Front Burner - Could the new U.S. climate bill hold lessons for Canada?

Episode Date: August 11, 2022

Despite its name, the Inflation Reduction Act is in large part a climate bill, with $369 billion US earmarked primarily for investments in green innovation in the U.S. and cutting greenhouse gas emissions. The U.S. Senate narrowly granted its approval last weekend, paving the way to a House of Representatives vote where political observers anticipate it will pass and be signed into law by President Joe Biden. Today on Front Burner, guest host Jason D'Souza speaks with Time magazine senior climate reporter Justin Worland to learn more about how the historic — albeit watered down — climate investment, before hearing from Eddy Pérez with the Climate Action Network Canada to better understand how Canada's efforts now stack up against the U.S.

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Last weekend, the Vice President of the United States cast the deciding vote in the Senate to pass what's called the Inflation Reduction Act. Despite its name, the Inflation Reduction Act is actually more of a climate bill. And though it's been watered down from its initial vision, Democrats are still championing it as historic. Every member of my caucus is elated about what happened because we've really, we've changed the world. Very few pieces of legislation will ever make the kind of impact that this climate bill will have. The Act bumps $369 billion into clean energy investments. Things like incentives for building solar panels, wind turbines, and lowering pollution levels in minority communities.

Today, we are going to hear from a Canadian climate organizer about how this landmark bill for the Biden administration compares with climate-fighting efforts being rolled out by the Trudeau government here in Canada. But first, here to explain the significance of this bill in the U.S. context is Time Magazine's senior climate reporter, Justin Worland. Justin, hello to you. Hello. Thanks for having me on. Well, thank you for taking the time. So first off, can you take us through some of the big highlights of this bill?

Well, this is a just about a $370 billion bill in terms of its climate spending. And really at the core of it is a series of tax incentives. The main ones are for renewable energy, wind, solar. tax incentives. The main ones are for renewable energy, wind, solar, and it really takes sort of a technology neutral approach and also has credits for carbon capture, clean fuels, etc. And the idea is that these will really drive out polluting fossil fuels from the power sector and do so rapidly. It's key that these last for 10 years, which in the past in the US, these kinds of tax incentives have been subject to renewal every two years or one year in some cases. And so this gives a lot of certainty for investors that these tax incentives are going to be here for a decade.

There are also a lot of consumer tax credits. So households can get up to $14,000 for energy retrofits, up to $7,500 for purchase of electric vehicles. Those are the top highlights, but we could get into a number of different things. In the scope of U.S. spending, how significant is that dollar figure north of $360 billion? I mean, this is the largest single investment in climate measures in U.S. history. And if you go back, the $90 billion that the U.S. spent in 2009. This legislation will finally make clean energy the profitable kind of energy. That will lead to the creation of new businesses and entire new industries. And that will lead to American jobs that pay well and can't be outsourced. I've often talked about the need to

build. You can see the ways in which that catalyzed a whole slew of technologies, companies in some cases, and left a big impact. And this is significantly larger than that at a critical moment. So I think this is a lot of money, even in a country that is spending a lot of money. I think it's fair to say that globally speaking, the U.S. hasn't exactly looked like a climate policy leader in some time. Did you think on a personal level we'd arrive at this moment? I had to think that at some point we would get to this moment. You know, frankly, I think I would have expected it to come a little sooner. But also, you know, I think in the last few months there was a sense of

pessimism for many, myself included, that the U.S. just maybe couldn't get it done in this time frame. But climate change is happening. We've known that it would happen at the scale that it's happening. And so you kind of had to expect or I expected that at some point the U.S. would pull the trigger. And, you know, I guess now is that moment. So take us back a moment then, Justin. How did we get here? There have been repeated efforts to pass big climate legislation. You know, Bill Clinton tried to pass an energy tax and that was thwarted.

President Obama tried to do a cap and trade system. The president wants to impose a national cap and trade energy tax. This isn't the agenda that many Americans are looking for. And I think many in the president's own party won't support those ideas. That failed in the Senate. And then, you know, there was an effort to try to find a climate policy, a legislative policy that really could get broad grassroots support, also was not offensive enough to big businesses that they would pull out their lobbying guns to doom it. And so this effort comes after three decades of efforts and is something that can kind of have a little bit of appeal for everyone. It's got those consumer rebates I was talking about. So people will see money in their pocket and they'll see energy costs come down.

It also has investments that a lot of businesses can get really excited about. So that's the sort of long sweep of it. But in the last year, we've seen a lot of back and forth with Senator Manchin, who is from West Virginia, coal state, maybe poised to doom the legislation because of those those things. Democratic Senator Joe Manchin from Coleridge, West Virginia, today defending his decision to block President Biden's climate legislation. Manchin says it calls for spending that will send inflation even higher. I haven't walked away from anything,

and inflation is my greatest concern. There is a long arc to the history of this legislation going back decades, and, you know, more immediately the last few months. When you talk about that back and forth that we saw most recently, there's been a lot of tension within the Democratic Party over how ambitious this bill should be, should have been, a lot of negotiation. Is there a sense of disappointment perhaps within the party about what this could have been, despite the fact that it is now a bill?

President Biden came in wanting to do a multi-trillion dollar spending bill with climate at the center, and this is significantly smaller. And so there are some people who are upset by the sheer size and some of the provisions that didn't make it in. There's also a lot of anger about the provisions regarding fossil fuels. So I mentioned earlier, it takes a sort of technology neutral approach, which is to say that carbon capture, hydrogen, other technologies that might help fossil fuels have a future

are included here. This gives a lifeline to fossil fuel, the industry in that respect. There's also some provisions in here that require the leasing of federal lands for oil and gas drilling, and that's upset a lot of people within the Democratic Party. So, Justin, beyond the big headlines,

what are some of the other things in this bill that stand out to you that perhaps you don't think have been getting that much attention right now? Well, I'll point to at least one thing that I find really remarkable. You know, if you just look through the line items, because it's talking about a billion here, a billion there, there's this line item. It's less than $10 billion, but it provides the loan program office at the Department of Energy with the ability to loan up to $250 billion to private companies for their various efforts that might need financing that's difficult to get from a bank. And so, you know, as I said earlier, you can look back to what the U.S. did in 2009. At the time, there was a similar, though much smaller loan authority to this office, and they lent money to Tesla, you know, a small loan that helped Tesla build its manufacturing capacity. And now, of course, Tesla is a enormous company, hugely valuable. And so

I think about, you know, what will this $250 billion be used for? What kind of companies might it catalyze? And you really see possibility for a new economy that might emerge from just that one little line item that's less than $10 billion. We talked about the U.S.'s role as a leader on the climate front and how that's been questioned. The U.S. under Biden signed back on to the Paris climate agreement, of course, after Trump notoriously pulled out. So we're getting out. But we will start to negotiate and we will see if we can make a deal that's fair. And if we can, that's great. And if we can't, that's fine. So the U.S. commitments within that agreement, like Canada, net zero by 2050, actually more ambitious than Canada in the near term of 50 percent below 2005 levels reduction by 2030, which, of course, just eight years away. Is this bill enough to get the U.S. on track to actually achieve the international agreements within the community? So it's not enough on its own. The analysis

from Rhodium Group, which is a U.S. independent group that analyzes these things, is that it'll take the U.S. to about 31 to 44 percent reduction. So there's a lot of different variables that might come into effect. That's the new total of current policies that this has implemented. So, you know, 44% is close to 50. And there are other things that the Biden administration can do to help get there, as well as, of course, actions from cities and states and from private companies that might take the U.S. from that 44 to 50. So it's not sufficient on its own, but it's keeping hope alive. For years, the messaging on climate has been increasingly bleak.

We are seeing the effects of severe climate. Today, you look at Newfoundland, where they're experiencing one of the worst fires they have in decades. In the States, you just have to look at California to see the impact wildfires have had on displacing so many people. Drought has plunged parts of the agricultural industry in the US, Midwest in the US, and of course, here in Canadian prairies into precarious territory. What does this bill say about the hope or even just the political will that we will really have to undertake real climate action? I would say that we're entering a new chapter. We're seeing all of these effects firsthand. I think this bill gives some hope that we're not going to allow those things to just go

unchecked as it seemed like we might have really just a few months ago, that there is the ability for policymakers to do big things here in the US. And I think a lot of the assumptions about how things worked need to be questioned in this new chapter. I think it's so important to say that I do think that there is a little bit of hope that comes out of this. And I think certainly that's something that people who, as I said earlier, have been trying for decades are feeling right now that, yes, okay, we can do big things. Justin, thank you very much for this. Thank you so much for having me. It's great to be on. Thank you. Of the people I speak to, 50% of them do not know their own household income.

That's not a typo. 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. Now, the Inflation Reduction Act we just heard about has one more legislative hurdle. It has to be passed by the House of Representatives, and there's a tight Democratic majority in the House. Justin says the expectation is they will vote in favor as early as Friday.

The bill will then be signed into law by U.S. President Joe Biden. To help us understand how Canada's climate plans compare, I'm talking to Eddie Perez. Eddie is the International Climate and Diplomacy Manager at Climate Action Network Canada. Hi there, Eddie. Hi, Jason. So given your work in the Canadian climate space, how does it feel to see that number, $369 billion, and what this U.S. bill promises to do? Listen, this is good news. Good news for climate activists and people working in the United States for climate action, but it's also good news globally. Despite the poison pills that this bill includes, I think it's something that we need to congratulate. What do you mean by poison pills?

This bill is a compromise. First, it is not the initial number that was in the Build Back Better proposal. Now, the new Build Back Better framework still includes $555 billion to fight climate change, and that's record investment. And it could sharply cut... It includes provisions that will continue to allow for fossil fuel expansion in the United States. And so while this has the potential to truly transform the renewable energy markets in the United States and Canada, we also need to recognize that this compromise is also going to lead to further fights between different set of governments and the climate movement so that we can stop supporting the

expansion of fossil fuels in the United States and in North America. Well, this is being held up as a huge step towards decarbonizing the U.S. economy. I'm interested in how it stacks up against our plans here in Canada. economy. I'm interested in how it stacks up against our plans here in Canada. So big picture, if you were to put the two plans side by side, how would you compare the approaches? Here in Canada, I think it's fair to say that we're a little bit on a way forward. We have put different set of tools on the table, including legislation, but also different frameworks like the Emission Reductions Plan that can help Canada have an accountability of the different type of pledges that we've made in the last year. The government has laid out sector-by-sector targets aimed at reducing

emissions overall 40 to 45 percent below 2005 levels by 2030, and put us on a path to achieve net zero emissions by 2050. The difference I think that is really remarkable is in terms of the climate investments. So Canada's climate plan falls really short when we compare it to what the U.S. just did. when we compare it to what the US just did. If you take a look at freelance budget, that budget allocates about $21 billion in new climate-related spending commitments, out of which it's just like $1.7 billion for this fiscal year. That is actually really far away from what we're seeing from the United States. So at this moment, if you just want to compare both realities, while Canada has given itself a really robust set of legislative and fiscal tools, such as carbon pricing and so on,

what we don't have that the United States is doing is upscale climate investments, bringing it as the core of their opportunity to meet climate targets. When you talk about that investment based approach, why is that important? It is critical because climate action requires a new set of investments to decarbonize the economy. If you look at, for example, in the Canadian context, the funding that is required to retrofit the entire stock of buildings in Canada, we actually need about $580 billion over the next 15 years. The decarbonization of the economy requires a transformation of the way in which we look at public investments. And I think that is something that the U.S. Congress has actually emphasized with this climate deal.

Eddie, break this down for us then. If, as you say, the public investment side of the proposals here, this bill, are important to that extent, why haven't we seen that similar approach being put forward by the Canadian federal government? I'll say two things. The first one is we have a different approach. That approach includes carbon pricing. It includes different regulatory frameworks. But we still have a very timid approach when it comes to climate investments. If you look at the Minister of Freelance budget,

the proposal for Canada to scale up massively investments came as the form of public partnership growth fund, which is something that up until today, we don't know specifically what it's intended to do. rely a lot on this perception that the government needs to adopt a public-private partnership idea if we're to scale up the level of investments required to really decarbonize the different sectors of the Canadian economy. And I think something that the United States did here, in my view, is that not only did they want to say climate investments are public investments, and they require a set of teeth and accountability policies. seeing governments every year providing incentive to the fossil fuel industry. We talk in Canada a lot about how much subsidies are being provided to industry every year. Things like ending fossil fuel subsidies, that was not announced in this plan. The federal government to step back from its plan to introduce another fossil fuel subsidy, a new tax credit for carbon capture and storage. A new tax credit for carbon capture and storage.

Well, this time is the opposite. We're now seeing the U.S. Congress providing support for renewable energy generation, use and production in ways we haven't seen in Canada historically. This is largely a climate bill, but it's called an Inflation Reduction Act. What, if anything, do you think Canada can learn in the way that this bill has been framed? Something that I think the United States is doing that is interesting is linking the story of this bill with everything that is happening around the world. People are looking for opportunities to spend in things that reduce inflation, to spend in things that help us meet a different set of prices, to spend in things that would move us away from the investments on

what's actually killing our environment and our ability to meet climate goals. And the story that comes from this climate bill is that government can act to help people take that pathway. I think it's fair to say, Eddie, that we as Canadians have this belief that we're so much more progressive than the United States on so many files, including the climate file. But when you look at this strategy and what the U.S. is declaring here and you look at Canada's plans, are Americans outpacing us on the climate front right now? So my personal view of it is Canada and the United States are both laggards. They have 30 years of climate delay. Both in their climate approaches continue to invest in fossil fuel subsidies. They continue to see fossil fuels companies as allies when trying to meet climate goals. They're both catching up to a reality that is actually outpacing both of these countries.

Canada needs to still catch up to the set of climate investments that the U.S. have put on the table. But at the same time, climate action in the United States remains fragile. And, you know, there's actually something really similar from the United States and Canada's approach. And it's that both of these approaches don't actually meet what they promised in Glasgow as climate pledges. So both have put forward new things, interesting things, but they all come with a different set of witnesses. but they all come with a different set of witnesses. You know, the federal government is spending $3 billion to reduce emissions directly this year and actually put forward $9 billion on investments for green infrastructure.

That represents 2.8% of total federal spending and 0.4% of the GDP in 2022 in Canada. So that gives you maybe an image of the size of climate investments in Canada's current spending. I also wanted to ask, Eddie, when you look at this US bill, how might Canada benefit from what's in this plan? We need to be reminded that the United States and Canada's economy are so interlinked. You know, I do see many opportunities for, for example, the transportation sector, you know, out of the 2 million cars that are produced in Canada, the biggest buyer of those cars is the United States. A lot of the pieces that are required, they come from the United States of Mexico. We know that the standards when it comes to electric vehicle regulation,

that those standards are shaped by US and Canadian policymakers and experts. And this is actually going to help turbocharge, for example, the transition towards the acquirement of more electric vehicles in Canada. So it's really actually good news that in these negotiations, Senator Schumer actually understood the importance of making sure that the Canadian auto sector and transportation sector was included in these stocks. Eddie, I just have one more question for you. And it's essentially, how do you feel about this? Because you started by describing this as good news, both for the American economy and globally. You also acknowledged that the current plans, both in the US and in Canada, are laggards.

And that even though it's good news, it's not good enough from what climate scientists are telling us about the changes that we need to implement. How do you square the idea of a bill like this being good news on this front, but not necessarily good enough to where we need to be ultimately? In 2022, what we have in our minds when it comes to climate ambition, the kind of action that is needed to meet our 2030 targets, all that got tested because of the different set of challenges that we've gone through domestically and internationally, be it with the war on Ukraine and its different impacts, but also because as we try to respond to the different set of challenges, we're still using our traditional

tactics to go back to the fossil fuel industry. And this is a demonstration that we need to continue fighting for governments to use public sources to set up accountability in the promises that they make, that it is possible to deliver some kind of a step forward that then helps us build new opportunities for action. But also, how I feel is we can now look at COP27 as an opportunity to unpack what this means for what's required to increase climate action globally. Before this bill, it would be impossible for the United States to come to Egypt, where COP27 is going to take place, and ask countries like China, countries like Brazil, like India, to do more to help us limit global warming to 1.5. And now I think the United States

are doing the very minimum. So that's how I feel, at least with this announcement. We have another opportunity and a fighting chance for what comes next. Eddie, thank you very much for this. Thank you, Jason. That's it for FrontBurner today. I'm Jason D'Souza in for Jamie Poisson. Thanks for listening.