Alex Wood's presentation to the All Party Caucus on Climate Change

1. Towards a greener
Canadian economy
Alexander Wood
Senior Director, Policy and Markets
awood@sustainableprosperity.ca
613.878.7189
Twitter: ALEXatSP

2. The challenge – and necessity – of defining a
green economy
Master 2
• Definitions of “green economy” abound (UNEP, OECD, WB), even in Canada
(CWF, GLOBE, ECO)
• But – in SP’s estimation – they do not capture full nature of what a green
economy should be in the Canadian context
• Canada’s economy is diverse, composed of significant resource (primary),
manufacturing (secondary), and services (tertiary) sectors. Each of these
needs to be taken into account to make our economy “green”
• Just as important as scope is question of static vs. dynamic definition: is it
better to talk of “green”…or “greening”?
• Reflecting all of that is need for metrics/indicators that are based on clear
understanding of what constitutes ecological limits (both of consumption and
sink functions)
Making markets work for the environment 2

3. The economic case for a green economy
Master 2
• Traditional economic growth theory focuses on interaction of
various forms of capital (human, financial, built) but has
typically omitted integration of natural capital
• If it has dealt with it at all, it has been as a constraint to growth
• Emerging paradigm around green economy/green growth and
the overlapping economic and environmental benefits of
efficiency and productivity
• That paradigm emerges from an increased understanding of
gap that exists between theoretical economic models (which
assume perfect efficiency) and real markets (which are
anything but)
Making markets work for the environment 3

4. Canada and the green economy
Master 2
 Why should Canada “green” its economy?
 Environmental argument is clear (clean water, clean air, stable climate, etc.)
 Economic arguments are getting clearer...
 Line of logic goes:
 We derive wealth from natural capital
 Using natural capital more efficiently makes it more valuable (productivity
logic)
 Developing efficiency/productivity solutions to sell to others (innovation
logic)
Making markets work for the environment 3

5. Natural Capital
• Master 2
Canada has the richest allocation of
natural capital in the world ($89,000
per capita: StatsCan)
• The sustainable, effective, and
efficient use of that natural capital is billions of dollars
what will make us a “green
1,400
economy” Energy
1,200 Timber
Minerals
• As a country, we’ve always derived
substantial social and economic 1,000
benefits from that form of capital
800
• Key issue then become how to 600
ensure enduring benefits from our
natural capital (especially non- 400
renewable kind) and protection of
the basic services it provides 200
0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Making markets work for the environment 5

6. Greening the economy and the Resource
Master 2
Revolution opportunity
“In an era of persistently elevated resource prices, enhancing
operating efficiency, improving resource management and
developing products with a more sustainable environmental
footprint make commercial and social sense. Moreover, advances
in building-energy efficiency, enhanced farm yields and power
plant efficiency would pay immediate domestic dividends.
However, once again, the real prize may be in emerging markets,
which contain an estimated 85 per cent of the resource
productivity opportunities in the world”
Mark Carney, Governor of the Bank of Canada
Waterloo, April 2, 2012.
Making markets work for the environment 3

7. Greening the economy and the Resource
Master 2
Revolution opportunity
Starting this year, $900 billion needed p.a. to realize productivity
opportunities that match supply to demand
That is the size of the potential market for Canadian innovation in
resource productivity
Moreover, increased resource productivity saves us costs of
expanding supply (Total savings from such investments estimated
at $2.3 trillion p.a.)
Source: McKinsey Global Institute, Resource Revolution: Meeting the world’s energy, materials,
food, and water needs, November, 2011.
Making markets work for the environment 3

8. The carbon productivity opportunity
Carbon productivity
needs to rise three times
as fast as labor
productivity did during
the Industrial Revolution

9. The water productivity opportunity
Exhibit I
Aggregated global gap between existing accessible, reliable
supply1 and 2030 water withdrawals, assuming no efficiency gains
Billion m3, 154 basins/regions
6,900
2% 900
CAGR -40%
2,800
1,500
Municipal & 4,500 4,200
Domestic 100
600 700 Groundwater
Industry 800
Relevant supply quantity is
much lower that the
4,500 absolute renewable water
availability in nature 3,500 Surface water
Agriculture 3,100
Existing 2030 Basins with Basins with Existing
withdrawals2 withdrawals3 deficits surplus accessible,
reliable,
sustainable
supply1
1 Existing supply which can be provided at 90% reliability, based on historical hydrology and infrastructure investments scheduled through 2010; net of
environmental requirements
2 Based on 2010 agricultural production analyses from IFPRI
3 Based on GDP, population projections and agricultural production projections from IFPRI; considers no water productivity gains between 2005-2030
SOURCE: Water 2030 Global Water Supply and Demand model; agricultural production based on IFPRI IMPACT-WATER base case

10. Conclusions
• Progress….but still a fair ways to go
• Resource productivity, as a vehicle for
greening the economy, represents a massive
opportunity
• Priorities
 Improving natural capital productivity
 Identifying ecological limits (metrics)
 Improving competitiveness and innovation
 Increasing climate change resilience