Now that it has been a month since the federal election, we can all reflect on what was resolved last month. Seeing as there were six parties that ran national campaigns and five that got seats in the legislature, the 2021 election was one of the most convoluted and inconclusive in Canadian history. As mentioned previously, presumptively ‘inconclusive’ outcomes are likely to persist. One thing that I believe is important is that there is an emerging (albeit grudging) consensus that fighting climate change is a top priority.
While I believe the world in general and Canada in particular are both playing catch up on this file, I still find it gratifying that the belated recognition of urgency is at least being taken seriously. What I find interesting is the disconnect between the necessary transition to a low carbon economy and the involuntary (due mostly to demographics) transition to a low growth economy. Even now, most discussions about stagflation deal primarily with the inflation side, while leaving much of the prognosis for stagnant (non) growth unaddressed.
The simple reality that no politician wanted to address head on is that the economic growth we became accustomed to in previous generations may well never return. That’s a stark reality that few voters or economists are prepared to truly internalize. The challenge is to simultaneously lower our carbon footprint while re-calibrating our growth expectations to something much lower than we’ve seen in the past.
The net-zero banking alliance is at the forefront of this challenge. Its web page opens with a paragraph stating that:
The industry-led, UN-convened Net-Zero Banking Alliance brings together banks worldwide representing over a third of global banking assets, which are committed to aligning their lending and investment portfolios with net-zero emissions by 2050. Combining near-term action with accountability, this ambitious commitment sees signatory banks setting an intermediate target for 2030 or sooner, using robust, science-based guidelines.
Noble words. The problem is that for much the west’s recent history, growth has been stalling – even with cheap, dirty energy as a primary economic driver. Now, just when the move to clean energy is belatedly ramping up, already slow growth will slow down even further as a direct result of the necessary transition. The Build Back Better initiatives in Canada and the U.S. are designed to provide some fiscal stimulus to pick up the slack, but they can only do so much. The intentions are good and I very much hope they work. The problem, I fear, is that the initiative will prove to be an example of “too little; too late”. We may run out of fiscal runway before we complete the transition. Mother Nature can be a cruel mistress. The old Fram auto filter commercials used the tag line of “you can pay me now… or pay me later” – with the “later” option always being far more costly. That, sadly, is where our challenge sits today.