OTTAWA — The Liberal government’s $8-billion program to decarbonize heavy industries and promote cleaner technologies has failed to attract many of the country’s largest emitters, according to the federal green watchdog. Here’s what you need to know. 

The acronym: Ottawa unveiled the Net Zero Accelerator (NZA) in December 2020 as part of its commitment to reach climate break-even by 2050. A new division of the flagship Strategic Innovation Fund, the program typically offers financing for firms embarking on major buildouts, transformations or R&D efforts. 

Major NZA awards include $700 million for Volkswagen’s $7-billion battery factory in St. Thomas, Ont.; $400 million for ArcelorMittal Dofasco’s $1.76-billion green overhaul of its steel plant in Hamilton, Ont.; and $300 million for Air Products to build a $1.6-billion hydrogen facility near Edmonton.  

The response: In 2021, 55 companies in Canada emitted the equivalent of at least one megatonne of carbon dioxide. Just 15 of those firms have applied to the NZA, according to a report the commissioner of the environment and sustainable development published Tuesday. Only two have signed final contracts to secure NZA funding, though another nine are currently under review.

“Without the large emitters, you can get a bunch of small reductions, but they’ll never add up to the big numbers we would need to really bring Canada’s emissions down,” commissioner Jerry DeMarco said in an interview.  

The numbers: Liberal ministers have touted the difference the NZA will make in keeping emissions out of the atmosphere. For example, Ottawa said ArcelorMittal’s furnace swap-out would cut emissions by 3 million tonnes per year by 2030, the equivalent of nearly a million passenger cars.

But the commissioner’s report suggests some of those promises may turn out to be hot air. Twelve of the 17 funding agreements the NZA has struck, don’t include a commitment from the company getting the funding that it will hit a specific emissions-reduction target. So while Innovation, Science and Economic Development Canada (ISED) claimed the program’s industrial decarbonization stream would save 7.2 megatonnes by 2030, the commissioner says only 5.9 megatonnes of that is backed up by legally binding agreements. (Five firms did commit contractually to cut 6.2 megatonnes between them in exchange for $886 million in funding.)

Without written obligations, Ottawa has no guarantees firms will follow through, DeMarco said, although he acknowledged it may be difficult for companies to accurately estimate and commit to emissions decreases on some longer-term projects. 

Canada’s emissions reduction plan aims to get the country to 40 per cent below 2005 levels by 2030. It’s counting on 33 megatonnes of the 269 megatonnes in targeted cuts coming from heavy industry, funded by the NZA. But in a November report, DeMarco’s office concluded that the country isn’t on track to meet its 2030 goal. “If this program falls short, they don’t have other programs that are picking up the slack in terms of reaching their overall Canada-wide target,” he said.  

The commissioner’s office also said the program hasn’t always stuck to the numbers, adopting a qualitative method for assessing emissions that deviates from global best practices. In its official response, ISED said it has established a “rigorous due diligence process” for NZA projects, and that its approach to measuring GHG reductions aligns with international standards. It also said using a “purely quantitative” method to measure the impact of the program isn’t appropriate, since its goals go beyond emissions reduction alone.

On Tuesday afternoon, Innovation Minister François-Philippe Champagne told reporters he did not agree with all of the commissioner’s conclusions. “We’re the envy of the world when it comes to our mission to make sure we would be the manufacturing hub of choice in a decarbonized economy,” he said, in response to The Logic’s question. 

Champagne listed a string of projects backed by or in negotiations with the program, including BHP’s potash mine in Jansen, Sask.; and in-development facilities in Alberta from Dow Chemical and Heidelberg Materials. “When I look at the score that we have in terms of attracting foreign direct investment, I think the numbers speak for themselves,” he said.

DeMarco reads the bottom line differently, noting that the NZA has so far secured 6.2 megatonnes of “bankable reductions” for more than $3 billion in funding. “That’s very limited success, considering the magnitude of the outlay of taxpayer funds.” 

Plastic and green buildings: In another audit released Tuesday, the environment commissioner found a $279-million effort to slash Canada’s production of plastic waste is off to a decent start but a lack of data makes it hard to tell whether the government is doing enough to get plastic waste to zero by 2030. The government is also moving much too slowly to use green materials in its own construction projects, with only one standard—on the carbon impacts of ready-mix concrete—set since green procurement became official policy in 2006.