supports Canada's ongoing transition to a clean growth economy." $1.8 billion of these funds are planned in the 2016-2017 to 2017-2018 period, with the majority ($1.5 billion) over this period being programmed through the Clean Water & Wastewater Fund.
In regards to a Cleaner, more Sustainable Environment, the Budget provides $1.7 billion over two years including $1 billion to support the Pan-Canadian Framework on Clean Growth and Climate Change through the establishment of the Low Carbon Eco
nomy Fund. This Fund will support provincial and territorial actions that materially reduce greenhouse gas emissions, are incremental to current plans, and achieve significant reductions during the 2020 to 2025 period of Canada's current nationally determined targets under the Paris Agreement (a 30% reduction from 2007 levels by 2030).
The Fund's criteria for allocation will be projects that yield the greatest absolute greenhouse gas reductions for the lowest cost per tonne. The Budget also provided for an additional $109.1 million over five years to Environment and Climate Change Canada to continue to advance the Government's climate change objectives through science, data reporting, policy and regulations.
The Budget also proposed formalizing the economic sector that is clean technology, for which an information framework will be developed by Statistics Canada in collaboration with Natural Resources Canada and Innovation, Science and Economic Development Canada. This information will enable the Government to track progress against its clean technology objectives. The Budget committed $400 million to the sector over two years.
$57 million was also budgeted for Transport Canada and Environment and Climate Change Canada to support the development of regulation and standards for clean transportation technology. This work will include the development of international emissions standards for aviation, marine and rail sectors.
Regarding an innovation-based economy, the Budget presents a framework for "A More Innovative Canada". Supportive Business Environment for Commercialization & Growth is one of the four pillars for this framework. Named as key strategies for this goal are:
- Strong Capital Markets with a risk appetite to support commercial breakthroughs
- An efficient tax system that encourages innovation, trade and the growth of Canadian Business
- Enabling marketplace frameworks for competition, foreign investment and intellectual property
- International market access for Canadian goods and services.
The tools named for this pillar are familiar to innovative firms including clean technology firms: BDC, EDC, and the Trade Commissioner's Service.
Leaders in the clean technology industry have proposed federally sponsored supply-side policies including venture capital, loan guarantees and a greater role for SDTC. Supply-side policies may be relevant at the provincial level, particularly in Québec, Ontario and Manitoba as they work to establish uses of proceeds from Cap and Trade Carbon Trading legislation. At the federal level, demand-side policies may be more pertinent given yesterday's budget.
