There is a saying in politics that goes something like: Never let a crisis go to waste.
For all the turmoil it brought to advanced economies, the recent financial crisis and deep recession that followed provide an opportunity for many countries to implement reforms aimed at strengthening the resilience of their financial system and boost national competitiveness. Canadian policy makers have shown leadership in demonstrating that financial stability and competitiveness can be mutually reinforcing.
Building on its successful track record, Canada could broaden its framework of sustainable financial competitiveness to a number of other sectors, including the oil and gas industry. With the important Keystone XL pipeline project in play and the Obama administration's reaffirmed desire to fight global warming, Canada needs to show its goodwill and determination to reduce greenhouse gas (GHG) emissions and the overall carbon footprint of its economy.
The long-standing belief on Wall Street and Bay Street was that less regulation and oversight was the way to go to encourage economic growth. That seems to be slowly changing and so-called "smart regulations" are one way to go about it, since their design seeks to foster innovation in emissions-reducing technologies and low carbon sectors. There is no doubt about it: Innovation is the key to a competitive economy in the global marketplace, and if the current trend continues, economies that are both competitive and sustainable will see their competitiveness thrive even more in the coming years.
In fact, the World Economic Forum's most recent report on competitiveness focuses on empirically establishing this positive relationship between sustainability and competitiveness.
Sustainable competitiveness at the World Economic Forum
The World Economic Forum's Global Competitiveness Report (and Global Competitiveness Index, or GCI) is a widely read and respected source of data and analysis on the national competitiveness of 144 countries. Canada's performance over the past few years has been lacklustre: it still ranks very high on the index, but has moved down from 10th to 14th between 2008 and 2012.
The Forum has also been working for more than two years on a sustainable competitiveness ranking (see report from p.49 and web page ). Defined as "the set of institutions, policies and factors that make a nation remain productive over the long term while ensuring social and environmental sustainability," sustainable competitiveness takes into account the impact of economic growth and productivity on the social and environmental spheres of society. By adding indicators to capture social and environmental considerations, the sustainability-adjusted Global Competitiveness Index (SAGCI) seeks to consider competitiveness from a longer-term perspective.
It is interesting to see that countries at the top of the GCI are also at the top of the SAGCI. Scandinavian countries score strongest on the environmental sustainability pillar. Canada scores better on social than environmental sustainability (25th), as is the general trend among advanced economies.
Time to recognize good initiatives, and go beyond them
There is a growing tendency on the part of Canadian and U.S. politicians and policy makers to develop and promote environmentally focused initiatives. Quebec adopted regulations setting up its cap and trade market with the goal of reducing greenhouse gas emissions by 25 per cent by 2020. California's governor recently approved a proposal to link with Quebec's carbon market , making them the only two jurisdictions in North America to participate (Ontario seems to be working on eventually joining). Meanwhile in British Columbia, the province's 2008 carbon tax is undergoing a review to determine its impact on residents and provincial competitiveness.
Alberta is catching up to this trend, too. Travelling often to Washington D.C., Premier Alison Redford has been pushing for the Keystone XL pipeline project to go ahead and working to demonstrate that her province is developing its resources responsibly. More important, the Alberta Premier has also been publicizing her province's proposed 40-40 plan to raise the carbon tax for heavy emitters to $40 a tonne from $15 (paid into a provincially managed technology fund) and compel oil sands emissions reductions of 40 per cent per barrel, as well as its $1.3-billion investment in carbon capture and storage projects.
Brad Wall, Saskatchewan's Premier, made a trip to Washington last month to talk about sustainable energy development and promote a $1.4-billion public investment in clean coal. Federal Natural Resources Minister Joe Oliver also went south of the border to promote Canada's environmental priorities and greenhouse gas emissions goals (to reduce emissions by 17 per cent by 2020 from 2005 levels). Mr. Oliver argued that responsible natural resource exploitation and environmental protection can go hand in hand, a point of view that is sure to strike a chord with the Obama administration.
All of these initiatives, projects and policies seem to reflect a broader understanding that it makes economic sense to factor in the link between competitiveness and sustainability, and the importance of securing social acceptability for major projects. As such, there is a real opportunity for governments to promote innovation and leadership of their various industries thanks to smart regulation, and in so doing boost potential economic growth.
Clement Gignac is senior vice-president and chief economist at Industrial Alliance Inc., and chair of the World Economic Forum Council on Competitiveness and member of the Forum's Sustainable Competitiveness Advisory Board.