Is Canada really committed to coal phase out? Or is it just trying to drive down the value of coal assets so it can buy them cheaply?
“Follow the money” is a catch phrase popularized by “All the President’s Men”. It was “Deep Throat’s” advice on how to unravel President Nixon’s web of corruption. It’s also good advice in understanding why 30 years of talking about climate change has resulted in so little action. Government and industry say good things while subsidizing and investing in bad things.
This week Canada and the UK governments announced: “Canada and the United Kingdom (U.K.) will champion a global alliance on the transition from unabated coal-fired electricity at next month’s United Nations climate change meetings in Bonn, Germany. From cleaner air, to public health, to sustainability, the benefits of moving towards low or non-emitting sources of power are clear.”
Sounds great, but are they putting their money where their mouths are?
On October 12, New York Times revealed the Canada Pension Plan Investment Board is bidding on the coal assets of Rio Tinto. The deal is expected to yield $2 billion for the international mining giant. So despite Canada’s “commitment” to phase out-coal at home and abroad it’s putting our money into the coal industry. This isn’t an isolated case – the CPPIB has investments in at least 35 coal companies at last count including Duke Energy which has been fined millions for pollution.
Environment and Climate Change Minister Mckenna who made the announcement in London would probably say the Canada Pension Plan Investment Board is an independent body not controlled by the government. So there is no conflict between her leading the coal phase out parade and the Canada Pension Plan leading investment in coal!
So let’s follow the money. It’s easy because the trail isn’t complicated or hidden. The CPPIB controls a $320 billion fund created by the government. It has been a successful investor earning reasonable returns on our money. However, it also receives about $5 billion annually from the Canada Pension Plan. These are funds in excess of the needs of the CPP to pay pension benefits.
The money comes from mandated payroll deductions paid by Canadian workers and employers. Technically, this is a not a tax, but it is collected by the government and handed over to the CPP by the government. Many organizations including the Canadian Taxpayers Federation call CPP contributions a tax. The Merriam-Webster dictionary defines a tax as “a charge usually of money imposed by authority on persons or property for public purposes.”
It is pretty clear CPP contributions are a tax, but that’s not a bad thing. We need a pension fund. It might even be a good idea to invest our contributions.
The point, however, is the government cannot claim it has no responsibility for how the funds are invested. It should ensure the funds are invested properly. This could be done by legislation, regulation or other means. When it comes to extending government policy on climate, health or environmental issues to the Canada Pension Plan or other pensions, Canada has done nothing.
Interestingly, the Canada Pension Plan restricts itself from investing in landmines or where human rights may be impacted. So government policy can and has impacted the CPPIB. Why not climate change policy?
Because neither the government or the CPPIB has acted responsibly, Canada is now sending conflicting messages.
Does Canada really want coal phased out or is it just trying to drive down the value of coal assets so it can buy them cheaply? Certainly these actions justify both conclusions.
Fortunately, Rio Tinto isn’t a done deal yet. Bidding doesn’t close till December. There is time to stop the CPPIB and, perhaps, start a public dialogue on how our mandatory contributions are invested.
Friends of the Earth Canada strongly supports the government’s action on climate change and we are proud of the leadership Canada has shown. I don’t understand why that action and leadership does not extend to the CPP and other Canadian pension funds. CPPIB has respected Canadian land mine and human rights policies. Why not climate change? Why not the coal phase-out?
Globally coal fired electricity is very large producer of of greenhouse gases. Canada, however relies on coal for a tiny Given the tiny fraction of its electricity generated. Canada could hace a far greater impact on coal pollution by phasing-out the CPPIB’s investment in coal. Why isn’t Canada doing both?
Doing so would also significantly strengthen Canada’s diplomatic efforts to phase-out coal.
Surely, Prime Minister Trudeau and CPPIB President Mark Machin can put their heads together on climate change policy and put our money where it will do some good.