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Ottawa, May 25, 2001
2001-053

Speech by the Honourable Paul Martin, Minister of Finance, at a Breakfast Organized by the National Round Table on the Environment and the Economy

Toronto, Ontario

Related document :

• Development of Environmental Indicators a Priority, says Finance Minister (News Release 2001-054). 

Delivered text is official version.

Let me begin by saying what a pleasure it is to be here this morning.

I would like to thank all of you for making time so early in your day and, in particular, I would like to thank David McGuinty and all those at the National Round Table for organizing this breakfast gathering, and for inviting Karen Redman and myself to participate.

We should also take a moment to thank Dr. Stuart Smith for his outstanding work as chair. Under his watch, the Round Table has made major strides and successfully developed proposals that are now an integral part of government policy. For evidence of this, one need look no further than the 2000 budget and last October’s budget update. Together, these provided $1.4 billion over five years for individual measures aimed at improving the environment. All of these initiatives attest to how effective and, indeed, how persuasive Stuart Smith can be. We owe a great deal to his experience, leadership and – above all – his vision for a stronger, healthier Canada.

Indeed, I would like to devote my remarks today to one of the initiatives arising out of the budget with which David, Stuart and the Round Table are very much identified, an initiative that, in terms of cost, is one of the most modest but, in terms of long-term impact, is poised to surely be one of the most significant. I am speaking about the environmental indicators initiative – an initiative that seeks to advance the science of measuring progress towards a more sustainable economy, a co-ordinated effort led by the Round Table, Environment Canada and Statistics Canada.

Before I go any further, however, I would like to pause to address a debate that has been taking place with respect to the development of the indicators.

Some have argued that the indicators initiative should reflect not only economic and environmental considerations, but also social concerns. I agree. As a long-term goal, developing a broader set of social indicators is an objective that we should certainly work toward. And there are several groups across Canada that are taking on this challenge.

But I also know how difficult it is to achieve a consensus on what those social indicators should be. My hope is that it will be easier to arrive at an agreement on the required environmental indicators. And therefore, we should not risk losing momentum at a point when there is a clear opportunity for timely action. The work being done on environmental indicators is both necessary in itself and as a model for the broader social indicators debate now underway. I regard it as a necessary first stage, and I believe we should get the first stage completed without too much deviation.

Why is it so important to have universally accepted environmental indicators? The answer is for the same reason it is so important to live in a community that offers clean air, good water, open parks and green spaces.

All of us owe it to ourselves and our children to give future generations air, water and habitats that are healthier and cleaner than those we inherited. Our resolve to do so, unfortunately, is too often only galvanized when we confront a North Battleford or a Walkerton. Or when we seek solutions to the growing incidence of asthma and wonder why it seems to be so much more prevalent today than ever before. In short, I regard these indicators as a continuous call to arms – an ongoing protection against environmental complacency.

But of course you all know the environmental arguments for action better than I. So let me retreat back into the confines of the Department of Finance to give you the economic arguments for environmental indicators.

Quite simply, I believe, as do you, that the state of our environment is inextricably linked to our country’s economic performance. Indeed, the concept that environmental protection and economic growth are complementary as opposed to isolated objectives is at the very heart of the Round Table’s perspective.

My own thinking in this area has been strongly influenced by the work of Dr. Amory Lovins – someone well known to this crowd, I am certain. Lovins argues that we simply must expand the definition of capital.

Everyone is familiar with produced capital – such as buildings and machinery. This is relatively easy to identify and put a value on, and its role in the economy is tangible. We are also aware of the importance of human capital – the brainpower and innovation of people. And in recent years there has been progress – albeit perhaps not as much as we would like – in valuing it and factoring it into decision making.

But what is even less well appreciated is the third kind of capital – natural capital. This includes natural resources with commercial value such as forests and fish. However, it also encompasses ecological systems such as watersheds and wetlands, as well as life-supporting ecological functions such as the carbon cycle – not the kind of things to which we are used to applying a price or any other kind of measurement.

But the fact is, understanding how ecological functions contribute to economic activity is an essential part of managing responsibly for future generations. Indeed, experience has shown that the failure to properly account for the use of natural capital results more often than not in its being depleted in ways that threaten the sustainability of future growth.

As Lovins notes, no one would run a business without accounting for capital outlays. Yet all too often we overlook these costs as they relate to natural capital, for which there are no known substitutes at any price and which are essential for human survival. Not accounting for these costs has led to waste on a huge scale.

Often the costs of depleting our ecosystems become apparent only when they begin to break down – with poor air quality or unclean water. It is pretty hard to talk about sustainability either environmentally or economically in these circumstances.

If this is so clear, the case so compelling, the question emerges: Why hasn’t there been greater progress? The answer, I would suggest to you, owes much to the difficulty of quantifying the relationship between the environment and the economy. In short, because we lack the right measuring tools, we too often fail to take full account of natural capital in the decisions and choices we make. That is why environmental indicators are so important.

This work is not simply of interest to academics and environmental activists. On the contrary. Measuring progress is about giving governments, companies – and indeed all Canadians – the information they need to ensure that the economic growth we enjoy is sustainable.

How important can indicators be? Allow me to answer by way of analogy. Consider the role played by some of our better known economic indicators.

• Gross domestic product (GDP) figures allow us to track the pace of economic growth. These figures are instrumental to governments in estimating, for example, how much revenue they will have available to them.

• Employment data give us a monthly snapshot of the number of jobs that are being created or lost – a key signal of the direction of the economy and the overall well-being of individuals and families.

• Changes in consumer prices are measured every month – with the power to move markets in a moment.

As finance minister, I use economic indicators every day. The ability to isolate and record data and the ability to measure and track them over time is indispensable.

What is even more important is that they force decision making. They will act as a caution against inertia. That is – fundamentally – why indicators are so important.

First, they will show us if we are using our natural resources properly, if our demand for renewable resources such as timber and fish is outstripping the environment’s capacity to replenish them.

Second, indicators can tell us about the health of our ecosystems. In particular, indicators of pollution and wastes, together with indicators of air and water quality, biodiversity and soil productivity, can measure the link between our activities and the sustainability of our ecosystems. This is critical to our economic activity and, even more importantly, our quality of life because ecosystems support the most fundamental aspects of our day-to-day lives. They clean our air and water and assimilate our wastes.

Third, they can tell us what our demand for resources means for future levels of economic activity and for the prosperity of our children and grandchildren.

Fourth, and most significantly, indicators allow us to track how key environmental factors are changing over time. This is important, for it is only by observing trends that one can acquire information that is truly meaningful.

In short, what these new tools will give us is the hard, quantitative data that will give us a sound basis for environmental and economic policy in the future.

There is another reason as well why indicators of any kind are so important.

Indicators receive an enormous amount of media attention, and thus play a crucial role in enabling public opinion to focus on the important areas of national debate. The starting point for mobilizing our national will has got to be solid information and broad understanding of the issues. Establishing national goals further mobilizes national will. And to sustain those goals, you need objective indicators measuring progress or the lack thereof.

Let me give you an example of what I mean. The Government’s fiscal situation is not the kind of subject that inspires people to poetic heights. However, in the 1990s, the Government was able to marshal the forces of public opinion towards eliminating our $42-billion annual deficit. How? We began by setting measurable, step-by-step targets for reducing the deficit – giving ourselves two years to get it down from 6 per cent of GDP to 3 per cent. This helped to solidify a broad national consensus that made necessary action possible. Having attained our interim targets and those that followed thereafter, by 1998 we were able to announce that we had eradicated the deficit from the national fiscal landscape. In fact, we were the first G-7 country to do so.

This didn’t just happen by accident. Rather, it was the consequence of a national consensus, a focused and determined effort on the part of a nation to strengthen a once ailing economy and better prepare itself for today’s global reality. A consensus that did not end with the cleanup of our national balance sheet, but rather began with a revolution in the structure of our economy and in the mindset of our people.

The ability to measure and account for progress using economic indicators was essential to this change in mindset. That is the kind of discipline that we must apply to our environmental challenges. Indicators will help us measure our progress in a way that engages the constituency that matters most – the public at large.

Obviously, indicators will not allow us to travel back in time and change the course of history. But they can help us to chart a better course for the future. The advent of such indicators will permit, in turn, the development of tangible new targets for progress.

Indeed, there are already signs of a growing public desire for hard data on environmental sustainability. As many in this room are well aware, there is a trend on the part of consumers and shareholders to demand that companies report on their environmental performance.

Well, government has a similar obligation. As David Anderson has said so well, it is incumbent upon us to show all Canadians not only that we are meeting our bottom-line financial targets, but that we are clearly focused on preserving and enhancing our natural heritage.

In closing, allow me to make a final point.

For Canadians of all ages, protecting the environment is not an option – it is something that we simply must do. It is a fundamental value – beyond debate, beyond discussion.

The unequivocal fact is that the entire spectrum of environmental issues will provide challenges but, as importantly, it presents many more opportunities. Given the importance of natural resources to our country and because of the severity of our climate, leadership in this area of our economy is not a matter of choice for Canada. Quite simply, we must apply the same innovative thinking, the same spirit of enterprise, the same technological ingenuity, to protecting and enhancing our environment, as we have to becoming world leaders in the fields of telecommunications, transportation and so many others.

We are at the early stages of one of the most significant economic transformations of our time. The information revolution was its preface, but the larger story has many more chapters to be written. I believe that Canada has the capacity to write those chapters. To lead the world. To set the pace. And to build from this revolution’s promise an even greater prosperity. That is why – in the end – environmental indicators are so crucial.

A country is not a balance sheet. Citizens are not just shareholders in a giant corporation called Canada. They must also share in a sense of belonging, a sense of participation in the decisions that affect them. They need to know that we are prepared to turn conventional wisdom on its head; to try new ideas and test old assumptions.

To do so, however, we need to make sure that we are debating the real issues – that the questions we ask are keeping up with the challenges we face. In other words, that we bring to this debate the mindset of the future, not simply the perspective of the past.

That’s what a set of publicly understood environmental indicators will provide. And that’s why I am so glad to be here with the Round Table, because there is no better group to bring the future to the present.

Thank you.