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This article originally appeared in The Hill Times on January 4, 2023.
Canada has joined more than 120 countries, including all other G7 nations, in committing to reaching net-zero emissions in our country by 2050. This ambitious goal is enshrined into legislation through the Canadian Net-Zero Emissions Accountability Act and became law last year.
Getting to net-zero emissions will be a complex, multi year undertaking and will require consistent efforts by a full range of stakeholders, including government, industry sectors, and civil society. Climate change is a critical issue of our time and requires the collective efforts of all parts of our economy working towards a shared objective. The banking sector is committed to doing its part to address this generational undertaking.
Canada’s banks have a long tradition of helping achieve national priorities. Some of our banks were founded before Confederation and financed the railroads that connected us from coast to coast, sold war bonds for the government that brought victory in two world wars, and helped generations of Canadians buy homes, save for retirement, and grow businesses.
This time is no different.
Banks understand that the financial sector is central to securing an orderly transition to a net-zero economy while ensuring the continued resilience of Canada’s financial system. That’s why banks are, for the first time, implementing climate action plans that set specific targets to meet the demands of this global challenge.
What’s more, banks are already hitting key milestones by reducing emissions from their own operations; setting sector-specific reduction targets in their lending; working with businesses across industries to help them decarbonize and pursue energy transition opportunities; launching innovative products to finance new and existing green projects; implementing climate-related financial disclosures, tracking financed emissions, and collecting quality data to better assess the challenge; and, beyond our borders, our six largest banks are playing an active role in global groups such as the UN-convened Net-Zero Banking Alliance.
This is the climate transition at work.
Banks are also investing in transformational technologies, like Carbon Capture, Utilization & Storage, and other innovations, to help clean up existing energy production and accelerate the transition to cleaner alternatives. Steeply reducing carbon intensity across our economy, however, will require hundreds of billions of dollars in additional investments.
A recent study by RBC indicates that Canada will need an estimated $2 trillion over the next 30 years to finance the transition to net-zero. That is roughly the same as the entire annual GDP of our country. Canada’s banks are key to financing the transformational technologies and capital improvements that will get us there.
The climate and energy transitions present both challenges and opportunities. A collaborative process is needed for Canada to meet its climate goals while simultaneously enhancing productivity and economic growth. We can purposefully generate more clean energy, grow our economy, and cut our emissions.
The banking sector encourages the federal government to collaborate with industry to design targeted investments and tax incentives that create pathways to net-zero, while taking a balanced and flexible approach to new regulation.
We need more carrot, less stick. Recent commitments to spur investment in green technologies, including hydrogen, in the 2022 Federal Budget and the Fall Economic Statement are steps in the right direction. But more needs to be done to help advance our country towards a net-zero economy by 2050.
While banks are helping to finance greener sources of energy, the full transition to net-zero will not happen overnight. We must balance the essential need to significantly reduce emissions while ensuring the continued supply of energy and critical products, some of which may only be obtained through the medium-term use of hydrocarbons. We must also meet our interim energy demands in a global context made more volatile by Russia’s war of aggression in Ukraine.
Energy is not only key to Canada’s economy, but it is also essential to funding our social needs. Oil and gas are crucial energy sources in Canada, necessary for everything from food production to transportation, manufacturing, and heating our homes. Canada, and people around the world, need this energy. There is simply not enough green energy currently to meet demand.
The 140,000 people working directly and indirectly in oil and gas share Canada’s vision for a low carbon future. They are in the best position to help us get to net-zero, given their deep expertise in delivering the fuel that keeps our country – and the world – moving. Oil and gas companies are also supporting our energy transition through pivotal investments in wind, solar, and other technologies that will help enable our transition.
From a geopolitical standpoint, Canada can supply energy to domestic and global markets cleanly, efficiently, and progressively. International customers prefer Canadian energy sources over those from dangerous conflict regimes because of our strong record on human rights, respect for the rule of law, and tradition of democracy. Deputy Prime Minister Freeland’s recent comments at the Brookings Institute in Washington, D.C., underscored the need for “friendshoring” among the world’s democracies, a view echoed by the U.S. and our closest allies. Now more than ever, social governance and alignment of values are key factors in securing vital supply chains, including energy.
The road to net-zero is long, but Canada has the economic strength to go the distance. Banks will be there every step along the way to finance critical breakthroughs that will help our society decarbonize and transition.