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Economy

Meeting Ottawa’s new housing target will require more than $300 billion in additional financing every year until 2030

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From the Fraser Institute

By Steven Globerman

Canada Needs to Save Much More to Finance an Ambitious Investment Agenda

To meet Ottawa’s ambitious new housing construction targets in order to restore affordability, the country needs more than $300 billion in additional financing every year from 2025 to 2030, finds a new report published today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“To increase home building and restore business investment in key areas like technology to previous levels, Canada needs to become much more attractive to investors, both from within Canada and around the world,” said Steven Globerman, Fraser Institute senior fellow and author of Canada Needs to Save Much More to Finance an Ambitious Investment Agenda.

To restore housing affordability, the Canadian Mortgage and Housing Corporation (CMHC), a Crown Corporation of the federal government, has estimated that about 3.5 million additional housing units need to be built by 2030 given expected construction rates.

The study finds that for the federal government to meet this housing construction goal, an estimated $331 to $364 billion in additional financing is needed annually from 2025-2030.

If business investment in key areas such as communications and IT are to return to previous levels, another roughly $13 billion is needed annually.

In total, this means Canada needs an additional $343 to $377 billion in financing annually over the next five years. To put this into perspective, this is equivalent to increasing the current Canadian savings rate by 50 per cent.

One option to mitigate the need for a drastic increase in the domestic savings rate is to attract more foreign investment, but that will require substantial policy reforms to make Canada a more attractive environment for foreign investors.

“It is very likely that the ambitious targets that have been set for homebuilding and business investment won’t be met, but even so, encouraging increased investment and higher domestic savings is a worthy policy pursuit,” Globerman said.

  • Both the Canadian government and policymakers from various organizations including the Bank of Canada have called for ambitious programs to increase capital investment in Canada, particularly investment focused on residential housing and productivity-enhancing business assets.
  • The ambitious domestic investment agenda will require a substantial increase in domestic savings in order to finance the necessary increased capital expenditure. The requisite increase has been largely ignored, to date, in policy proposals and surrounding discussion of those proposals.
  • The financial capital required to fund major investments in residential housing and even modest increases in business investment will require an increase in the domestic savings rate of as much as 50 percent. Alternatively, much larger inflows of long-term foreign capital investments into Canada beyond what has been realized over the past few decades will be required.
  • Such large increases in the domestic savings rate and in foreign capital inflows would require unrealistic and unsustainably high real interest rates. The implication is that the federal government’s investment goals, especially with regard to increasing the supply of residential housing, are unrealizable over the foreseeable future. Nevertheless, implementing policies to encourage increased domestic savings and channeling those savings into high priority investment activities should be a public policy imperative.

Read The Full Report

Steven Globerman

Senior Fellow and Addington Chair in Measurement, Fraser Institute

Bjorn Lomborg

Net zero’s cost-benefit ratio is crazy high

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From the Fraser Institute

By Bjørn Lomborg

The best academic estimates show that over the century, policies to achieve net zero would cost every person on Earth the equivalent of more than CAD $4,000 every year. Of course, most people in poor countries cannot afford anywhere near this. If the cost falls solely on the rich world, the price-tag adds up to almost $30,000 (CAD) per person, per year, over the century.

Canada has made a legal commitment to achieve “net zero” carbon emissions by 2050. Back in 2015, then-Prime Minister Trudeau promised that climate action will “create jobs and economic growth” and the federal government insists it will create a “strong economy.” The truth is that the net zero policy generates vast costs and very little benefit—and Canada would be better off changing direction.

Achieving net zero carbon emissions is far more daunting than politicians have ever admitted. Canada is nowhere near on track. Annual Canadian CO₂ emissions have increased 20 per cent since 1990. In the time that Trudeau was prime minister, fossil fuel energy supply actually increased over 11 per cent. Similarly, the share of fossil fuels in Canada’s total energy supply (not just electricity) increased from 75 per cent in 2015 to 77 per cent in 2023.

Over the same period, the switch from coal to gas, and a tiny 0.4 percentage point increase in the energy from solar and wind, has reduced annual CO₂ emissions by less than three per cent. On that trend, getting to zero won’t take 25 years as the Liberal government promised, but more than 160 years. One study shows that the government’s current plan which won’t even reach net-zero will cost Canada a quarter of a million jobs, seven per cent lower GDP and wages on average $8,000 lower.

Globally, achieving net-zero will be even harder. Remember, Canada makes up about 1.5 per cent of global CO₂ emissions, and while Canada is already rich with plenty of energy, the world’s poor want much more energy.

In order to achieve global net-zero by 2050, by 2030 we would already need to achieve the equivalent of removing the combined emissions of China and the United States — every year. This is in the realm of science fiction.

The painful Covid lockdowns of 2020 only reduced global emissions by about six per cent. To achieve net zero, the UN points out that we would need to have doubled those reductions in 2021, tripled them in 2022, quadrupled them in 2023, and so on. This year they would need to be sextupled, and by 2030 increased 11-fold. So far, the world hasn’t even managed to start reducing global carbon emissions, which last year hit a new record.

Data from both the International Energy Agency and the US Energy Information Administration give added cause for skepticism. Both organizations foresee the world getting more energy from renewables: an increase from today’s 16 per cent to between one-quarter to one-third of all primary energy by 2050. But that is far from a transition. On an optimistically linear trend, this means we’re a century or two away from achieving 100 percent renewables.

Politicians like to blithely suggest the shift away from fossil fuels isn’t unprecedented, because in the past we transitioned from wood to coal, from coal to oil, and from oil to gas. The truth is, humanity hasn’t made a real energy transition even once. Coal didn’t replace wood but mostly added to global energy, just like oil and gas have added further additional energy. As in the past, solar and wind are now mostly adding to our global energy output, rather than replacing fossil fuels.

Indeed, it’s worth remembering that even after two centuries, humanity’s transition away from wood is not over. More than two billion mostly poor people still depend on wood for cooking and heating, and it still provides about 5 per cent of global energy.

Like Canada, the world remains fossil fuel-based, as it delivers more than four-fifths of energy. Over the last half century, our dependence has declined only slightly from 87 per cent to 82 per cent, but in absolute terms we have increased our fossil fuel use by more than 150 per cent. On the trajectory since 1971, we will reach zero fossil fuel use some nine centuries from now, and even the fastest period of recent decline from 2014 would see us taking over three centuries.

Global warming will create more problems than benefits, so achieving net-zero would see real benefits. Over the century, the average person would experience benefits worth $700 (CAD) each year.

But net zero policies will be much more expensive. The best academic estimates show that over the century, policies to achieve net zero would cost every person on Earth the equivalent of more than CAD $4,000 every year. Of course, most people in poor countries cannot afford anywhere near this. If the cost falls solely on the rich world, the price-tag adds up to almost $30,000 (CAD) per person, per year, over the century.

Every year over the 21st century, costs would vastly outweigh benefits, and global costs would exceed benefits by over CAD 32 trillion each year.

We would see much higher transport costs, higher electricity costs, higher heating and cooling costs and — as businesses would also have to pay for all this — drastic increases in the price of food and all other necessities. Just one example: net-zero targets would likely increase gas costs some two-to-four times even by 2030, costing consumers up to $US52.6 trillion. All that makes it a policy that just doesn’t make sense—for Canada and for the world.

Bjørn Lomborg

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2025 Federal Election

POLL: Canadians want spending cuts

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By Gage Haubrich

The Canadian Taxpayers Federation released Leger polling showing Canadians want the federal government to cut spending and shrink the size and cost of the bureaucracy.

“The poll shows most Canadians want the federal government to cut spending,” said Gage Haubrich, CTF Prairie Director. “Canadians know they pay too much tax because the government wastes too much money.”

Between 2019 and 2024, federal government spending increased 26 per cent even after accounting for inflation. Leger asked Canadians what they think should happen to federal government spending in the next five years. Results of the poll show:

  • 43 per cent say reduce spending
  • 20 per cent say increase spending
  • 16 per cent say maintain spending
  • 20 per cent don’t know

The federal government added 108,000 bureaucrats and increased the cost of the bureaucracy 73 per cent since 2016. Leger asked Canadians what they think should happen to the size and cost of the federal bureaucracy. Results of the poll show:

  • 53 per cent say reduce
  • 24 per cent say maintain
  • 4 per cent say increase
  • 19 per cent don’t know

Liberal Leader Mark Carney promised to “balance the operating budget in three years.” Leger asked Canadians if they believed Carney’s promise to balance the budget. Results of the poll show:

  • 58 per cent are skeptical
  • 32 per cent are confident
  • 10 per cent don’t know

“Any politician that wants to fix the budget and cut taxes will need to shrink the size and cost of Ottawa’s bloated bureaucracy,” Haubrich said. “The polls show Canadians want to put the federal government on a diet and they won’t trust promises about balancing the budget unless politicians present credible plans.”

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