A Federal/Provincial Economic Stimulus Package
Overview: A bold federal initiative to supercharge growth in the green economy, harmonize with Obama’s five million jobs surge, and incentivize provincial action. Funded in part by a Canadian Green Bond and in future from cap & trade program revenues, the program will finance retrofit of Canada’s building stock, provide long-term, low-cost debt capital to renewable energy producers, incentivize investment in clean-tech manufacturing and deploy stimulus into transit, housing, green grid and other low-carbon infrastructure. Size: Loans: $18.6B ; Spending: $22.7B over 5 years
Strategic Political Benefits: Bold Green Economy stimulus is very popular with the public and aligns Canada with the incoming Obama administration. Federal government publicly leads a “race to the top” among provincial green energy strategies. Green Bonds generate direct public engagement, make government action highly visible and positive.
•Green Jobs Now: Immediate stimulus retrofitting government real estate, low-income housing; incentivize commercial and homeowner retrofits.
•Long-term stimulus to the emerging green economy: Low-cost debt capital to accelerate production of “green-collar” jobs, green infrastructure and renewable energy. Green sector strategy to incentivize investment in Canadian clean-tech manufacturing.
•Meet federal 90% non-emitting electricity targets with provincial cooperation: Lower-cost debt means lower cost of renewable energy production. Program incentivizes provincial cooperation, levels the playing field with fossil fuels, and accelerates renewable energy production.
•Expand and extend valuable federal initiatives e.g.: ecoENERGY, Canada Mortgage and Housing (CMHC) and federal-provincial mechanisms.
•Directly engage Canadians via Green Bond promotion. Green Bonds are very popular with the public. A model proven in Europe, it provides a safe investment vehicle in times of financial distress, demonstrates government leadership on climate change, and provides a clear, popular policy announcement.
•Encourage provinces to build positive regulatory environment for renewables. Provinces providing long-term economic stability for renewable energy production and contributing to national targets are prioritized. Disbursement mechanism minimizes risk of loan defaults.
Buildings: Smart Energy Fund (2.5 Billion over 5 years): For energy efficiency and small-scale renewable energy systems access to capital can be a primary barrier. Budget 2009 establishes a $2.5 Billion Smart Energy Fund that makes no interest/low interest loans to homeowners, businesses, industrial firms, and public entities for energy efficiency technologies, staff training, green building, and renewable energy technologies like solar water heating.
Renewable Energy: (16.1 Billion over 5 years) The Green Economy Action Fund provides no-interest/low-cost capital loans for renewable energy production funded in part by green bonds.
Financial Efficiency: As the only significant cost to the government is in the form of defaulted loans the ratio of dollars generated as renewable infrastructure capital to dollars cost to the government is high – higher than either tax credits or other direct subsidies can provide. Total cost per tonne of CO2e is estimated between $1 – $13.
Provincial/Federal Interplay: Clear encouragement to provinces to build regulatory environments that can compete for program funding. Example: Ontario’s Green Energy Act provides substantive feed-in tariffs. This makes Ontario projects safer investments for the fund, and the Green Economy Action Fund will target these projects, enabling much larger, faster roll-out of renewable production. Other provinces will compete for these funds by implementing renewable support policies of their own.