March 01, 2016
By Ken Johnson
What if First Ministers meeting in Vancouver later this week could simultaneously: stimulate the economy, reduce Canada’s carbon footprint and create well-paying full-time jobs, using a tax tool that is already a proven success south of the border?
Here’s a suggestion for Honourable Ministers Trudeau, McKenna, and Morneau: Take a major page out of President Obama’s energy playbook and implement a five-year, 30 percent Federal Investment Tax Credit for investments in renewable energy projects.
Why a renewable energy tax credit? Because it’s elegant, understandable, simple to implement, equitable (no playing favourites), scalable — incentivising home-owner solar to major corporate low-carbon mega-projects — and most importantly, the American example has proven that it works — sending a strong market signal that helps stimulate major investment in renewables, build businesses and create jobs.
The 30 per cent Investment Tax Credit for solar and other renewable technologies and the 2.3-cent-per-kilowatt-hour Production Tax Credit for wind power in consort with state incentives have had a huge impact on U.S. wind and solar investment over the last decade. The American Wind Energy Association now credits the Production Tax Credit for spurring an increase in U.S. wind power generation of more than 300 per cent since 2008, from 16.7 to 70 gigawatts. Between 2010 and 2015, cumulative U.S. installed solar jumped from 2 to 27.5 gigawatts — a 1300 per cent increase, while U.S. solar industry employment grew by 115,000 workers to 209,000 — a 123 per cent increase.
Experts estimate U.S. solar capacity will expand at least 72 gigawatts to top 100 gigawatts by 2020, meeting energy demand for 30 million homes. Solar employment will nearly double to 420,000 jobs.
California solar employers overwhelmingly cite the federal tax credits as substantially contributing to their firms’ success. Investment in wind and solar stalled when the tax credits were due to be phased out.
In Canada, wind energy generating capacity increased an average of 23 per cent, per year since 2010 to 11.2 gigawatts, providing about 5 per cent of Canada’s electricity demand and enough to power over three million homes.
By contrast, solar installed in Canada 2010-2014 paled at only 1.71 gigawatts, less than one quarter of the 7.3 gigawatts installed in 2015 in California alone. Almost all of Canada’s solar was built in Ontario through its Green Energy Act incentives under McGuinty, which have now been curtailed. Disturbingly, in 2015 clean energy investment in Canada actually dropped 46 percent.
Investment capital is available. In 2013 Canadian corporations were sitting on an estimated $600 billion in cash (32 per cent of GDP), and $60 billion has been sidelined in the tar sands slowdown.
Can we afford the tax credit? Experts say the 5 year extension of the investment tax credits in the U.S. will result in billions in tax credits, but create hundreds of billions in renewable energy investment. Bloomberg New Energy Finance estimates wind investment will be 76 per cent higher and solar investment 43 per cent higher with the extension.
The federal government collects fewer taxes from those investing in the renewable revolution, but increases the tax base because of the substantially greater revenues from businesses building and supplying the solar and wind industry. And for every million dollars invested in renewables, an estimated 17 jobs are created in the United States, more than three times the five jobs per million in fossil fuels or nuclear. Many solar and wind workers are well-paid, a further contribution to the tax base.
To cover any potential net negative financial impact of the investment tax credits on the federal purse, increase the federal excise tax on gasoline at the pump by 10 or 20 cents while gas prices are very low and volatile. It would have minimal impact on motorists accustomed to paying much higher gas prices, but create a strong dependable stream of additional federal revenue.
Bold climate action is urgently needed. Canada’s CO2 emissions are still rising. Over the past 15 years, Canada’s North has warmed 2.8 degrees Celsius (5 degrees Fahrenheit.) In the same period the extent in January of the Arctic ice sheet has shrunk by 1,049,000 square kilometres — the size of Nova Scotia, PEI and British Columbia combined — from the 1979-2000 January average.
After decades of deliberate federal foot-dragging on climate change, it is time for bold climate action in Canada — a 30 per cent federal investment tax credit would kickstart it. The Liberals can demonstrate climate change leadership, stimulate the economy without increasing our carbon footprint and increase employment with well-paying, stable jobs. The U.S. has already demonstrated it works; it is time to implement it here.