One could be forgiven for thinking that the world has stalled out on tackling climate change, given the rapid retreat from climate policy in the U.S., as well as the relatively subdued role climate issues played in the recent federal election.
However, recent developments show that quite the opposite is true: global climate policy and the energy transition continue to march forward, making recent setbacks in the U.S. outliers within a larger, long-term shift to clean energy.
The rest of the world is moving ahead on climate—that’s a big risk for Canada’s economy if the country doesn’t keep up
Take just one example: electric vehicles (EVs) are set to make up one in every four cars sold globally this year, according to the . Last year in China—by far the world’s largest auto-market—EV sales made up . That share is expected to climb to 80 per cent by 2030. Globally, EVs are set to reach market share in just five short years, which will cut off of global demand.
That’s an important development for a country like Canada that currently depends on oil exports for a significant portion of its economic activity.
But this story isn’t limited to passenger vehicles. Many countries continue to expand their existing climate policies and these changes could have broad economic implications for Canada, especially at a time when the country is seeking to strengthen relationships with large non-U.S. export markets amidst trade uncertainty with the U.S.
For example, both China and India—the second and third largest global emitters—have recently signaled their commitment to cutting emissions. Chinese president Xi Jinping has stressed that shifting global realities will to address climate change. In fact, China is expanding its carbon market—which is already —t´Ç . This move will increase the scope of emissions covered by three billion metric tonnes, more than four times the size of Canada’s annual greenhouse gas inventory. India, for its part, is set to introduce a next year.Â
In Europe, both the U.K. and the EU are broadening the scope of their emissions trading schemes by implementing carbon tariffs on imported goods. Once these policies are in effect (and , countries exporting into Europe and the U.K. will pay a tariff unless they are already subject to carbon pricing in their home territory. Fortunately, for Canadian exporters, the country’s industrial carbon pricing system can help protect them from paying the full carbon tariff.
Climate policy in Europe more broadly continues to make progress. Early last year, the to strengthen their net zero legislation by setting a new target of reducing emissions by 90 per cent compared to 1990 levels by 2040. And though from governments has delayed the new target from coming into effect, things may speed up now that Germany, EU’s largest economy, has recently it.
If all that wasn’t enough to demonstrate a clear global trend towards a low-carbon economy, consider investment trends. Within the last few years, investors have shown . More recently, the Trump government’s moves to as well as the EU’s attempts to for companies have created . But the market for green bonds remains strong in countries like Australia, where the government is moving ahead with the release of its , an important tool to support capital flowing towards low-carbon investments. Despite this year kicking off with Trump’s inauguration, one Australian investment firm reported that they issued the month of January. Globally, while issuance numbers are down slightly from the past four years, they remain on track to surpass pre-pandemic levels.
Canada needs to make climate a policy priority if it wants to stay competitive
Policy backsliding in the U.S. has enormous implications for Canada, particularly given our close trade ties.
However, the new federal government cannot be sidetracked by the setbacks south of the border given global momentum elsewhere.
If it wants to deliver on , the new federal government needs to make climate a policy priority. The new federal government can start by strengthening industrial carbon pricing, , finalizing the Clean Electricity Investment Tax Credit, and releasing a made-in-Canada climate taxonomy.
Aligning Canada’s climate policies with those of the many countries that continue to make progress on climate will support Canada’s efforts to diversify its trade relationships, reduce internal trade barriers, and help the Canadian economy to remain competitive.
