How do we get to a net-zero economy? It starts with a better understanding of the regulatory environment that can give your business a boost in achieving your environmental goals.
Cost of Doing Business with Canada’s Carbon Tax
In late 2020, the Canadian government announced that starting in 2022 the carbon tax will increase $15 per year from its current $30 per tonne of greenhouse gas (GHG) emissions to $170 per tonne in 2030 – an increase of 566% over 10 years.1 The federal carbon tax only applies in provinces and territories that do not have their own carbon-pricing scheme in place. The result is a universal price signal to reduce emissions, although uneven across Canada.
The impact of this increase will be felt one way or another on businesses and consumers alike.
Most economists agree that a carbon price is the most economically efficient way to reduce emissions on an economy wide basis. But it does impose additional costs on small and medium sized businesses by making fossil fuels more expensive. To reduce the impact of this additional cost, companies need to look at ways of reducing fossil fuel usage and therefore their carbon footprint.
So, what does this all mean for businesses big and small?
For starters, transportation businesses in which fuel is one of their largest capital expenses will see their expenditures significantly increase. The current price on carbon roughly equates to an extra 2.3 cents per litre of gasoline, which is set to rise to an extra 12 cents per litre by 2022. After that, we can expect an increase of approximately 27.6 cents per litre, and eventually 39.6 cents per litre by 2030.2
One important investment that was lost in Ottawa’s carbon tax announcement was plans to extend funding for electric vehicle rebates while also increasing spending to develop Canada’s charging infrastructure. Via the iZEV purchase incentive program, the government has committed a further $287 million until the end of 2022, and has earmarked $150 million to upgrade the country’s charging infrastructure.3
For Canadian SMEs making investments aimed at sustainability, the federal government has a number of rebate programs to help them offset costs.
One of them is the Climate Action Incentive Fund that provides financial support for retrofit projects in sectors such as building, transportation, waste, agriculture and others. It’s currently available in Saskatchewan, Manitoba, Ontario and New Brunswick. SMEs can claim up to 25 per cent of eligible costs amounting to not less than $20,000 and no more than $250,000 per project and per recipient.
While there are no direct rebates for large companies, the government has introduced an output-based pricing system (OBPS) for industrial emitters located in a province or territory where the carbon tax is in effect. Under OBPS, organizations pay a carbon price if their emissions exceed a certain level. For those that make their operations more sustainable and pollute less, they can earn credits and sell them.4
Large companies are aggressively pursuing ambitious sustainability goals, under pressure from their investors, customers and even employees. And they’re increasingly looking at their own supply chain and the sustainability practices of their suppliers. SMEs and MMEs who supply to larger companies can expect to see additional scrutiny on their sustainability practices and an increasing preference to do business with suppliers who have integrated sustainability considerations into their business.
Renewable Energy Opportunities
The low-carbon economy presents significant economic opportunities, particularly for organizations in Canada’s natural resource sector. Sustainability think tank the Pembina Institute released a blueprint report in June 2020 that projects Alberta businesses could foster major investment in sustainable and renewable energy projects that could generate more than 67,000 jobs, or 76% of the current fossil workforce, by 2030.5 This includes:
- 31,300 jobs in renewable electricity
- 14,500 jobs in transit and EV infrastructure
- 14,500 jobs in energy efficiency
- 6,900 jobs in oil and gas
While the shift to clean and renewable energy is well underway, it’s going to take time and won’t happen overnight. That’s why it’s critically important for organizations to capitalize on this transition period to establish strategies that support their business objectives while reducing their carbon footprint on the path towards a low-carbon economy.
Inaction is Not an Option
According to a report from the federal government, Canada is warming at a rate twice as fast as the global average6, so it’s imperative that Canadian companies do what they can to embrace sustainability and make themselves resilient in the low-carbon economy.
HSBC is not only committed to becoming a net zero bank, but also supporting our clients on this important journey with our suite of sustainable finance propositions and sustainability expertise.
We’re also proud to support organizations such as Climate Smart7 to help businesses understand their current climate impact and explore ways reduce their carbon footprint and cut costs.
Contact us to find out more about how we can work together.
7 HSBC Bank Canada supported Climate Smart in the expansion of its training offering across Canada through community investment.