Fraser Institute
Canada can solve its productivity ‘emergency’—we just need politicians on board
From the Fraser Institute
By Jake Fuss
Policymakers are slowly acknowledging the problem, but their proposed solutions are troubling.
According to Carolyn Rogers, senior deputy governor of the Bank of Canada, it’s time to “break the glass” and respond to Canada’s productivity “emergency.” Unfortunately, the country is unlikely to solve this issue any time soon as politicians are doubling down on the policy status quo rather than making sorely needed reforms.
Worker productivity—the level of output in the economy per hour worked—is a crucial indicator of a country’s underlying economic performance. When productivity increases, we not only increase our output and efficiency, but worker wages typically rise as well.
According to Statistics Canada, the country’s productivity dropped for six consecutive quarters before eking out a small gain in the final quarter of 2023. Rogers is right, this is an emergency, and it’s unsurprising that living standards for Canadians are falling alongside our productivity. Since the second quarter of 2022 (when it peaked post-COVID), inflation-adjusted per-person GDP (a common indicator of living standards) declined from $60,178 to $58,111 by the end of 2023—and declined during five of those six quarters, now sitting below where it was at the end of 2014.
Policymakers are slowly acknowledging the problem, but their proposed solutions are troubling. Federal Finance Minister Chrystia Freeland, for instance, recently emphasized the importance of making “investments in productivity and growth.” Yet, the federal government increased taxes on capital gains in its recent budget, which will disincentivize investment in Canada. Usually, when a politician says the word “investment” this is a fancy way of saying we need more government spending.
And in fact, more government spending appears to be the popular solution to every problem for most governments in Canada these days. Canadian premiers and the prime minister already support this approach in health care even though it’s been tried for decades. The result? In 2023, the longest wait times for health care on record despite having the most expensive system (as a share of GDP) among high-income universal health-care countries.
And now, these same policymakers are advocating for the same approach to boost productivity—that is, throw taxpayer money at the problem and hope it will somehow go away.
But there’s hope—governments have other options. For starters, governments from coast to coast could eliminate interprovincial trade barriers, which limit productivity improvements by (among other things) shielding inefficient local businesses from competition from businesses in other provinces. Governments also effectively prohibit the entry of foreign-owned competitors in crucial industries such as telecommunications and air travel. There’s less incentive for Canadian firms to innovate or improve when there’s no threat to shake things up.
Moreover, if governments reduced regulatory red tape and subsequent compliance costs, firms could allocate more resources towards training their workers, investing in equipment, and producing new and better products. And if governments reduced tax rates on families and businesses, they could make Canada more attractive to productive businesses, high-skilled workers and investors. Our current relatively high tax rates on capital gains, personal income and businesses income discourage capital investment and scare away the best and brightest scientists, engineers, doctors and entrepreneurs.
The Trudeau government, and other governments in Canada, seemingly want to spend their way out of our productivity emergency. While some level of government spending can help improve productivity, continued spending increases reallocate resources from the private sector to the government sector, which is by nature less productive. Governments should impose credible restraints (i.e. fiscal rules) on the growth of government spending to prevent this crowding out of private-sector investment.
There are plenty of ways Canada can boost productivity. We just need policymakers to be on board.
Author:
Energy
Global fossil fuel use rising despite UN proclamations
From the Fraser Institute
By Julio Mejía and Elmira Aliakbari
Major energy transitions are slow and take centuries, not decades… the first global energy transition—from traditional biomass fuels (including wood and charcoal) to fossil fuels—started more than two centuries ago and remains incomplete. Nearly three billion people in the developing world still depend on charcoal, straw and dried dung for cooking and heating, accounting for about 7 per cent of the world’s energy supply (as of 2020).
At the Conference of the Parties (COP29) in Azerbaijan, António Guterres, the United Nations Secretary-General, last week called for a global net-zero carbon footprint by 2050, which requires a “fossil fuel phase-out” and “deep decarbonization across the entire value chain.”
Yet despite the trillions of dollars already spent globally pursuing this target—and the additional trillions projected as necessary to “end the era of fossil fuels”—the world’s dependence on fossil fuels has remained largely unchanged.
So, how realistic is a “net-zero” emissions world—which means either eliminating fossil fuel generation or offsetting carbon emissions with activities such as planting trees—by 2050?
The journey began in 1995 when the UN hosted the first COP conference in Berlin, launching a global effort to drive energy transition and decarbonization. That year, global investment in renewable energy reached US$7 billion, according to some estimates. Since then, an extraordinary amount of money and resources have been allocated to the transition away from fossil fuels.
According to the International Energy Agency, between 2015 and 2023 alone, governments and industry worldwide spent US$12.3 trillion (inflation-adjusted) on clean energy. For context, that’s over six times the value of the entire Canadian economy in 2023.
Despite this spending, between 1995 and 2023, global fossil fuel consumption increased by 62 per cent, with oil consumption rising by 38 per cent, coal by 66 per cent and natural gas by 90 per cent.
And during that same 28-year period, despite the trillions spent on energy alternatives, the share of global energy provided by fossil fuels declined by only four percentage points, from 85.6 per cent to 81.5 per cent.
This should come as no surprise. Major energy transitions are slow and take centuries, not decades. According to a recent study by renowned scholar Vaclav Smil, the first global energy transition—from traditional biomass fuels (including wood and charcoal) to fossil fuels—started more than two centuries ago and remains incomplete. Nearly three billion people in the developing world still depend on charcoal, straw and dried dung for cooking and heating, accounting for about 7 per cent of the world’s energy supply (as of 2020).
Moreover, coal only surpassed wood as the main energy source worldwide around 1900. It took more than 150 years from oil’s first commercial extraction for oil to reach 25 per cent of all fossil fuels consumed worldwide. Natural gas didn’t reach this threshold until the end of the 20th century, after 130 years of industry development.
Now, consider the current push by governments to force an energy transition via regulation and spending. In Canada, the Trudeau government has set a target to fully decarbonize electricity generation by 2035 so all electricity is derived from renewable power sources such as wind and solar. But merely replacing Canada’s existing fossil fuel-based electricity with clean energy sources within the next decade would require building the equivalent of 23 major hydro projects (like British Columbia’s Site C) or 2.3 large-scale nuclear power plants (like Ontario’s Bruce Power). The planning and construction of significant electricity generation infrastructure in Canada is a complex and time-consuming process, often plagued by delays, regulatory hurdles and substantial cost overruns.
The Site C project took around 43 years from initial feasibility studies in 1971 to securing environmental certification in 2014. Construction began on the Peace River in northern B.C. in 2015, with completion expected in 2025 at a cost of at least $16 billion. Similarly, Ontario’s Bruce Power plant took nearly two decades to complete, with billions in cost overruns. Given these immense practical, financial and regulatory challenges, achieving the government’s 2035 target is highly improbable.
As politicians gather at high-profile conferences and set ambitious targets for a swift energy transition, global reliance on fossil fuels has continued to increase. As things stand, achieving net-zero by 2050 appears neither realistic nor feasible.
Authors:
Business
UN climate conference—it’s all about money
From the Fraser Institute
This year’s COP wants to fast-track the world’s transition to “clean” energy, help vulnerable communities adapt to climate change, work on “mobilizing inclusivity” (whatever that means) and “delivering on climate finance,” which is shorthand for having wealthier developed countries such as Canada transfer massive amounts of wealth to developing countries.
Every year, the United Nations convenes a Conferences of Parties to set the world’s agenda to reduce greenhouse gas (GHG) emissions. It’s the biggest event of the year for the climate industry. This year’s conference (COP29), which ends on Sunday, drew an army of government officials, NGOs, celebrities and journalists (many flying on GHG-emitting jet aircraft) to Baku, Azerbaijan.
The COP follows a similar narrative every year. It opens with a set of ambitious goals for climate policies, followed by days of negotiating as countries jockey to carve out agreements that most favour their goals. In the last two days, they invariably reach a sticking point when it appears the countries might fail to reach agreement. But they burn some midnight oil, some charismatic actors intervene (in the past, this included people such as Al Gore), and with great drama, an agreement is struck in time for the most important event of the year, flying off to their protracted winter holidays.
This year’s COP wants to fast-track the world’s transition to “clean” energy, help vulnerable communities adapt to climate change, work on “mobilizing inclusivity” (whatever that means) and “delivering on climate finance,” which is shorthand for having wealthier developed countries such as Canada transfer massive amounts of wealth to developing countries.
Some of these agenda items are actually improvements over previous COPs. For example, they’re actually talking about “climate adaptation”—the unwanted stepchild of climate policies—more this year. But as usual, money remains a number one priority. As reported in the Associated Press, “negotiators are working on a new amount of cash for developing nations to transition to clean energy, adapt to climate change and deal with weather disasters. It’ll replace the current goal of $100 billion (USD) annually—a goal set in 2009.” Moreover, “experts” claim the world needs between $1 trillion and $1.3 trillion (yes, trillion) in “climate finance” annually. Not to be outdone, according to an article in the Euro News, other experts want $9 trillion per year by 2030. Clearly, the global edifice that is climate change activism is all about the money.
Reportedly, COP29 is in its final section of the meta-narrative, with much shouting over getting to a final agreement. One headline in Voice of America reads “Slow progress on climate finance fuels anger as COP29 winds down.” And Argus News says “climate finance talks to halt, parties fail to cut options.” We only await the flying in of this year’s crop of climate megafauna to seal the deal.
This year’s conference in Baku shows more clearly than ever before that the real goal of the global climate cognoscenti is a giant wealth transfer from developed to developing countries. Previous climate conferences, whatever their faults, focused more on setting emission reduction targets and timelines and less about how the UN can extract more money from developed countries. The final conflict of COP29 isn’t about advancing clean energy targets or helping vulnerable countries adapt to climate change technologically, it’s all about show me the money.
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