Introduction
The federal budget can be the government’s most important environmental policy statement in any given year. This year’s federal budget was released by Finance Minister Ralph Goodale on February 23, 2005.

On paper, the 2005 budget commits $5 billion to the environment over the next five years, though it is noteworthy that nearly $2 billion of that figure constitutes money recycled from previous budget announcements. This year’s allocation compares to $5 billion over ten years committed in the 2004 budget. The bulk of the 2005 funding is narrowly focused on climate change measures, which is somewhat unfortunate because there are so many other areas of Canada’s environment that are in urgent need of attention.

Climate Change
Last year the word “Kyoto” did not appear anywhere in the federal budget. However this year Finance Canada has, apparently, rediscovered the “K” word and it appears liberally throughout the document. Alas, this time around it was Mr. Goodale’s speechwriter who misplace the “K” word. Thus the term “Kyoto” did not pass Mr. Goodale’s lips when he delivered his budget speech in the House of Commons. Perhaps next year both the Department and the speechwriter can arrange a pact to share the “K” word between themselves?

There’s a sizable investment in measures to combat climate change, albeit some of the money is recycled (e.g. $225 million for EnerGuide home retrofits) and much of it does not start flowing until the “outer” years. Targeting of the dollars is also always important in the budget, because it’s often not so much a case of “how much” is spent as it is a case of “where” the money is spent.

Some of the climate change dollars are appropriately targeted in this budget. The new $1 billion “Clean Fund” is, at least partially, a case in point. The budget envisions that the Clean Fund will be used to, inter alia, purchase domestic reductions in greenhouse gas emissions. The advantage of this program is that it is performance based, not technology based. In other words, the federal money flows only to those who achieve actual reductions in greenhouse gas emissions instead of to those who merely install new equipment that may reduce emissions. As a general rule performance based measures are the most economically efficient and, hence, the most desirable.

The budget also envisions that the Clean Fund will be available for other more dubious programs such as measures involving so-called “clean coal” and carbon sequestration, as well as the purchase of international emission reduction credits.

The wind power production incentive is quadrupled in the budget at a cost of $200 million. This makes sense since we know that wind power can be used right now, virtually anywhere across Canada, to immediately begin reducing greenhouse gas emissions associated with the generation of electricity. The enhanced wind incentive is accompanied by a modest $97 million Renewable Power Production Incentive for non-wind sources of renewable energy. This represents a clear step in the right direction.

On the other hand, the vaguely worded proposals for a Sustainable Energy Science and Technology Strategy ($200 million) and a federal/provincial Partnership Fund ($250 million) must be viewed with a great deal of caution. First, these types of mechanisms are notoriously ineffectual, because in the absence of an accompanying strong political commitment they tend to stagnate. The government has a record of using this type of open ended “strategy” or “fund” to buy time when pressed on its Kyoto commitment. It is essentially an ethereal long-term measure that offers none of the much needed assistance in the short- to-medium term. While there can be no doubt that the government needs to engage in long-term thinking and planning for the second Kyoto commitment period, at present the seriousness of the government’s long-term commitment is suspect due to its weak handling of the Large Final Emitters and vehicle fuel efficiency issues (two issues that have dramatic implications for the second commitment period). In that regard, it would likely be prudent to keep a wary eye on the government’s handling of the Sustainable Energy Science and Technology Strategy and the Partnership Fund.

Finally, rounding out the climate change funding envelope is an enhancement and broadening of the Accelerated Capital Cost Allowance for efficient and renewable energy generation, at a cost of $295 million over five years. The capital cost allowance (CCA) rate, i.e. the rate at which equipment can be written off for tax purposes, has been enhanced from 30 percent to 50 percent. And now, in addition to applying to wind turbines, solar energy systems, small hydro, etc., the enhanced CCA also applies to piping for district energy systems, pumps, equipment to produce biogas and certain other renewable energy equipment. These are modest steps in the right direction, but it must be noted that they pale in comparison to the tax incentives that government doles out annually to dirty energy sectors such as oil & gas and nuclear power. For instance, federal tax subsidies to the oil and gas sector alone total a staggering $1.4 billion per year.

Cities
The budget makes another solid $300 million investment in the Green Municipal Funds, which is widely recognized as being a well designed and well managed program. Half of the money is earmarked to assist with the cleanup of qualifying brownfields (abandoned properties that are environmentally contaminated) which typically sit idle and are a factor in the growth of urban sprawl.

Nature
As was the case with last year’s budget, there was nothing in the ‘05 budget specifically for the protection of Canada’s terrestrial wilderness areas. The federal government manages a network of 51 national wildlife areas and 92 migratory bird sanctuaries that contribute to the protection of an incredible diversity of habitat for birds and species at risk. However, this protected areas network is in a state of crisis, as acknowledged by Canada’s Auditor General. Environment Canada currently lacks the capacity to manage this protected areas network. Staff, capital and operating expenses amount to a mere $1.9 million per year for the entire country. The government has failed to make even the modest investment needed to pull-back from this crisis.

On the other hand, the government has made a modest investment of $28 million over two years to implement phase I of its Oceans Action Plan. This is a very preliminary stage that involves small steps in improved oceans management — the real test of whether the government is serious about protecting our overstressed coastal regions will be if the funding is there in subsequent budgets for the establishment of a network of Marine Protected Areas.

One final note on nature conservation involves the glaring absence of a fully implemented Ecogifts program. Right now, individuals who make donations of ecologically sensitive land are hit with a 25 percent capital gains tax, even though they personally experience no financial gain whatsoever. The capital gains tax on ecological gifts should be completely eliminated, as has been done with cultural gifts.

Parks
After a healthy investment in Canada’s popular national parks in the 2003 budget the government has provided another welcome infusion of $60 million over five years to enhance and expand the maintenance of park ecology. This is accompanied by an investment of $39 million for the non-ecological component of our national parks including, roads and buildings.

Canadian Environmental Protection Act (CEPA)
The budget provides $90 million over five years for Health Canada to conduct “risk assessments” in connection with potentially toxic substances under CEPA.

The problem with the “risk assessment” approach to assessing potentially toxic substances is that it places government policy makers in the dubious position of having to determine acceptable levels of risk, pursuant to which public exposures to unsafe substances is kept "as low as reasonably achievable" with social and economic factors being taken into account.

The preferred approach is the application of the “precautionary principle”, which states that if there are reasonable scientific grounds for believing that a substance may not be safe, it should not be introduced until we have convincing evidence that the risks are small and outweighed by the benefits. The precautionary principle puts the burden of proof on industry or government to demonstrate beyond reasonable doubt that the substance is safe, rather than requiring the public to prove that it is not.

Atlantic Salmon Endowment Fund
A one time investment of $30 million to establish an Atlantic Salmon Endowment Fund dovetails with the governments investment in a Pacific Salmon Endowment Fund in 2001. While such a narrowly focused investment in a single species is highly unorthodox, it must be borne in mind that salmon fishing is enormously popular and attracts fishermen from across the country, including from Ottawa.

Invasive Species and Great Lakes Action Plan
The budget allocates $85 million to combat invasive species and adds $40 million to the Great Lakes Action Plan, both over five years.

Polluter Subsidies
With this budget the government continues to add to the taxpayer subsidies it provides to certain industries that pollute the environment and jeopardise our health. In particular, the oil and gas sector receive a doubling of the accelerated capital cost allowance (ACCA) for pipelines and an ACCA of 15 percent for pipeline compression and pumping equipment. This subsidy comes on top of the existing annual tax subsidy of $1.4 billion that the oil and gas sector already receives from the federal government.

On an interesting note, the budget also contains at least a partial recognition that polluter subsidies, such as the above-noted oil and gas giveaway, are environmentally irresponsible. The budget states that henceforth, “new accelerated CCA will only be considered for investments in green technology.”

Conclusion
This federal budget is an example of how the government relies too heavily on spending alone to try to solve Canada’s environmental problems. Canada places an inordinate reliance on subsidies and voluntary measures to try to protect the environment — more than any other developed country according to the OECD. There is an unwillingness on the part of the government to make polluters pay (through the use of economic disincentives) for spoiling our air and water, and a reluctance to regulate in order to meet Canada’s environmental objectives.