Climate Change and the 2023 Federal Budget

Cleantech Investments Must Treat Energy Efficiency as Grid Infrastructure

The historic cleantech investments in the 2023 federal budget deliver the incentives required to begin decarbonizing the electricity grid and driving down Canada’s greenhouse gas emissions. But to get the fastest emission cuts and maximize the economic benefits of the climate transition, the investments in Budget 2023 will have to recognize deep energy efficiency measures as an essential contribution to power grid infrastructure.

The 2023 Federal Budget will keep Canada at least moderately competitive with the Inflation Reduction Act in the United States, with a healthy enough investment to keep up with global green transition trends. The emphasis on clean electricity and the tax incentives for clean technology will help communities scale up renewable energy and drive down emissions. $8 billion per year over the next decade is a healthy down payment on a clean industrial strategy. But it falls far short of the $125 to $140 billion per year that Canada will need to shift to a net-zero economy, according to federal government estimates.

To stretch this funding as far as possible, we’ll need an efficient power grid that makes best possible use of the new, renewable energy coming onto the system. That will only happen if governments recognize deep energy efficiency measures like heat pumps as essential investments in clean infrastructure.

Renewable energy is cheaper than it’s ever been, and it’s ready for prime time. But to hit our emission reduction targets, we know we need to scale up solar and wind installations at a dizzying pace. We should be directing all federal funding to make that happen and encourage oil and gas companies to decarbonize their operations using their own record profits.

A tax incentive for clean electricity falls short if it includes abated natural gas. We need to avoid locking in new fossil fuel projects, and now that wind and solar cost less than gas plants—as this budget recognizes—we absolutely can. The unproven carbon capture technologies required to “abate” natural gas emissions are simply not a good use of public investment dollars intended to accelerate deep emissions reductions over the long term.

Those investment targets are manageable in an economy with annual output of $2 trillion, where the federal government spent $500 billion in an emergency response to the COVID-19 pandemic—showing that we find money for the things we need when we decide they have to get done. The latest report from the Intergovernmental Panel on Climate Change is the latest reminder that now the time to respond to the climate emergency and seize the opportunities of a low-carbon economy.