The Department of Finance 2001-03 Sustainable Development Strategy: Results in 2002-03

Objective: Maintaining a Healthy Fiscal Climate

Continue to pursue the Government’s Debt Repayment Plan to ensure the debt-to-GDP (gross domestic product) ratio remains on a permanent downward track

For information on the federal government’s progress on reducing the debt-to-GDP ratio from its peak of 67.5 per cent in 1995-96 to 44.3 per cent in 2002-03, please see the Annual Financial Report and the Budget Plan 2003 (www.fin.gc.ca).

Continue implementation of the Government’s Five-Year Tax Reduction Plan

As part of the Government’s long-term fiscal plan, most of the measures contained in the $100-billion Five-Year Tax Reduction Plan have now been implemented.

Objective: Building a Strong Society

Ensure predictable and growing funding for health and social programs

Budget 2001 brought the total cash transfer to the provinces and territories through the CHST from $15.5 billion in 2000-01 to $18.3 billion in 2001-02 and $19.1 billion in 2002-03. Combined with the growth in the value of the CHST tax points to $16.2 billion in 2002-03, the total CHST transfer to provinces and territories grew to $35.3 billion in 2002-03.

Conduct a mid-term review of the Canada Health and Social Transfer (CHST) in 2003-04 and set a new five-year legislative funding track by the end of 2003-04

Building on the 2000 agreement, First Ministers reached a new Accord on Health Care Renewal in February 2003, which will see increases in federal support through transfers and targeted funding reach $17.3 billion over three years to 2005-06 and $34.8 billion over five years to 2007-08. Cash transfers will grow from $19.1 billion in 2002-03 to $22.2 billion in 2007-08 ($27.7 billion including the Health Reform Transfer). The 2003 budget also indicates planned levels for cash transfers to 2010-11 to provide a 10 year predictable and growing funding framework for provinces and territories.

Ensure fiscal disparities are addressed through the equalization and Territorial Formula Financing programs

Federal and provincial officials met numerous times over the course of the year to advance the agenda on Equalization renewal. Similarly, federal and territorial officials have met several times to advance Territorial Formula Financing renewal.

Monitor developments and make adjustments when necessary, or in the context of the Canada Pension Plan (CPP) 2001-03 review, to ensure that the retirement income system remains sustainable and meets seniors’ needs

Federal and provincial finance ministers, as part of their statutory review of the CPP, confirmed early in 2003 that the plan is on a secure financial footing. The 9.9 per cent contribution rate that took effect on January 1, 2003 - the final step in fully implementing the 1997 federal-provincial reform package - should be sufficient to sustain the plan for more than the next 50 years.

Objective: Implementing Key Federal Sustainable Development Priorities

In the context of planning for future budgets, work with other federal departments and stakeholders to identify ways to address sustainable development priorities

As part of the Agriculture Policy Framework (APF) and Bridge funding announced in June 2002, which constitute a new approach for managing the many risks related to the agriculture industry, the federal government will work with provinces, farmers and other stakeholders to develop new environmental farm planning and management practices.

The Department worked with other federal departments to develop the Climate Change Plan for Canada and options to implement it. Budget 2003 provides funding of $2 billion over five years for climate change measures, including $250 million for Sustainable Development Technology Canada and $50 million for the Canadian Foundation for Climate and Atmospheric Sciences in 2003–04. The remaining $1.7 billion is to be allocated towards other cost–effective measures to reduce greenhouse gas emissions in Canada in such areas as energy efficiency, renewable energy, sustainable transportation and new alternative fuels over the next five years.

Budget 2003 also provides $1B over 5 years to address federal contaminated sites; improve air quality; better assess and manage toxic substances; further protect Canada’s species at risk; support implementation of Canada’s commitments at the World Summit on Sustainable Development; upgrade, maintain and monitor water and waste water systems on First Nations reserves; commence the establishment of 10 new national parks and 5 new national marine conservation areas and restore the ecological health of existing parks.

Finally, Budget 2003 announced further investments in infrastructure. The Canada Strategic Infrastructure Fund, which is designed to provide support to large–scale infrastructure projects in areas such as water and wastewater treatment, and local transportation, was initially provided with $2 billion in Budget 2001. In Budget 2003, the federal government increased the size of this Fund to $4 billion. In addition, Budget 2003 also announced $1 billion over ten years in funding for municipal infrastructure projects, which are typically smaller in scale.

Objective: Using the Tax System

Examine areas where the tax system may be having an impact on the longer-term goals of sustainable development

Consistent with the treatment of ethanol in gasoline, the government has enacted a measure announced in Budget 2003 that exempts the ethanol or methanol portion of blended diesel fuel from the federal excise tax on diesel fuel.

Similarly, the government has also enacted a measure from Budget 2003, that exempts bio-diesel, which is produced from biomass or renewable feedstocks, from the federal excise tax on diesel fuel when it is used as a motive fuel or blended with regular diesel fuel.

Assess policy options aimed at levelling the playing field between various economic activities

The Department consulted with the Canadian wind energy industry on the definition of a test wind turbine contained in the Income Tax Regulations and the current Natural Resources Canada criteria for a test wind turbine. These consultations considered the possibilities to enhance incentives for wind energy projects. Changes to the regulations were announced in July 2002, permitting the installation of more than one test wind turbine as part of a taxpayer’s wind farm. At the same time, changes were announced that apply to wind electricity and qualifying renewable energy and energy conservation projects which would provide greater flexibility in the timing of investment financed using flow-through shares.

The Department continued to evaluate tax proposals put forward by stakeholders. As well, the Department has been monitoring the work of non-governmental organisations, academics and other government departments on the subject of making changes to the tax system to encourage environmentally sustainable behaviour.

The Department participated in various interdepartmental meetings focused on the analysis and modelling of different policy options to address climate change.

The Department also continued the development of economic models to assess the costs of major economic instruments to reduce greenhouse gases.

The Department reviewed draft work of OECD groups studying the linkages between economic and environmental policies as well as future trends in tax policies with environmental implications.

The Department attended regular meetings of the OECD Working Party on National Environmental Policy as part of the Canadian delegation led by Environment Canada. The Department also participated in discussions of the OECD Joint Group of Tax and Environmental Experts.

Objective: Participating in Negotiating International Environmental Agreements

Assist in the preparation of Canada’s approach to international negotiations on climate change

The Department participated in interdepartmental discussions on the Kyoto Protocol negotiations.

Support initiatives to enhance the understanding of linkages between multilateral environmental agreements (MEAs) and trade rules

The Department participated in the development of the Canadian position for multilateral negotiations on the relationship between existing WTO rules and trade obligations set out in MEAs, as called for in the 2001 Doha Ministerial Declaration.

The Department also provided input to, and comments on, a draft interdepartmental discussion paper.

Further, Finance participated in a workshop regarding paragraph 31(i) of the Doha Declaration on the relationship between specific trade obligations and WTO rules.

Objective: Integrating Environment Into Future Negotiations on Trade and Investment Agreements

Work with the Department of Foreign Affairs and International Trade (DFAIT) on trade and environment linkages in the context of the WTO and possible future trade negotiations

The Department participated in the development of the Canadian position for multilateral negotiations on trade and environment as called for in the 2001 Doha Ministerial Declaration.

Finance monitored or participated in the work of the WTO Committee on Trade and Environment (CTE).

The Department also participated in interdepartmental preparatory meetings to the CTE in Special Session (CTESS) and CTE meetings, led by DFAIT. Provided input to the instructions for the CTESS and CTE meetings.

Work with DFAIT and Industry Canada to promote free trade in the environmental sector and continue to review specific requests to remove tariffs where they are identified as a significant disincentive to the acquisition of environmental technology products

Finance contributed to the development of the Canadian position for negotiations as a follow-up to the 2001 Doha Ministerial Declaration. The Declaration calls for negotiations on the reduction or, as appropriate, elimination of tariff and non-tariff barriers on environmental goods and services.

Objective: Developing Environmental Assessment Guidelines for Export Credit Agencies

Together with DFAIT, actively participate in and contribute to the work of developing common environmental guidelines for export credit agencies at the OECD and at the G-8 level

Worked with DFAIT and EDC to implement, monitor and improve the OECD Agreement on Export Credits and the Environment to ensure that sound environmental practices and mitigating strategies are observed in projects benefiting from official export credit support.

Objective: Working With International Financial Institutions (IFIs)

Promote macroeconomic stability in the international financial system and in individual emerging economies

Finance represented Canada at the G-7 and IMF meetings that resulted in progress being achieved in terms of strengthening surveillance and crisis prevention, helping members strengthen their institutional capacity, improving IMF lending to promote ownership and effectiveness of country programs and strengthening support for low income countries.

Support the work of IFIs in the development of alternative energy projects

Finance provided instructions to our Canadian Executive Director at the World Bank for discussions that resulted in the World Bank committing to scale up the impact of alternative energy on its poverty alleviation and sustainable development work. This builds on the World Bank’s past experience as well as on its Strategic Partnership for Renewable Energy with the Global Environment Facility.

Work with IFIs, civil society and other stakeholders to operationalize the Comprehensive Development Framework (CDF) as a practical strategy for promoting long-term sustainable development in poor countries

The Department worked with other Government Departments and agencies and the World Bank and the IMF in the lead up to and at the World Summit on Sustainable Development (WSSD), held in Johannesburg, South Africa (August 26 to September 4, 2002) to highlight sustainable development issues. This resulted in the World Bank establishing a senior management task force to assess WSSD outcomes and to identify actions for the World Bank following the WSSD.

Finance and other government departments encouraged the IMF to work with the World Bank and the WTO to advance the Millennium Development Goals by supporting economic reforms in low-income countries aimed at accelerating growth and reducing poverty. To strengthen capacity building as a critical ingredient of sustainable development and growth, the IMF opened two regional technical assistance centres in Africa.

On the eve of the WSSD, the World Bank released its 2003 World Development Report (WDR), which was focused on sustainable development. The 2003 WDR emphasized the importance of governance and good economic and social policies to sustainable development, issues which Finance and other government departments have pushed them to address at the World Bank Executive Board.

In the fall of 2002, the Department of Finance worked closely with the Office of the World Bank Executive Director for Canada to provide input into the revision of the World Bank’s Forestry Strategy. The revised strategy aims to ensure that the forestry sector can have a greater impact on poverty reduction, while maintaining its strong focus on sustainability.

Finance and other government departments have encouraged the IMF to collaborate more closely with other organizations and national governments where there are clear links between its core activities and environmental issues. We see evidence they are doing so in such areas of taxation and other fiscal instruments that can have an indirect impact on the environment.

Expand the focus on sustainable development in the Department’s annual reports to Parliament on the Bretton Woods institutions and the European Bank for Reconstruction and Development (EBRD)

A discussion of environment and sustainable development issues was included in the Department’s 2002 Annual Report to Parliament on Operations Under the Bretton Woods and Related Agreements Act and its 2002 Annual Report to Parliament on Operations Under the EBRD Act. In the case of the EBRD the report increased its focused on municipal and environmental infrastructure issues.

Objective: Increasing Knowledge and Understanding of International Environmental Financial Practices

Participate in upcoming activities and conferences of the United Nations Environment Programme (UNEP) Financial Services Initiatives

The Department attended several conferences and meetings regarding sustainability, including:

• the 2002 UNEP FI Annual Global Roundtable Meeting on Finance and Sustainability in Rio de Janeiro;

• the Triple Bottom Line Investing Conference organized by Brooklyn Bridge in November 2002; and

• the Conference Board conference on linking sustainable development and shareholder value in December 2002.

Finance initiated a dialogue with financial institutions that have to comply with the new Public Accountability Statement (PAS) requirements. The first round of statements was released in the first half of 2003.

The Department also provided input on a number of sustainable development/corporate social responsibility initiatives pertaining to financial institutions.

Objective: Enhancing Awareness of the Environmental Impact of Our Operations

Develop and implement a communications strategy to encourage the adoption of best practices

A communications strategy was developed to help employees to evaluate various communications tools when working on greening of operations initiatives. The strategy has directed both the content and method of communication regarding the department’s environmental management programs, as well as promotion of events for Earth Day and Canadian Environment Week. The strategy has been continually updated to accommodate feedback from participants.

Promote Earth Day and Canadian Environment Week

Earth Day and Environment Week events were promoted by various means, including the following:

• Communiqués were sent to each Department of Finance Canada staff member promoting events and providing information about the greening of operations and environmental stewardship.

• Contests were developed and prizes were awarded for participation in Earth Day and Environment Week events.

• Displays were presented in the central concourse of the department’s headquarters (L’Esplanade Laurier) to generate interest in various topics relating to the greening of operations and environmental stewardship.

Objective: Developing Tools and Implementing Programs to Support Best Practices

Review the Department’s existing internal environmental programs

Environmental management programs, including Earth Day, Environment Week, Ethanol Fuels, InfoSite (departmental intranet site), Laser Toner Cartridge Recycling, Pantyhose Recycling, PaperSave, Waste Reduction, Duplex Photocopying and Desktop Printing, Energy Efficiency Awareness, and the Enviro E-mail Account were re-evaluated to establish the efficacy of past mitigation procedures, as well as to determine if any new programs should be initiated.

Establish baselines and benchmarks for progress in five areas (solid waste, energy use, fleet management, procurement and toxic substances)

Baselines and benchmarks have been established for progress in solid waste (side saddle program), energy efficiency awareness, duplex photocopying, and toxic substances. Baselines in procurement will be developed once training has been initiated.

The collection of these data will assist in the following ways:

• evaluation of program success;

• identification of changes year over year;

• development of program revisions, as required;

• guidance on areas where resources need to be allocated; and

• continued performance measurement.

Develop departmental inventories in key areas for regulated substances

An inventory was developed, following Environment Canada’s guidelines, that documents all ozone-destroying regulated substances (i.e. coolants from late- model refrigerants and halons used in dry fire-extinguishing systems) within the department. This inventory will be updated yearly by Corporate Services Branch to track the decrease in these substances.

Promote the use of ethanol-blended fuels for Finance’s three vehicles

Updates have been made to the InfoSite Ethanol Fuels Service Provider List on a regular basis.

An information package developed by Natural Resources Canada on the benefits of ethanol fuel was distributed to each driver, along with a small, laminated map of the National Capital Region that indicates the location of ethanol fuel providers.

Develop a purchasing guide for, and provide related training to, the relevant departmental employees

A guide was developed to support purchasing agents in the selection and acquisition of "green" products based on consultation with acquisition cardholders. This guide is expected to be published online by December 2003.

A memorandum of understanding has been drafted with Public Works and Government Services Canada to provide green procurement training for our acquisition card holders. Training is set to begin by December 2003.

Develop means for selling debt to Canadians electronically

Canada Investment and Savings has enhanced electronic access for customers and distributors through on-line applications, enquiries and redemption capability for its payroll customers and sponsoring organizations. An electronic payroll savings campaign was successfully launched in the federal public service and will be extended to the private sector, beginning in October 2003. Our e-campaign initiative reduces paper, printing and distribution costs for applications and marketing materials.

Important Notices