Canada has spent the last 20 years debating our response to climate change,but in that time our governments have taken no real action to reduce greenhouse gas emissions. This is no doubt because they believe that taking action on climate change would impose a cost on our economy. But on this their worries are profoundly misplaced. For a proper climate change strategy would increase the efficiency and competitiveness of the Canadian economy and better position us to compete globally.
Although Canada has come through the latest economic troubles relatively well, we should not be smug, for we have serious economic challenges to face. Our economy lacks the innovation required to lead in the 21st century. We are under-investing in R&D.
We are under-investing in venture capital and startups. In areas like energy efficiency, renewable energy and high-speed rail, we’re not even in the game. Considering that these sectors are likely to take up a growing percentage of worldwide GDP, these shortfalls are not incidental to our future economic well-being.
A proper climate change strategy- in the form of a real and growing price on carbon—would help address these economic deficiencies. Done properly it would lead to an increase in R&D, trigger new investment into clean technologies and renewable energy, and increase the productivity of the Canadian economy. But Canadians have been brainwashed into believing that environmental action comes at an economic cost. This is a misperception that must be countered in the interests of Canada’s economic future.
More than 20 years ago, Harvard professor Michael Porter developed what is now called the Porter Hypothesis. The essence of that was that proper environmental legislation can actually lead to economic gains, as a result of what he called the “Innovation Effect.”
According to Porter, setting environmental limits causes firms in the economy to innovate— principally by encouraging investment into research and development, which can often lead to dramatically improved economic performance.
In the 1990s, the Porter Hypothesis was tested on an economy-wide basis across Europe as countries like Finland and Sweden—and eventually many other European countries— introduced significant environmental taxes. A major report on the effect of these measures, commissioned by the European Union, entitled “Carbon Energy Taxation: Lessons from Europe,” found that in most cases these policy measures had led to increased employment and economic growth for the countries that implemented them.
More recently a report by Roger Martin and Alison Kemper that looked at carbon pricing in the Canadian context found that: “Pricing carbon can help drive innovation in technologies and business models that promote resource efficiency, and so drive productivity improvements.”
This is a lesson of vital importance to Canada. A properly designed price on carbon would not only address greenhouse gas emissions, it would also spur growth through increased R&D investment and a more innovative and energy-efficient economy.
In my line of work, I see thousand of companies that are inventing the new emerging environmental technologies and business of tomorrow. It’s very clear to me that these sectors are ready to explode, if only the proper policies were in place. Even within the very resource sectors that have been the core of the Canadian economy—sectors like oil and gas, mining and forestry— a clean revolution is ready to take shape. A price on carbon would be the spark for this new economy.
The Canadian economy could be a leader in clean innovation globally. But first we have to insist that our political leaders take this opportunity seriously and put in place the policies required—if not for the environment then for the economy.
Andrew Heintzman is cofounder of Investeco, the first investment firm in Canada to be exclusively focused on environmental sectors.
