Exclusive: Report questions value of federal clean energy initiatives 

OTTAWA – An internal federal report is raising questions about the value of some recent government spending on clean energy initiatives, including hundreds of millions of dollars in research funding for the fossil fuel industry that has produced few tangible results in terms of a reduction in emissions.

The analysis, released to Postmedia News through access to information legislation, said that regulations, standards and other similar policy tools are the most cost-effective options for cracking down on industrial pollution. On the other hand, it said that a wide range of “incentive-based initiatives” was stimulating the economy and creating jobs, but was more expensive and less effective at reducing greenhouse gas emissions that contribute to global warming.

“When policy objectives were not well designed, when other players were not ready to engage, or when technology or market economics were not in place, a number of these efforts failed to create self-sustaining sectors,” said the report on the review of clean energy initiatives, dated March 25, 2011. “In other cases, when investments were made into already mature sectors, the net impacts of federal investments in some instances, were notably reduced by actions that would have occurred anyways.”

The review by senior bureaucrats examined about 20 different government measures, including popular incentive programs for home energy retrofits and renewable electricity generation as well as improved energy efficiency standards for buildings and appliances.

The report also appears to support the government’s decision to cancel the renewable energy incentive program that has helped “establish a viable wind energy sector in Canada,” suggesting that it not be continued “in its current form,” because of a relatively high cost of reducing greenhouse gas emissions.

It also said that the home energy retrofit program, which was extended for one year, has leveraged spending from other stakeholders by 10 times the amount of federal investments.

The report estimated the federal government had spent about $964 million from 2007 to 2011 on all of its energy efficiency programs, including the incentives for home retrofits.

But the most risky investments, according to the report, involved initiatives promoting “cleaner fossil fuels,” such as the $1.5 billion in subsidies for biofuels, along with an estimated $790 million spent on demonstration projects for capturing carbon dioxide emissions and burying them underground to reduce pollution from large industrial polluters such as coal plants and oilsands facilities.

It said data regarding any possible reductions in pollution from these investments was “very limited,” with the cost being “at the high end of the range” among all of the clean energy spending initiatives. But it said this “was not unexpected for research, development and demonstration programs due to their technical and commercial risk and longer time frame nature.”

Natural Resources Minister Joe Oliver, who unveiled a new list of 17 clean energy projects on Thursday that were getting about $53 million in previously announced funding through an arm’s-length federally funded agency, Sustainable Development and Technology Canada, said the government was adopting a “practical” approach that balances environment and energy concerns with fiscal prudence.

“We’re not just shovelling money,” he said. “We’re trying to be selective and practical in looking at companies that can achieve the results we hope it will.”

He added that it isn’t always possible to know in advance which research and development projects will work, but that a suite of programs will produce results that are good for the economy, the environment, science and industry.

For example, he highlighted that one new project supporting research into a solvent that could dramatically reduce water use and the environmental footprint of oilsands development as an interesting initiative.

“We have to balance what we’re trying to achieve in terms of the environment with our fiscally prudent approach to the deficit, which is to eliminate the deficit by 2014 to 2015, so that’s why in some cases, programs have an end to them,” said Oliver. “We’ve invested a lot of money, but some of them will be continuing.”

While SDTC boasts an 84 per cent success rate on the projects it supports, the Natural Resources Canada report noted that progress in developing “next generation biofuels” through a special SDTC fund “has not met expectations to date.”

The agency’s president and CEO, Vicky Sharpe, explained that taking risks was part of its job.

“Because the risk is high, SDTC needs to be involved and, not surprisingly, we have had some technologies fail,” she said. “If there had been no failures we would not have been doing our job properly (by) not taking sufficient risk.”

David Sawyer, director of climate change and energy at the International Institute for Sustainable Development, a public policy think-tank, noted that the analysis excluded important details about regulations and standards such as putting a price on emissions that would make polluters pay to change their behaviour. But he agreed that the government needed to continue supporting research for the long term.

“There’s a need for people to recognize that government is establishing the architecture to get going and that is positive,” Sawyer said.