Green the Budget - December 11, 2001

OTTAWA - The federal government — facing a crucial decision next year on ratifying an international treaty on climate change -- is going to spend new money on the development of wind power and other energy efficiency projects. Paul Martin, Minister of Finance, said wind power is a key renewable energy source in reducing greenhouse gases, which are blamed for the gradual warming of the planet. He announced a 10-year, $260-million program to provide financial incentives for the production of electricity from wind-powered projects. The details, including the eligibility requirements, will be announced later, Mr. Martin said. The program calls for an incentive of 1.2¢ per kilowatt-hour of electricity produced from eligible projects.

The incentive declines over time to 0.8¢ per kilowatt hour. It will help provide a long-term base of revenue and attract private sector investment, government officials said. The provinces are also invited to contribute to the development of wind power projects. Canada is expected to ratify the Kyoto Protocol on reducing greenhouse gas emissions by mid-year 2002. The Kyoto agreement is aimed at reversing the gradual warming of the Earth's climate by cutting the use of fossil fuels. As well, the budget provides for additional funding for other Kyoto-related projects by doubling two existing funds aimed at helping municipalities, the Green Municipal Enabling Fund and the Green Municipal Investment Fund. These funds were created by Ottawa last year and received initial funding of $25-million and $100-million, respectively. Yesterday, Mr. Martin said each of these endowment funds will be doubled. So far, the funds have created more than 100 projects for improving the use of energy and increasing public transit. "These funds are improving the quality of our life and securing our position as a leader in environmental technology," Mr. Martin said. In a further step to improve the economic climate for alternative fuels, Mr. Martin also said the income tax act will be changed to broaden the eligibility of electricity projects for capital-cost tax reductions. The measure, which will make small-scale hydro-electric projects viable, will cost an estimated $5-million in lost tax revenue. Projects with the capacity of producing up to 50 megawatts of power will be eligible for the accelerated capital-cost allowance. Previously, the generating limit for the tax break was set at 15 megawatts. The government is also making electrical energy systems that use blast furnace gas — a byproduct of the steel manufacturing process — eligible for the enhanced capital-cost tax break. Robert Hornung, Pembina Institute policy director, said the green measures in the budget are small but positive steps to encourage the development and use of alternative fuels. Alternative fuels "is an area where we're behind other countries. Hopefully, this will help to kickstart the renewable sector to help us catch up," Mr. Hornung said. A doubling of green funds for municipalities is encouraging, and a promise of $2-billion in infrastructure money could be helpful in promoting sustainable economic development and more reliance on renewable energy sources, but details of how the money will be spent are lacking, Mr. Hornung said.