Canada's Performance 2005: The Government of Canada's Contribution

1. Sustainable Economy

Introduction

A central role of government is to improve the well-being of citizens, and a sustainable economy is essential for achieving this objective. Improved fiscal and monetary policies have helped create a productive and competitive economy, driving significant progress in terms of Canada's standard of living. Canadians must recognize, however, that in order to maintain or surpass these standards over the long term, a sustainable approach to the economy, environment, and society is required. Sustainable development is commonly defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Success depends on the reconciliation of economic growth with environmental considerations as well as a commitment to foster the development of human capital.

A sustainable economy includes economic stability and competitiveness, employment and education, a healthy environment, and sound environmental practices. Canada's economic well-being depends on such factors as the following:

• the strength of Canada's industries;
• a well-balanced ecosystem, and the vitality, diversity, and sustainability of natural resources;
• dynamic trade relationships with other nations;
• a highly skilled, healthy, and adaptable workforce;
• the health of the financial and service sectors; and
• the ability to span distances using communications and transportation technologies.

The Canadian economy is one of the strongest and healthiest among the seven leading industrial countries of the G-7, which consists of the U.S., the United Kingdom, France, Germany, Italy, Canada, and Japan. The federal government recorded its eighth consecutive balanced budget in 2004-05. Between 1997 and 2004, Canada experienced the strongest growth in employment among the G-7 countries. The driving forces behind recent economic developments in Canada are global in scope, such as rising energy prices, and have contributed to the appreciation of the Canadian dollar.

Alongside economic priorities, there is consensus that environmental quality is central to the long-term quality of life of Canadians and their prosperity. It is critical to the health and sense of well-being of Canadians, to the livability of Canadian communities, and the legacy conserved and protected for future generations. Indeed, a competitive economy and a sustainable environment are complementary goals.

The Government of Canada's role in a sustainable economy

Worldwide there is an increasing recognition that a new model of competitiveness is emerging-one where environmental sustainability exerts considerable influence over economic performance and quality of life. With the aim of enhancing the well-being of Canadians at the heart of its economic, environmental, and social policies, the government recognizes the need to fundamentally transform Canada's approach to environmental sustainability-a key element of a sustainable economy. One way that the government is addressing this need is through the implementation of a competitiveness and environmental sustainability framework to better align environmental and economic signals. The Government of Canada is working with provincial and territorial governments, industry, Aboriginal organizations, and non-governmental organizations to develop a shared approach through this framework.

The Government of Canada recognizes that in a sustainable economy, environmental and economic success go hand-in-hand and are supported by policies that draw on a variety of innovative tools, including market-based instruments. At the same time, a sustainable economy must also rely on the traditional roles and responsibilities of the government, such as preparing the budget, designing and analyzing tax policies, and creating legislation and regulations that, for example, protect the rights of workers and regulate industries.

Financial markets play an important role in allocating resources to firms with the best investment opportunities. Budget 2005 takes a series of measures to improve the efficiency of financial markets. With more efficient financial markets, Canadian investments can earn a higher return and Canadian businesses can become more competitive globally.

To build a globally competitive economy, the Government of Canada is dedicated to pursuing its commitment to invest in skilled knowledge workers, cutting-edge research, science, and innovation. The October 2004 Speech from the Throne identifies the people of Canada as the nation's greatest source of creativity and economic strength. The government is committed to supporting the development of human capital. Budget 2005 announced initiatives that focus on early learning and child development, literacy, and improving and accelerating the integration of immigrants into the workforce.

This chapter tracks the Government of Canada's contribution to five outcomes related to a sustainable economy:

1. sustainable economic growth;

2. an innovative and knowledge-based economy;

3. income security and employment for Canadians;

4. a fair and secure marketplace; and

5. a clean and healthy environment.

Supplemental Information

Economic growth and environmental concerns

Natural, human and social capital

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the area of sustainable economic growth. In the electronic version of the report, clicking on indicators in the Performance Highlight table will lead you to detailed information about current performance and trends.

Note: The legend summarizing the symbols used in the table above can be found in the introduction, on page 2.

The Government of Canada's contribution to sustainable economic growth

By undertaking the right investments and creating favourable conditions for growth, the government can encourage continued prosperity, perpetuating the virtuous circle of a robust economy, secure social foundations, a sustainable environment, and a sound fiscal framework. Each of these elements strengthens and reinforces the others, leading to, for example, lower interest rates, increased revenues, reduced taxes, and new social, economic, and environmental investments.

Sustainable economic growth includes strong regional economies and sectoral competitiveness balanced with sound environmental practices. Budget 2005 affirms the importance of Canada's regions and sectors, investing in regional economic development agencies and key sectors, such as agriculture and space. Reducing regional disparities is a priority, as is creating an attractive business environment that maximizes the contribution of all sectors to Canada's standard of living.

With a significant number of weather-dependent industries in Canada, a growing concern is the number of extreme weather events that have had disastrous ecological and economic costs. Some of these effects foreshadow what might be expected as the climate changes. Some recent disasters include the 2001 Prairie drought, which resulted in payouts to crop insurance programs exceeding $1 billion; the Saguenay flood of 1996, which cost the Canadian economy more than $1 billion in damages; and the 1998 ice storm, the costliest weather event in Canadian history, with property damage exceeding $5 billion.

Healthy ecosystems are essential to the strength of the economy in direct ways. Canada's natural resource sectors and ecotourism depend on healthy forests, agricultural lands, and oceans. Canada's forests contribute $59.0 billion and its oceans $22.0 billion to the Canadian economy annually. Compromised ecosystems and inefficient and unsustainable management of natural resources can have significant economic consequences. Natural resource-based industries (energy, forestry, minerals, and metals) provide jobs to more than a million Canadians, and in 2004 there were approximately 324,100 people employed in agricultural production in Canada. The 1992 collapse of the northern cod fishery off the coast of Newfoundland resulted in the direct loss of 20,000 jobs and a further 20,000 being harmed or lost indirectly. Adopting a sustainable approach to the management of natural resources is a vital strategy for ensuring the long-term economic viability of natural resources-based industries.

Canada officially ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) on December 17, 2002. Under this Protocol, Canada is required to reduce its greenhouse gas emissions to 6.0 per cent below 1990 levels in the period from 2008 to 2012. Canada is one of the largest producers of greenhouse gas emissions on a per capita basis in the world-a situation that results from its climatic conditions, its large landmass, and the energy-intensive nature of many of its industries. Project Green-Moving Forward on Climate Change: A Plan for Honouring our Kyoto Commitment embodies the Government of Canada's efforts to balance economic and environmental concerns. The Plan provides for Government of Canada investments in the order of $10 billion by 2012 to fully realize the anticipated reductions of about 270 megatons of greenhouse gas emissions.

Several departments, agencies, and Crown corporations contribute to sustainable economic growth through their respective departmental strategic outcomes or Crown mission statements. Clicking on the links in the electronic version of the following table will lead you to planning, performance, and resource information, which is contained in the organizations' departmental performance reports and reports on plans and priorities as well as in the Annual Report to Parliament on Crown Corporations and Other Corporate Interests of Canada. The Strategic Outcomes Database, which can be found at http://www.tbs-sct.gc.ca/rma/krc/so-rs_e.asp, also leads to relevant audits and evaluations.

Supplemental Information

Economic growth

Performance context

To set its programs, expenditures, and performance in context, the Government of Canada is tracking key measures of long-term progress in the area of an innovative and knowledge-based economy. In the electronic version of the report, clicking on indicators in the Performance Highlight table will lead you to detailed information about current performance and trends.

Note: The legend summarizing the symbols used in the table above can be found in the introduction, on page 2.

The Government of Canada's contribution to an innovative and knowledge-based economy

Innovation is a driving force in economic growth, environmental sustainability, and social development. It is an integral element that helps us to deal with and prepare for challenges such as climate change. In today's knowledge-based economy, education plays a key role in providing individuals with the knowledge, skills, and competencies to participate effectively in society and the economy (OECD, Education at a Glance 2004). Innovation through new knowledge has become the main source of competitive advantage in all sectors of economic activity and is closely associated with increased exports, productivity growth, and the creation of new firms. Recognizing this, the government committed to making significant strategic investments in building a world-class research environment in Canada in Budget 2005.

The federal government launched Canada's Innovation Strategy in 2002, a 10-year plan to help make Canada one of the world's most innovative countries. In collaboration with provincial and territorial jurisdictions, universities, communities, and citizens, the government is working to make Canada a world leader in developing and applying ground-breaking technologies, creating and commercializing new knowledge, promoting continuous learning, training skilled workers, and ensuring a strong and competitive business environment. Budget 2005 reaffirms these previous budget commitments, which invested in the Canada Foundation for Innovation, the Social Sciences and Humanities Research Council of Canada, and Genome Canada. As well, in Budget 2005 the Government of Canada committed to investing $125.0 million over the next three years to move forward on the Workplace Skills Strategy to help workers keep pace with changing requirements.

Several departments, agencies, and Crown corporations contribute to an innovative and knowledge-based economy through their respective departmental strategic outcomes or Crown mission statements. Clicking on the links in the electronic version of the following table will lead you to planning, performance, and resource information, which is contained in the organizations' departmental performance reports and reports on plans and priorities as well as in the Annual Report to Parliament on Crown Corporations and Other Corporate Interests of Canada. The Strategic Outcomes Database, which can be found at http://www.tbs-sct.gc.ca/rma/krc/so-rs_e.asp, also leads to relevant audits and evaluations.