4.6 Governance
Framing the Future: Embracing the Low-Carbon Economy
Governance “determines who has power, who makes decisions, how other players make their voice heard, and how account is rendered.”73 Governance looks beyond government as a single actor; in fact, it includes a wide range of involvement from governments, civil society, different sectors, and business communities. Canadian federalism presents unique governance challenges. The federal government has regulatory control of interprovincial trade and international trade and commerce; other areas offer decentralization and delegation of authority to the provinces, as with energy and natural resources. Yet other areas, such as the environment, are a shared responsibility. Divisions of power make tackling far-reaching policy issues a challenge in practice.
Governance shapes a nation’s response to and management of the global transition to a low-carbon economy. A transformative shift in policy direction and objectives, such as that required for countries to prosper in a low-carbon transition, requires vision and leadership above all else.74 Without exception, political leadership was necessary to propose, endorse, and embed the low-carbon growth plans where they exist.
Canada as a whole does not have a coherent climate change strategy or a low-carbon growth plan. The failure to bridge regional interests and perspectives over the past 20 years has resulted in a patchwork of uncoordinated federal and provincial actions to reduce emissions. Four key contributing factors are apparent: disparity in regional economic interests, a commitment to equitable burden sharing, a lack of institutional intergovernmental relations capacity, and a polarized or unengaged public.
The market implications of gaps in leadership and coordination are significant. Simply put, key sectors of the Canadian economy lack the policy certainty or support to prioritize low-carbon investments. Instead, investors, firms, and households may postpone investment decisions or choose conventional options with known payoffs.
In NRT convening sessions, stakeholders across the country identified inter-regional co-operation as an opportunity to increase the supply of low-carbon electricity, the availability of hydro-based energy storage, and/or bolstering the reliability of the regional electricity system. Interprovincial and inter-regional collaboration was also noted with respect to trade policy and the harmonization of standards. It was also suggested that inter-regional co-operation with respect to technology development could benefit all parties — for example, harnessing the innovative capacity in central and eastern Canada to contribute to the work already being done in western Canada to find solutions for sustainable oil sands development.
Stakeholders also saw increasing awareness of and education about energy and emissions as a strategy to change: the manner in which resources are used, the political environment for decision making, and the willingness to pursue new opportunities.
4.7 Economic Competitiveness
Trends and conditions shaping Canada’s national competitiveness matter. Analysis by the World Economic Forum (WEF) for the Global Competitiveness Index (GCI) ranks Canada twelfth overall out of 142 economies, moving down from tenth place in 2010–2011 and ninth place in 2009-2010.75 Ahead of Canada are Switzerland, Singapore, Sweden, Finland, the United States, Germany, the Netherlands, Denmark, Japan, the United Kingdom, and Hong Kong. Although Canada has some clear areas of strength — for example, Canada ranked fifth and sixth overall for labour market efficiency and health and primary education, respectively — Canada has two areas of notably mediocre performanceh: macroeconomic environment and business sophistication. While many of Canada’s peers (e.g., U.S., UK, France) were similarly poorly ranked for macroeconomic environment indicators, Canada stands out (along with Australia) as having lower overall business sophistication.
Our macroeconomic environment influences the attractiveness of the Canadian economy for investment and is a fundamental prerequisite to growth — low-carbon or otherwise. Key additional enabling conditionsi include the presence of appropriate price signalsj and an efficient but robust regulatory framework.k Factors like the nature of Canada’s competitive advantage and value-chain breadth affect business sophistication, hindering or enabling how the country competes on a low-carbon basis. Canada was ranked low for both these categories. In the first case, the low ranking (71) results from the relative emphasis on natural resources and primary commodities in the economy.76 Trade and market access are also critical in terms of both influencing the country’s economic focus and fostering growth given the relatively small size of the Canadian market.
Recognizing that traditional competitiveness metrics are insufficient to assess the implications of the manner in which countries respond to the opportunities and costs inherent in the global low-carbon transition,77 they are still an important part of the picture.
4.8 Conclusions
Innovation, investment, trade and market access, labour markets and skills, and governance are all key elements of effective low-carbon planning. Our analysis reveals that Canada has strengths in each of these areas upon which it should capitalize. It also identified weaknesses that should be addressed. The importance of the macroeconomic environment and overall economic competitiveness was also established. We build on these findings in our final chapter to identify priorities for action going forward and to set out the essential conditions for low-carbon growth.
[h] Identified indicators where Canada ranks below twentieth place. In macroeconomic environment, Canada ranked forty-ninth and in business sophistication Canada ranked twenty-fourth.
[i] These are consistent with the framework conditions for green growth put forward by the OECD in its 2011 publication “Towards Green Growth,” which include policies that seek synergies between economic growth and conservation of natural capital, policies that reward innovations that limit or create efficiencies in natural resource use, and policies that penalize pollution and inefficient uses of natural resources.
[j] This includes pricing of pollution and natural resource use.
[k] Regulatory coherence and a focus on outcomes are two key elements (OECD 2011c).
[73] Institute on Governance 2011
[74] Meléndex-Ortiz 2011 as cited in The Frederick S. Pardee Center 2011
[75] World Economic Forum 2011b
[76] World Economic Forum 2011b
[77] Vivid Economics 2009
© 2013