Thank you, Madam Chair and members of the committee, for inviting me here today.
My name is Derek Eaton. I am the senior director of public policy research and outreach at the Smart Prosperity Institute, which is a clean economy think tank housed at the University of Ottawa.
I'd like to acknowledge that I reside on on the unceded traditional and ancestral territories of the Mississaugas of the Credit, the Anishinabe, Chippewa, Haudenosaunee and Wendat nations. We recognize the unique and enduring relationship that exists between indigenous peoples and their traditional territories worldwide.
The Inflation Reduction Act is positive for Canadian businesses because it provides more certainty about an economic decarbonization strategy for North America’s largest economy. The range of measures included in the act are likely to weather political changes in the U.S., because they are part of what has been called a “new productivist agenda” for economic policy, focusing on well-paying jobs and diverse, inclusive growth opportunities in various regions of the United States.
The act does, though, put pressure on Canada to determine its economic place in the net-zero transition. Otherwise, we will see businesses and jobs move to the U.S. or not consider Canada as an attractive option.
As a small open economy, highly integrated with our large neighbour to the south, Canada cannot afford to take a passive approach to our economic transition, but this is largely what we have done. The government has created an array of incentives and funding mechanisms to encourage investment in clean energy and clean tech. The latest of these is the Canada growth fund.
However, the approach being taken is to generally leave it to market forces to determine where the best individual funding opportunities are. The problem with this approach is that it ignores what we know from history about how new economic clusters emerge and consolidate in areas of innovative technology.
The coordination of investment opportunities locally, regionally and up and down a value chain is critically important and requires a strategic approach to the identification of a pipeline of projects. Modern industrial policy is about this coordination, which, although challenging, is pursued by many of our major trading partners. Modern industrial policy differs from what has happened in the past, which has tended to focus on supporting individual companies with government subsidies instead of looking at how to support the growth of an industrial ecosystem.
Work by Smart Prosperity and The Transition Accelerator, as well as others, including the Canadian Climate Institute and RBC, has identified a number of Canada’s top opportunity areas in the net-zero transition. These include electric vehicles and the battery supply chain; carbon capture, utilization and storage; biofuels, especially sustainable aviation fuels; hydrogen; alternative proteins; mass timber; critical minerals; and ag tech. These growth areas all present opportunities to transform Canada’s legacy industries in oil and gas, forestry, mining, aerospace, agriculture and automotive manufacturing into world-leading climate solutions ecosystems.
How can Canada begin taking a more strategic approach as a response to the Inflation Reduction Act? The process can be boiled down to two simple action items.
One is to set bold and clear economic targets to guide strategy in priority opportunity areas. Canada should create net-zero competitiveness goals. “Goals” here means quantitative economic targets that refer to physical actions—improvement, production and deployment of technologies. “Net-zero” means indexed to the government mandates or our net-zero targets. “Competitiveness” means benchmarked to a vision of Canada’s place in the global supply chains of 2030 and looking forward to 2050.
These targets must be supported by a clear supply chain strategy that seeks to build economic value in Canada while identifying export opportunities. The targets should be used to focus public funds and guide policy design at the sectoral level.
The second major action item is to create inclusive partnerships to foster strategic collaboration. Canada needs new forms of collaboration between first nations, government, industry, finance, universities and civil society. Collaborative forums here should not be talking shops but active working groups that set and revise targets, create strategy, seed projects and identify high-priority investments.
Brokers and independent intermediaries are crucial to the process of collaboration. It's important to empower independent voices that can provide expertise and help develop projects. An independent agency of this type could be in government so long as it is insulated from politics and free from bureaucratic routines. Otherwise, it could come from civil society or it could be true public-private partnerships, organizations built for the purpose of catalyzing strategic collaboration for net zero.
I thank you for this opportunity. I look forward to your questions.