Transcript: Contemporary Issues in Canadian Federalism Series: Economic Development and Infrastructure
[The CSPS logo appears onscreen alongside text that reads "Webcast".]
[The screen fades to Ji Yoon Han in a video chat panel.]
Ji Yoon Han: Good afternoon and welcome to this event on economic development and infrastructure. Thank you for joining us. My name is Ji Yoon Han and I'm a research associate at the Institute for Research on Public Policy Centre of Excellence on the Canadian Federation. This event is the third in a series created through a partnership between the school and the center on Contemporary Issues in Canadian Federalism. I'll just say a few words to introduce today's discussion, connecting it to the themes presented in the first two events, and then we'll pass it all over to our moderator.
Let me start by acknowledging that the land from which I am talking to you is the unceded traditional territory of the (inaudible). I recognize that we all work in different places and therefore you work on a different traditional Indigenous territory. Please take a moment to consider the original peoples of the land you are on. Thank you.
So far in the series, we have talked about the importance of federalism and the fundamentals of fiscal federalism. If you haven't tuned in for our previous events, I encourage you to do so. Within the events, some common themes have emerged that will have relevance to our discussion today. Several of our panelists have talked about how the allocation of responsibilities under federalism can have pros and cons, that decentralization of responsibilities can make it more difficult to build consensus, slowing down the development of projects or creating barriers to implementation.
On the other hand, federalism can also allow different levels of governments to focus their energies on areas where they have advantages. For example, in our previous event, Trevor Tombe pointed out that the federal government has advantages when it comes to macroeconomic policy, mitigating risk cost regions and raising revenue, while subnational units of governments are better equipped to tackle projects with predominantly local effects. The fiscal arrangements Canada currently has reflects this dynamic, and that's true when it comes to the topic of today's event as well. We'll hear from my panelists on how this core dynamic can impact the way different levels of governments approach economic development and infrastructure.
Now for the main event, I'll pass it over to our moderator for today, Hugo Cyr.
[Hugo Cyr appears in a video chat panel]
[Text appears « Hugo Cyr, École nationale d'administration publique ».]
Hugo Cyr: Thank you very much. Thank you again for joining us.
My name is Hugo Cyr. I'm the Director General of the École nationale d'administration publique, the ÉNAP.
I will be your moderator for today's panel. We have an exciting event planned for you. And before we proceed, let me share a bit of logistical information to optimize your viewing experience.
To optimize your viewing experience, we recommend that, if possible, you disconnect from your VPN or use a personal device to watch the session. Note that simultaneous translation and real-time translation is available for this event. These services are available through the webcast platform. Refer to the email reminder sent by the School to use these services.
For questions, please go to the top right corner of your screen and click the chat button and enter your question. Even if you don't see your question appear in that chat, don't worry, it gets to the moderator.
Today, we are looking at how federalism impacts economic development and infrastructure. We're doing so with two outstanding speakers, each with unique expertise on the matter.
[Herb Emery appears in a video chat panel.]
So, our first speaker is Professor Herb Emery, the Vaughan Chair in Regional Economics at the University of New Brunswick. Herb's research looks at regional disparities across Canada and how that impacts economic growth in Canada.
[Alison O'Leary appears in a video chat panel.]
Alison O'Leary is the Senior Assistant Deputy Minister of Communities and Infrastructure Programs at Infrastructure Canada.
So, we will proceed as follows. Herb will first give us a brief history of infrastructure issues and federalism in Canada and how that relates to contemporary challenges. And Alison will then provide a personal perspective on how the federal government is addressing the different and varying infrastructure needs and what tools and structures are in place to achieve these objectives. We will then move to a discussion on the issues raised during the presentations and to questions for our panellists.
So, again, it is my pleasure to introduce Professor Herb Emery.
Herb, over to you.
Herb Emery: Thanks very much. Is my sound okay? Great.
[Text appears "Herbert Emery, University of New Brunswick".]
So, thanks for the chance to discuss today this exciting topic on infrastructure. One dimension I hope to bring to the discussion of federalism is that often when economists talk about it, it seems like the principles are fixed in time, and it's really just a tension over how we feel about them at different points or maybe changing opportunity costs.
[A slide appears with the text "A brief history of infrastructure in Canada, 1870-present: And how history helps us understand our current challenges Herb Emery, Vaughan Chain in Regional Economics, Director, Atlantic Institute for Policy Research", The UNB logo also appears on the slide.]
But with infrastructure, if we look at it a little bit of economic history, we start to understand that the context for the decisions matters as much as the federal relations, federalism, relationships, and in particular, over time, we're going to see shifting opportunities, priorities and values of the population. And those are going to differ by where you live, whether it's your local government decision, provincial or federal. And it's really that changing balance, which is creating some of the challenges going forward and also the perception that's coming in that it has to be government driven to get a lot of projects built.
[A new slide appears titled: Infrastructure broadly defined.]
So, going through some of that, if I can get things to advance, I wanted to just sort of lay out what I think of when I talk about infrastructure and what it is, it's the basic physical and organizational structures and facilities needed for the operation of a society or enterprise. And so again, it's very broad when we start, it's going to be buildings, roads, power supplies. It could be other organizations that help organize collective action in society, but that's not going to be helpful for us getting the data because we don't count this stuff.
So, I'm going to get a bit narrower. See how I can get to, I think I missed one.
Sorry, this is the broad definition, I'm having a bit of stickiness between my mouse and my keyboard, so I apologize for that.
[A new slide appears titled: Where is our infrastructure and capital?]
If we ask where is all this infrastructure located, the simplest way to think of it is a picture of North America at night and what you see, wherever there's light is, there's a lot of capital and there's a lot of infrastructure. And when we start the Canadian Project after Confederation, there wasn't a lot of capital and infrastructure on a lot of this map, and so a lot of the initial project that we think of with Canada was opening it up and putting a lot of that capital in, but today what we're looking in is where the light is the brightest, we're trying to make it glow brighter.
And that's leading to a very different dimension around provinces that are a little dimmer on this map, but have opportunities for resource development, are now struggling with the very bright spots on the map that are demanding that they become even brighter with more population and more capital.
[A new slide appears titled: Infrastructure more narrowly defined in the economic and policy literatures.]
If we narrow the infrastructure definition down a little further, it's usually thought of by people in the general public as large capital-intensive natural monopolies, so often highways, other transport facilities, water and sewer lines, and then the other dimension that people often think of is it's often publicly owned.
And increasingly over time, what we see is the discussion of infrastructure has switched from that broad definition I gave you, to one that ends up being the tangible capital stock owned by the public sector. And as you get to that kind of narrowing, you can start to see that it's going to put shackles on what you're allowed to think about in terms of opportunities and developments and even who should pay, because as soon as we say, owned by the public sector, we're automatically making decisions about finance, who gets to decide and who gets to set priorities.
[A new slide appears titled What do we know about public infrastructure capital stocks? A graph shows Infrastructure Capital Stock of various levels of government over time.]
Now, what do we know about public infrastructure stocks and why do we need to pay attention to it? Well, for one thing, we don't measure a lot of- we don't have great data on infrastructure in Canada, this was a really good paper written, I think, around 2004, that showed the value of the Canadian public Capital stock is up to 2002 and it was worth about $200 billion in 2015 purchasing power. So, 75% of this infrastructure is owned by provincial and local governments, and it's been rising to over 90% in 2002, mostly because what we've seen over time is a shift from provincially owned and controlled capital to local government owned and controlled capital.
It's really important to notice that where the federal government used to be more important before we had the big expansion of local and provincial capital, because the federal capital stock's been fairly stagnant, is the federal government is not a big owner of infrastructure, but the provinces and the local governments are, and so this is where federalism starts to reach a challenge, the money is seen as residing with the federal government, but the construction and the ownership of the assets is going to be provincial and local, so who's going to pay for it? And this largely reflects that much of our urban, much of our economic growth since the 1960s has been urban growth and development, and unlike the historic period, which was much more around hinterland resource development. So, as we've shifted from developing the hinterland for resources for export to much more of a knowledge based urban economy, we're starting to see that shift in who owns the capital stock and who's responsible for maintaining it.
And this is where the tensions come in, if you've been through Trevor's talk, Trevor Tombe, you know that the revenue powers reside disproportionately with the federal government compared to the other levels of government.
[A new slide appears titled Canadian growth over the past 30 years has been urban growth in the biggest cities. Images of the Toronto skyline in 2001, 2014 and 2022 are shown.]
If you think of it in a tangible way, this is the skyline of Toronto from 2001 to 2014 to 2022. This is a pretty profound transformation of a skyline reflecting all of that construction and all of that population growth that's been going on and the economy today only 20 years on, is dramatically different than it was in 2000, which was only about seven years after the NAFTA free trade agreement.
So, as we've been going through this, this urban dynamic is becoming more and more important to where we're going to build and what we see our priorities as being, and just to break it up with a bit of humour, it's also turns out with this urbanization, we're getting more critters moving to the city.
[A new slide appears titled "More New Brunswick raccoons prefer urban life to woods, study suggests".]
So, apparently in New Brunswick, the raccoons prefer urban life to rural, so it's a big transformation all around.
[A new slide appears titled "Value of public infrastructure stock per capita falling since 1979 but we don't know if that is a problem or not" « Le valeur du parc des infrastructures publiques par habitant est en baisse depuis 1979, mais nous ignorons s'il s'agit d'un problème ou non. » - A graph shows Per Capita Infrastructure Capital Stock of Public Administrations in Canada over time.]
A big issue is do we have enough infrastructure? Well, one of the things we have to pay attention to is that infrastructure investment is lumpy and we tend to build it all at once, and we tend to build too much because we're building it for the future as well. So, when I take that previous diagram, which showed you the value of federal, provincial and local capital stocks divide by population, what we see is that the value of public capital per person has been declining and what has been built on things like highways, roads, water, water treatment and sanitary sewers, some of that balance has been changing.
But overall, what we see is this declining value of public capital per person. Some people interpret this as a problem or a deficit, but in a lot of cases, what we may be seeing is that we're actually growing into the capital stock that we built in the first place and the issue is maybe historically we overbuilt in the challenges going forward is are we going to make the same mistake again or how do we know we've got the right size? And so this is going to be a challenge of when we build.
[A new slide appears titled "Beyond roads, bridges and sewers" One graph shows the expenditure of new construction in transportation, communication, electric power, gas, and water utilities from 1956 to 1976. A graph beside it shows the expenditure of new construction in institution and government departments from 1926 to 1976.]
To give you more context, this is infrastructure expenditure up until 1976. What I show you on the right-hand panel, new construction and institutions and government departments, covers things like hospital, education, universities, which we often think of as big assets, they're tiny compared to what we see just over and things like electric power, water transportation, motor transportation and rail, and in particular the electric power one dominates most of our infrastructure spending historically, and it's about to dominate it again with the transition to net zero.
And so, when we think about scale, the kinds of things that governments are muddling around with, trying to figure out with the roads, the schools and the hospitals, it's actually quite small compared to some of the other infrastructure needs that might be coming in, like pipelines switching from telephone to fiber optic cable, maybe now to satellite. And we're going to see these transitions that start to drive different types of needs and it's going to also shift who should be building them.
[A new slide appears titled "Focusing on publicly owned infrastructure may be misleading..."]
Focusing on publicly owned infrastructure is also misleading. It's mostly telling us about highways, roads and sewers and it's reflective often of investments with localized benefits and they're often non pecuniary, meaning you can't get a revenue source off of them, but they are improving quality of life. That's a different thing than building a road into develop a mine, building a nicer road so that you have a shorter commute to work. You can't monetize it necessarily the same way, but I'll come back to that, that's a choice. But the kinds of infrastructure projects we're building are going to have different financial aspects because they're not necessarily generating monetary returns. Most infrastructure in Canada is developed, operated, maintained by private owners, not the government. Rail, pipeline, telecommunications, power, we've divested previously publicly owned infrastructure assets which were privatized and sold.
What we're looking for increasingly going forward is private construction operation based on tolled capital. So, we're going to put tollbooths on bridges, we're going to put tollbooths on highways, and we're going to recoup our capital costs through pricing. We're going to go to things like regulated natural monopolies and crown corporations as well. This is how we can start to build on a scale that may not be possible for governments to think about.
So, I'm asking you to stretch your mind when we talk about infrastructure and the role of government to going beyond where the government builds and owns to one, which is what can the government stimulate, finance and help recoup the costs and what's the priority for doing it?
[A new slide appears titled "Infrastructure supported by Federal Government historically".]
Infrastructure supported by the federal government not built and operated, but supported, historically reflected the standard government argument that the federal government should be involved in projects where there's a benefit spillover. So, if you're going to build a railway to the prairies to settle them to create a larger home market for Canada, that investment project had a spillover benefit for Canadians living in eastern Canada so it made sense to use federal dollars or federal incentives to open up that project.
But what we're seeing increasingly today is that the federal government is getting involved in jurisdictional decisions where there is no broader spillover benefit from the local population. So, we're starting to see federal dollars for infrastructure going to things like local museums, rec centers, play houses, public transit. But it's not the same kind of logic in the past that they were building things that had that broader national benefit.
The other thing that was happening in the first phase or earlier is things were being built ahead of demand to open up the hinterland as an economic opportunity. That discussion is ongoing right now in terms of Arctic economic development, but it's not going very far or you'll often see work on the northern corridor for infrastructure, which is getting sort of a pre-approved route so that you can put the pipelines and the telecommunication lines and everything's in.
The second stage, which is really what we're stuck in now is the connecting and filling in stage. So, we're trying to encourage integration of regional economies and we're also doing the last mile stuff to do more inclusive growth. So, last mile broadband, making sure everybody's connected, but a lot of things that wind up getting built are to encourage integration of regional economies, this would have a spillover benefit, but not always. So, again, we need to think about what's the logic for each level of government being responsible.
[A new slide appears titled "Infrastructure supported by provincial governments and local governments".]
Infrastructure supported by provincial and local governments where they often want the federal government to pay is aimed at retaining more wealth from the exports generated in their region if they can have more competitive transportation, cheaper energy, better communication services, then they can use their infrastructure to keep more of the wealth local because they're going to attract capital to the local economy. So, maintaining your local airports and industrial parks is a big priority. You can also do things to attract population that improve amenity value of the location. This is the rec centers, play houses, arenas and swimming pools, but these are more about wealth redistribution across regions as opposed to wealth creation.
And so, again, it can be pretty tricky deciding when is it wealth creation, when is it redistribution. But in these cases, this would be a situation where you would expect the local tax bases to be paying for it, not the federal government.
[A new slide appears titled "Indivisible Investments – technical change in transportation and communication trigger "lumpy investments".]
You get into visible investments, which creates the lumpiness and this is especially the case in transportation communications is that you can't build part of a network, you have to build the entire network. It doesn't help you to have a highway that goes halfway from Toronto to Montreal, you need the whole highway in order to get the benefit. So, the transportation, we've seen transformations from wagon roads to canals, derailed to asphalt roads, now it looks like we're going back to rail again. Communication, we had telegraph to telephone to fiber optic cable and the Internet, radio, television, now we're looking at satellites.
So, each time technology changes in the opportunities, we're building networks, which is going to create some indivisibilities and create high needs for money. For energy, when we went to long distance transportation and transmission of energy, we had to build all that infrastructure to ship things and make sure it could get there. We may be going through a period of time where we can decentralize energy sources again with things like small modular reactors, where you can have more local generation without tying into a much larger grid. That's going to start competing with things like the Atlantic Loop to integrate the regional electricity system of Atlantic Canada with Labrador and Quebec. It could be that we can could instead be investing in generation that is decentralized and more for local generation. Decarbonization of the energy system is going to require massive upfront investment in new generation transmission, charging stations and rail, and they're going to have to be done in a hurry. It's not something that can really follow the technology or you won't make the transition. So, think about the indivisibilities that will come in.
[A new slide appears titled "New Brunswick, rail to road... 1945 to 1965, Rail abandonment and highway construction". Three maps of New Brunswick from different time periods are shown.]
Now, just quickly, an example of this, the panel on the left shows the rail network in New Brunswick in 1940. The middle panel shows you what it looks like today as we've torn up the rails, and what we replaced it with is basically highways. And with that transition, we went from private finance of construction, which was rail, to now we have a publicly owned and operated system, which is the roads. And so, switching from rail to road wasn't just a change in technology, it was also a change in finance and who's going to pay for it. And so, when we go through these decisions with new technologies coming in and what are we going to do, we're always going to have to make decisions, do we let the market produce it or do we leave it to the government to sort of direct how they want it to go and figure out how to operate.
[A new slide appears titled "Lumpy Investments – when do we invest in infrastructure?".]
With the lumpy investments, it's also important as we're heading into a recession, potentially, most infrastructure is built during boom times, not during recessionary times. So, there's a lot of infrastructure building when expectations for the economy are high, not low. When you get new technologies or modalities for doing things where you got new resource developments, with strong growth and flush government budgets, you get access to capital markets, which is critical. If you don't have that opportunity, then you can't get capital to build. And it also turns out we build a lot of infrastructure Whenever the country has a numbered birthday, like 100 or 150, we seem to build a lot of infrastructure all at once. And if you live in New Brunswick, all that Centennial construction in 1967 has now hit its life span and they're having to replace it, so it's leading to a lot of lumpiness around that birth date.
[A new slide appears titled "Issue: Is investment in infrastructure in Canada sufficient?".]
Those are interesting facts, but so what? Well, the issue of investment, is it adequate or sufficient in Canada? This problem with the lumpiness and ahead of demand means we've kind of inherited infrastructure and it may not be the right stuff that we need today. So, when people in 1970 made decisions about where we were going to be living and where how we were going to be living with what technology, they couldn't have anticipated what Toronto was going to look like. They couldn't have anticipated the hollowing out of the rural network of communities and things like that. So, what we have is a spatial distribution of infrastructure that may not match what we need today. It's locked in on an older urban network and the vintage of the infrastructure may be wrong because we overinvested in technologies that haven't lasted like copper telephone lines, when really today we need satellites.
And so, this challenge where we lock in on a technology is we're making decisions that are going to affect the future and we may decide that things are okay for a while, but we start to discover the schools are in the wrong place or we locked in on the wrong technology, compared to other countries that just waited a bit longer to see what was going to take off, is it really hydro generation or do we want small modular nuclear reactors? So, again, the challenge we're dealing with infrastructure deficits isn't just the age, it's often, we've got the wrong stuff because it was built on expectations of a future that didn't come to fruition, like Winnipeg never did become Chicago, but they built it big enough to be that. And so, this is where when we're making decisions today, we have to be a little humble about our ability to forecast what the future is going to look like.
[A new slide appears titled "Financing infrastructure: economic issues are surmountable in the past".]
In the past, the financing infrastructure was surmountable largely because there were boom times. So, when you go back to how did we get so many railways built around prairie settlement, most of it was because we had expectations 100 million people would be living in western Canada today. That didn't happen, but we got three transcontinental railways anyway. So, expectations can be really important for this. The government's expectations over its ability to finance with different types of incentives, it could be cash, it could be land grants, could be loan guarantees. The focus on direct public investment in infrastructure and challenges of finance are a more recent thing because of political decisions we've made. We've made investments in what we called public goods, which are technically things that we can't exclude people from using. And if we use them, they don't use it up for other people.
But often, what we've done instead is we've called public goods, things that really don't have a monetary stream attached to them. They're non-pecuniary benefits, they can't be monetized. So, community assets became public goods rather than public goods that are important for competitiveness. We also made decisions, the things that we call public goods really aren't. We could toll on them, we can't exclude people from using them, but politically that's very difficult to do. So, putting a tollbooth on a bridge in Montreal today is a politically contentious thing after the previous bridge didn't have a toll bridge on it or didn't have a toll on it. So, we've made choices not to toll things that could be privately owned and operated, including public transit. Now, you can give lots of good reasons why public transit should be subsidized. You could even give a reason that we shouldn't have fares on it at all. But again, we need to recognize that this isn't dictated by the destiny of economics, these are political choices.
[A new slide appears titled "Public infrastructure and illusory finance".]
The other thing we have to recognize, and I'm probably running out of time, so just cut me off, I'm going too long, is that historically, we made decisions when we built infrastructure, we didn't price in the future cost of maintenance and replacement. So, one reason that we had the illusion that public infrastructure was so cheap, is that unlike a private owner, we didn't have to figure out how we were going to pay for its sustainability.
And so, what we have today is a lot of liabilities of the previous decisions are coming home right at the time where we need to be investing in new stuff. So, we shifted costs to the future, which is now limiting what we can build, and that's the problem of living with this legacy capital that wasn't financed in the correct way because the expectations were growth in the future would pay for it. And now it's turning out that growth was strong, but it didn't produce the revenue we needed to maintain that capital stock.
[A new slide appears titled "The problems of publicly owned infrastructure are rooted in the political choices for how to finance them...".]
The other problem is that public ownership and pay-as-you-go finance along with cost sharing from senior levels of government. In other words, grants from the federal government distorts local decision making. If you don't make locals pay for the project through user fees of their own tax base, they're going to ask you for a lot of stuff. And so, when you have this competition of everyone going to Ottawa saying, please build our tunnel, please build our bridge, please build our playhouse, you're going to get a lot of asks for the project because it's ignoring the fact that they're not facing the full tax price, and this is something that has to be reconciled.
And again, as the federal government increasingly talks directly to mayors, it's creating a problem because in the past they could have had the premiers play the bad guy, but now we've got premiers and mayors competing for the love and attention of the federal government.
[A new slide appears titled "An emerging challenge for infrastructure investment – Population concentrating and competitiveness of cities is the "national interest".]
And then the final thing I'll just leave it with is- sorry.
Hugo Cyr: Perfect. Yes, if you can conclude, that would be perfect.
Herb Emery: So, the last point I just want to make is that the national interest is shifted. It used to be about regions and hinterlands opening things up for population to grow and getting that urban network, but increasingly it's a focus on large cities. And so when we have things like a rural strategy, federally, to get infrastructure in, we're now competing with much larger populations who would like to see it in the cities, so I apologize for going long and I will cut it off there.
Hugo Cyr: Thank you very much Herb.
I'll now turn it over to Alison. Thank you!
Alison O'Leary: Thank you Hugo, thank you Herb! Thank you for that presentation.
So, good afternoon, I am Alison O'Leary. Before I do begin, I would like to acknowledge that I'm coming to you from the (inaudible), the unceded and unsurrendered territory of the Anishinaabe Algonquin Nation, whose presence in the Ottawa Gatineau area reaches back to time immemorial.
The other thing I'd like to mention off the top is that the views I'm about to express are my own, they come from practical experience. I fully admit that I don't know everything, but I did spend a couple of years as the Assistant Deputy Minister for Intergovernmental Affairs at the Privy Council Office, and for the past four years I've worked at Infrastructure Canada, where I'm currently the Senior Assistant Deputy Minister for Infrastructure Programing.
So, I think one of the things that I wanted to start off and Herb, I think this will build a bit on what you were talking about, is why is infrastructure important? So, I'll give you some facts in a few minutes. But first, I would invite you to just think about your day-to-day life. How did you get to the office today? Did you ride your bike, on a bike path? We call that active transportation. Did you drive over roads or bridges? Did you take public transit? That's all infrastructure. Maybe you're working from home. Before you started, did you turn on the dishwasher or throw in a load of laundry? You're dependent in those circumstances on water and wastewater infrastructure. What are you going to do tonight? Are you going to take your kids to hockey practice? Are you going to play badminton at the local community center? Are you going to go to a museum? We call that community culture and recreation infrastructure. So, those are just some examples of how infrastructure contributes to your everyday quality of life. In addition, investments in infrastructure contribute to increased productivity, economic growth and support jobs.
So, I promised you some facts, so here goes. So, a report by the government of Ontario outlines that infrastructure investments in public transit can positively impact productivity in the long term. Transit investments can help reduce traffic congestion and travel times, thus increasing the available time for work activities and reducing lost productivity. According to a Deloitte report, infrastructure investment returns up to 2.7 times its initial outlay. According to the Global Infrastructure Hub's 2020's study, public infrastructure investment has an economic multiplier of 1.5 times the investment in 2 to 5 years, higher than other forms of public spending.
We've also all heard a lot about supply chains this past year and infrastructure plays a key role in getting things where they need to be. The World Bank has touched on how infrastructure supports sustainable growth. Given that investments in energy and transportation networks directly impact the movement of people and goods through reduced delivery costs, facilitation of physical mobility and fewer productivity constraints and jobs, greater employment is certainly enabled through infrastructure investments. We all saw firsthand through the COVID 19 pandemic how important digital connectivity and broadband infrastructure is to support the ability to work remotely, to connect with your loved ones and to support e-commerce. The list goes on.
More broadly, a 2021 IMF report showed that 1 million U.S. dollars in infrastructure investment generated 3 to 7 jobs in advanced economies and even more in developing ones. So, this is nice and all, but to your point Herb, why does the federal government care? You might be asking yourself, although you did already answer the question, if the federal government actually owns your local community center or the cell towers that you see as you drive down highway seven.
So, as you mentioned, well, no, in Canada, the majority, more than 60% of public infrastructure is owned by municipal governments and another 30% or so is owned by provincial and territorial governments. The federal government and Indigenous communities together make up the balance in terms of infrastructure ownership, and the private sector also plays a key ownership role in some types of infrastructure assets, so think broadband, think telecom and the non-profit sector is also an important partner in things like community focused infrastructure projects.
So, what I would argue is that the federal government can bring to the table is threefold. One is the money. Two is the setting of national objectives and incentivization towards them. And three is convening power and coordination. So, let's talk about the money first. The reality is that building and maintaining infrastructure is just plain crazy. I remember when I first came into the infrastructure department, I was really taken aback by all those zeros at the end of the numbers that I was seeing. Four years into working in a department responsible for a very large quantum's in federal funding programs. Now, the joke is that I don't get out of bed for less than $1,000,000,000. But kidding aside, federal fiscal capacity is important in supporting long term sustainable infrastructure costs across the country. Now let's talk about national objectives.
Like with many areas of work across federal government departments, there are instances where the national interest and local priorities might not always align. Sometimes because of political dynamics, sometimes because at the end of the day, it just happens that different levels of government have different priorities, different needs or frankly, different time horizons to address things that they care about, think election cycles. So, this is where the federal government has an opportunity to work in collaboration with other levels of government while leveraging its fiscal capacity to deliver funding programs in a way that aligns with federal objectives or incentivizes towards them.
So, I thought it might be helpful to give a few examples. One is resilience. So, we've all witnessed some of the devastating events that have happened in this country in recent years. The flooding events in B.C., water contamination in Iqaluit, Hurricane Fiona in the Atlantic, among others. So, the federal government, through departments like Public Safety, of course, responds in the aftermath. But the more proactive approach is to plan ahead and to work to build more resilient infrastructure before disasters happen.
So, the federal government plays a role in supporting communities to develop asset management plans, its shares information on building codes and standards, and it offers funding programs to support infrastructure projects that adapt to and mitigate against climate related natural disasters before they happen. So, Infrastructure Canada's Disaster Mitigation and Adaptation Fund, which launched in 2018, and has a current total envelope of almost $4 billion, does exactly that. You can also think about climate change. So, the federal government plays a role in driving investments toward infrastructure projects that work to address climate change, such as investing in retrofits of public buildings to increase their energy efficiency, building net zero buildings or investing in public transit projects to help reduce GHG emissions.
For example, in 2021, the Federal Government announced $3 billion per year, beginning in 2026/27, to support public transit projects across the country. And we're working right now to consult on and design the program that would deliver that funding. You can also think about social inclusion. So, the pandemic certainly highlighted the social disparities that exist for many vulnerable groups across the country and infrastructure investments targeted towards underserved communities, can make a really important difference.
So, another example, we have a green and inclusive buildings program that uses Statistics Canada's Multi Deprivation index as one of the central tools for assessing and prioritizing project applications aimed at retrofitting or constructing publicly accessible community buildings to create, for example, safe spaces for urban kids to gather after school or to create wellness centers in Indigenous communities, things that can make a real difference in people's lives.
One of the other things that the federal government is really focused on right now is housing supply and affordability and homelessness. These are real challenges that are facing this country. So, one of the things that we're working on in real time right now is looking at ways to better link issues related to infrastructure and housing. We're actively working on how to leverage the fiscal capacity of the federal government with infrastructure funding that it brings to the table, to incentivize action on the part of provincial, territorial and municipal actors to address the housing crisis. So, for example, in budget 2022, the federal government signaled its intention to tie access to infrastructure funding to actions taken by those local actors to increase housing supply. So, as we enter into the renewal of the agreements that govern the $2.3 billion in annual funding transfers under The Canada Community Building Fund, formally the gas tax fund, this will be one of the key federal objectives to advance. So, that's why the federal government cares. I think that is how we can sometimes look at how we match up local interest, provincial and territorial jurisdiction and national federal objectives.
But one of the things that I've really learned to appreciate in working in this space is that it's a really big country and there are many actors that have a role and have a view when it comes to talking about infrastructure investments. You talked a bit about it earlier, Herb. Different regions across the country have different needs and require different levels of infrastructure investment. So, think about remote communities where construction costs are just by nature, higher. There's logistical challenges in terms of building infrastructure. Think about short shipping seasons, reliance and sea lifts to get materials in. In some rural and remote areas, access to high-speed Internet does remain inaccessible or unaffordable. Although progress is being made with investments from colleagues at Innovation Science and Economic Development in urban areas like Toronto, Vancouver. Montreal continued investment in public transit, and active transportation is critical to help people get around. In other places, it's more roads and bridges that are the ways that people stay connected.
In some places, finding ways to repair, maintain and upgrade, water and wastewater infrastructure is critical to ensure that access to clean drinking water exists and it minimized lost due to things as simple as leaky pipes. So, in fact, one of the things that we're working on right now is to fulfill the government's commitment to accelerate the use of the remaining funds in the $33 billion investment Canada Infrastructure Program. A lot of progress has been made since this program was set up in 2017, and this is one that's delivered through bilateral agreements with provinces and territories. But as we work through the last few billions at the end, what we have observed is that taking a cookie cutter approach, to structuring funding agreements exactly the same across all jurisdictions doesn't necessarily reflect the different contexts across this really big country.
So, we're working closely with provinces and territories as I speak, to look at what we might be able to do to take into account those different realities, and this is giving us real time insights and lessons learned into how we might take a more nuanced approach next time around. At the federal level, we're also working to really understand and build the evidence base for what this country's infrastructure needs are. This is really critical, especially when you think about the order of magnitude of the dollars that we're talking about. So, the global infrastructure hub extrapolates, if you take current global infrastructure investments, which is $2.3 trillion with a T, in 2022, and if you extrapolate that out, we can expect the total global investment in infrastructure of 63 trillion with a T, dollars, from now until 2040. So, even a small portion of that here in Canada is a lot of money. And even us at Infrastructure Canada, with a multi-billion dollar program funding envelopes that we have, we simply can't cover everything. So, that's why we need to work with partners across the country to come to grips with what the true needs are, where the gaps exist, and how we can collaborate to address them.
So, one of the other things that we're doing is working to launch Canada's first National Infrastructure Assessment. So, we're currently seeking input from the public, from Indigenous peoples, provinces, territories, municipalities, stakeholders, on how to address Canada's infrastructure needs, establishing a long-term vision, improving coordination, amongst infrastructure owners and funders, and determining the best ways to fund and finance infrastructure. So, once this is in place, it will help to identify Canada's evolving needs and priorities in the built environment to try to take that longer term vision and to undertake evidence based long-term planning towards a net zero emissions future.
So, maybe the last thing I'd want to say in terms of the federalism piece of things, the reason that you're all here, is that the infrastructure landscape in Canada is such that the better coordinated all levels of government are, the more effective our collective infrastructure investments will be. So, the federal government, I would argue, is perfectly within reason to put parameters around the funding that it offers to ensure that projects that those dollars help, help to advance and contribute to national objectives. Provinces and territories, regularly also contribute their own funds towards those same projects and know very well the specific context of their own jurisdictions.
And municipalities and Indigenous communities are the local actors that largely own and operate the very infrastructure we're talking about, and they have a first hand understanding of the practical needs and development plans of their communities. So, finding ways to ensure that everyone is steering in the same direction, or at least trying to, and using a mix of program tools to bring different levels of government to the table, to work to align our objectives, incentivized as our desired outcomes, that's a key federal role in the Canadian context.
So, maybe I'll stop there and thank you for your time and I'll turn it back to you, Hugo.
Hugo Cyr: Thank you, thank you very much, Allison, for this presentation. So, now we'll move on to a series of questions. I will ask the first one, what means of coordination with provincial and territorial governments of proves to be most successful or satisfactory for all partners and stakeholders, in light of your experience or in terms of your historical analysis?
Herb Emery: Well, in my case I think the answer is whenever you can get the other level of government to pay, everybody seems happier. And the real challenge when we've been looking at challenges of municipal finances, trying to get the balance right between the local beneficiaries bearing the appropriate cost and future beneficiaries, and so there's some complicated things about the equity of the fair finance of these projects between taxpayer as represented by different levels of government matching benefit to cost or if I pay for this for you, will you get something in return in the future when you have a project? And that's part of the complication that's come in is increasingly it's just turned into more of a story federally of Ottawa has the money, the province and the cities don't, so Ottawa needs to pay, and I don't think that's the right model.
And again, we need to go back to thinking about, again, as Alison put it so well, once Ottawa defines its national objectives, it really becomes a matter of figuring out how do you design the program to align the interests with achieving that with the appropriate financial incentives to do it. And you can't just sort of let it- what I worry about is it becomes politically driven, you can get votes by building nice things for people and spreading it around, but as we're trying to go to net zero and things like that, we're going to have to be a little more tough love on some of these things because everybody wants Ottawa to pay for the transition. But a lot of cases we're going to have to pay for it through local rates, particularly through electricity.
So, again, we need to be convening the conversations about how do we determine that fair share, the national priorities, saying you can't use coal past 2030 with the additional cost of the generation assets and transmission you have to bring in, who's going to pay for that and how much is Ottawa, how much is the provincial utility? Or in some cases, is this Ottawa's opportunity to say, forget these provincial utilities, it's time to regionally integrate the grid.
And again, that's another discussion that provinces may be resistant to, but it may be in our long run interest to start having not provincial utilities, but having much larger regional players that would serve the whole region. I'm kind of rambling now, it's just, it's a very complicated question in my mind, and I don't have an easy answer for it.
Hugo Cyr: Thank you.
Alison O'Leary: I might just add, yeah, I might just add, so I think that's a great answer, if I look at it more from a program delivery kind of place. But the fact is that there's always just too much demand to go around, right? So, whether we deliver programs that we take project applications in directly from municipalities, Indigenous communities, what have you, or if the provinces and territories do that and then bring us projects, at the end of the day, whatever level of government is doing that kind of sorting is going to have to say no to a bunch of people, right?
Like, we've got programing that has this many billion dollars or provinces and territories have this many dollars, and there's always just too many (inaudible) to go around. So, that's why I think it is really, really important to try as hard as we can, no matter what type of delivery tool you're using to really look at what are we trying to achieve here, and then really set the frame for bringing projects in to allow us in the public service to provide an objective assessment of what the asks are and our best advice in terms of this is how these projects stack up against what we're trying to achieve, whether that's resilience, whether that's climate adaptation, whether that's social inclusion, what have you, or just sometimes people need playgrounds and that's fine. But really making sure that we know what we're trying to do and that other levels of government know what we're trying to do so that we can try to sort of do the sorting and the assessment of what rises to the top in a coordinated fashion.
Hugo Cyr: Thank you! We're getting several questions related to telework and the new post-pandemic realities. And so, in particular, what are the opportunities that come with the fact that many people have chosen or want to continue teleworking, working remotely, that in terms of infrastructure, of the federal government's infrastructure portfolio, what opportunities does this new form of work organization open up for Infrastructure Canada? So that's the first question. And secondly, are there any interesting trends in this area from other countries?
Alison O'Leary: Thank you for the question. I think in terms- speaking from kind of an infrastructure investment perspective, I think we certainly have seen how important connectivity is across the country. We take it for granted a lot, those of us living in bigger cities that we can do things like this and looking at places in the country that are more remote, that's a luxury that just doesn't exist or is just too expensive for people to take advantage of in their day-to-day life. So, we do have the capacity through some of our infrastructure programing to fund broadband and connectivity projects.
And then, colleagues at Innovation Science and Economic Development in Canada, also have a significant funding envelope where they're working to advance the federal government's objectives of getting to full connectivity across the whole country. And we're not there yet, but there is a ways to go, and I think that just opens up so many opportunities for people from across the country to find job opportunities that they may not otherwise have without good connectivity or to just say better connected with people in other parts of the country or even just in the village next door. So, I think it is absolutely critical for sure and something that progress has been made in terms of advancing those objectives. But there is more work to be done.
Hugo Cyr: Alright, thank you.
Herb, anything to add?
Herb Emery: Yeah, just I think this is one of the thornier issues that is coming up because it really gets into this problem of what is the national interest, and so last mile project, which is important, let's say, for keeping communities viable or alive, in the short run is great for those communities if they don't have to pay the full price of the services they're going to get, but on the other hand, there's also a lot of a lot of economists that would point out that the opportunity cost is putting the same dollars spend in a place that can grow the income and employment of the country much more, and so by making the decision not to support last mile type projects, you can focus your investments instead on these growth centers, and it may be in the long run, much better for the national economy and these issues around- this is coming up also in schools and hospitals, when we are asked do we have the population to keep them open?
And we're really talking about we have to have a discussion about sustainability of communities whose industries are gone, whose future may not be there, and if the federal government's role is to maintain the population, who wants to remain there in a comfortable way or accessing as much as they can, we need to have a discussion about that. But if the national interest, particularly as the economy gets tight, you might see that, it's not going to be the priority going forward, like we are going to need at some point to start talking about deleting infrastructure so that we're not obligated to maintain.
And I think that in Canada, we've delayed those kinds of conversations, but more and more the dynamic of the big cities and their needs are going to be pushing us towards that and it's happening, happening without discussion and a lot of passive decisions right now that, we just don't fix things when they break in some places and we don't talk about it because the media isn't around to do it the same way but New Brunswick, the covered bridges are falling apart now, and they're making decisions to not replace some of them, and it's stranding a few people on the other side.
But again, these issues around, opportunities to work remote, if that's really the case, then we should be also questioning why are we building such a big road network around Toronto? We could be encouraging remote work over physical transportation in a car, but politically, I think if I were to go to Toronto and suggest that, I get my head ripped off, so it's these are mostly political issues at the end of the day, because it's a values judgment and a choice and a priority. There's no single best decision.
Hugo Cyr: So, you touched upon, just in the last comment, the issue of there's a difference between the maintenance of infrastructure and development of new infrastructures, and what are the long-term challenges that you foresee emerging for economic development and infrastructures in Canada, and if you can also focus your answer on how is federalism offering opportunities and challenges to meeting those new emerging issues?
Herb Emery: Well, ideally, when you build something, you put in to place some method of financing, the ongoing maintenance and replacement, even expansion if you need to do it. If instead what you do is you just build it and say future generations can figure it out, then you're going to build a hole in the budget, that's going to lead things like degraded infrastructure, because it's more popular to build something new than fix it. And if you own a house, you know that your electric panel is less exciting fix then to build on an addition off the back kind of thing.
So, it's a lot of it again, what I liked about the Canadian Infrastructure Bank model was that by bringing in effectively infrastructure that has a price or toll attached to it, often with private ownership and operation, could be an outcome is you would be building into the finance to that project the ongoing sustainability and maintenance of that capital in a way that often a publicly built or publicly supported build with no ongoing revenue would not. I think the city of Toronto experimented with that when they proposed to toll the Gardiner Expressway and for 427 and the Wynne government was not keen on doing that because of the reaction of voters outside of Toronto, but it completely changed Toronto's finance model when they were going to get a bigger share of gas tax than if they could have toll revenues.
And so, we need to think about putting revenue sources on a lot of this infrastructure because that will solve a lot of the ongoing maintenance problem. But politically, that's really unpopular. Even public private partnerships have been unpopular for a lot of things. But again, if we're just going to build it and create a liability for generations in the future, which we're now starting to see a lot of those liabilities today, especially in our region, where all those centennial builds of 1967 are now crumbling, and we have a dam nearby that we have a $5 billion liability, it has to be refurbished and there's no revenue source to do it.
So, these aren't little problems when you don't finance the maintenance. And so, it's something that has to be done I think going forward when you build is you need to be able to account for that. And I also think there needs to be more discussion about the leading infrastructure that should be replaced by the new asset as opposed to, you now maintain two assets.
Hugo Cyr: And to what extent would you say federalism is offering opportunities or challenges to meet those?
Herb Emery: Well, I think that when you have a break, there's no price put on the construction or the toll or the finance. You tend to overbuild because everyone thinks it's free. And if you get too big an asset for your population, you've got a bigger maintenance problem down the road because the rate base, let's say it's electrical assets, you're not going to be able to pay for it. You're going to be continually asking for some kind of federal injection or you're going to be borrowing. So, the role of federalism, I think, in these cases is to go back to think about who's the beneficiary of the project.
And the more local it is, the larger the share of finance to be going local. If it's got a spillover benefit to the rest of the country and we're going to under build, let's say, as a small province, then the Ottawa should be stepping in to help us build bigger so that the full possibility of that project comes to fruition. That might be a case with an inter-tie on a transmission line through New Brunswick to the Northeast United States so that we can get more power exports. Something as simple as that, that New Brunswick's self-interest wouldn't build it, but Ottawa could enable that to happen.
Federally, we just need to think about, is our interest in provinces doing the decisions or do we want Ottawa regionalizing more and more of these decisions, so that we can build them on a scale that makes us more competitive, integrates us better into the rest of the country, and is just more sustainable in the long run. But again, I think it's the federalism aspect comes in through the finance and just the priority setting in the decisions that you're going to make.
Hugo Cyr: Thank you.
Alison O'Leary: I think I would just build on that to say some of that also goes back to data and evidence right, and really having transparency and the ability for people to see and understand what is the infrastructure that we have across this country and what in what state is it. So, really looking at some of the opportunities that we have as a federal government to collect and then share back objective data and evidence, I think is really, really important.
The other thing that we're living through right now is I talked about the kind of many billions of dollars in program funding envelopes that we have under our responsibility, but we're actually committing quite a bit of those funds. So, we're looking right now at what might be the next generation of infrastructure programing that the federal government stands up and so that's a real opportunity, I think, for different levels of government to bring their views to the table, share their data and their evidence, and allow us as the public service contingent to really try to piece together and analyze where do we stand, where are those needs across the country, what are the challenges that people are facing? So, operating expenses, for sure, that's a real thing, typically that hasn't been something that we fund as a federal government, we bring more of the capital aspect to the table. Also, looking at things that are happening right now in terms of inflation and cost escalation, what implications is that going to have down the road and how do we take all of that into consideration as we think through how we might design and deliver infrastructure programing down the road?
So, I think it's an interesting time to be in this position and to really be looking at some of those really important things, because I think your point is bang on, Herb, the decisions that are taken today, tomorrow, next year, do have very long term implications, and sometimes it's easy to forget that.
Hugo Cyr: Thank you. We have a question here from the audience. Would it be more effective from an energy point of view to focus on retrofitting our existing infrastructure? So, would it be faster and would require less energy?
Herb Emery: So, less energy? I'm just trying to figure out the link to energy and the retrofitting. So, retrofitting to reduce the use of energy would definitely be a good approach to take. But again, we need to think through is just where is the benefit from that investment going to be realized. So, if I make housing or buildings more energy efficient, that's going to reduce my costs so the benefit also is going to me as a homeowner. So, I think that there's issues in that case where the federal government can help out with the upfront costs that a lot of local governments, provincial governments or households have difficulty meeting.
But the issue is should the federal government pay for all of it? And so the structure of how you provide that support upfront would really be what you would want to think about. The other side of it is, again, there's just some places you can't retrofit easily. And so this gets back to the tougher decisions may be just easier to push people into areas where you can build new and get the stuff done. And I know that's not a pleasant thing to suggest, but we do see examples of that where it's just too difficult to deal with an old building.
Hugo Cyr: Alright. Alison?
Alison O' Leary: Yeah, maybe I would just add very quickly, I know we're probably short on time, but I would just add, like, that's a great question and in fact, we have a program right now for public buildings that allows the opportunity for both. So, whether it's retrofitting existing buildings to increase their energy efficiency or creating new net zero buildings and the federal government does bring funding to the table, but it's cost share typically with other levels of government. And so, allowing that opportunity for both choices to exist and for communities to come forward with their proposals about what they think makes sense in their local context, and then we have the opportunity to assess those applications on the basis of things I talked about, like, does it align with national interests?
Hugo Cyr: And one of the issue that keeps arising in your comments is, especially in Herb's presentation, is the issue of where will the benefit be felt of the interest infrastructure in question. And there are issues, for example, that are clearly more local in their effects or felt effects, and there are issues that are really, have a much wider impact over the entire country. And at the same time, we discussed the fact that the federal infrastructure program sometimes will impact or the money will be used in order to subsidize local infrastructure. You talked about rec rooms, for example, and so on. To what extent is that an issue for federalism in terms of is that a fiscal issue or others that fit with the idea that the federal infrastructure program has to meet more pan-Canadian goals and leave to the territories or provinces, the more local issues? How is it being discussed?
Herb Emery: I keep feeling like I'm going first all the time, but let me start with one where there's a lot of skepticism and that there is a broader benefit, and that's sports stadiums for professional teams where you often see the federal government under a lot of pressure to put money towards building a new stadium to keep an NHL team or attract some other kind of team. And generally those benefits are very localized. And even when the local government looks at it, they also say this is a private business profiting. We're not even sure we should be involved in this. And so, again, that has been one where you see intense pressure, I think Stephen Harper was the first one who was always being pushed on, especially when Quebec wanted an NHL team back. This issue around, should the federal government be in the business of supporting pro sports versus all the other priorities you could do, it sort of gets that, there's other kinds of projects that the Canadian Infrastructure Bank, I think, makes us worry less about where the benefit can be realized, because with the tolling that would be behind those projects, at least the way I understood the bank to be envisioned originally, is there must be a benefit for the local population from that infrastructure in order to be getting the price that you can pay to retire it. So, that's an example where the broader discussion or hiring people like me to demonstrate there's a benefit with the input output model or something like that, is that if you have a price put on it, then the locals will be able to identify what they see the value as being.
And if the federal Government understands the project and sees that there's advantages to building bigger, it starts to have a different discussion when you start to align that, who's going to pay type discussion with, are they building the right project, is it in the right place, is it large enough for what we need? But again, you would need discussion, collaboration and cooperation to figure out what does that project look like. And from time to time, I think we see it on some projects and other times it just seems that the mayors and the premiers and the Prime Minister are going to be calling each other names and we don't get very far, so we'll see how it goes.
Hugo Cyr: Alison?
Alison O'Leary: Yeah, I think I would add that public infrastructure, public interest, those are definitely things that are kind of at the core of our best advice when it comes to making infrastructure decisions or investments. But sometimes there's hard choices to be made to, right? So, if you think about resilience, let's say. So, there are a lot of communities facing coastal erosion right now, a lot of communities in the north where the ocean is coming right up to the front porches of people's houses. So, finding ways to talk to, people at a local level and talk about kind of really hard choices that they need to make. And then once those kind of pathways are determined, then what can the federal government do and what can it bring to the table to help support those local decisions in really difficult circumstances, I think is an area where that collaboration that I was talking about before and alignment of interests becomes really, really important to make really hard decisions.
Hugo Cyr: Well, if I can just keep on going on that theme, we've been touching in in throughout the series on reimagining federalism or trying to look at federalism beyond more than just two players. What are the, what other actors are important to consider when it comes to challenges in economic development and infrastructure challenges like the one that you mentioned and how are they brought to the table?
Alison O'Leary: So, maybe I can start on this one, Herb if you like. So, I think provinces and territories absolutely are key players. Municipal governments are key players. Indigenous communities are key players. The non-profit sector, the private sector. All of those kind of actors play their own roles and have their own interests and objectives. I think in terms of bringing sort of use to the table, one is really doing some of the things that I was talking about consulting with and having opportunities for dialogue in a very kind of open and honest kind of way I think is really important. Thinking back to my time in intergovernmental affairs, one of the things that I found to be really important is that ability to build and maintain relationships, right? To be able to pick up the phone and call your counterpart in the province or the territory and have a really honest conversation about what's happening from each of your perspectives, even if you're being pulled in different directions or even if you know the political winds are blowing in different ways.
Being able to maintain those open dialogs and communicate sort of what each side trying to do and then look for where are the areas of potential overlap that you might be able to work together and provide options perhaps for decision to consider in trying to move things forward. So, I think that's really important. And then in terms of just kind of delivering funding programs, what we have right now at Infrastructure Canada is really a full suite of tools that use different delivery mechanisms to get funding committed for projects. So, things like what used to be the gas tax funds, the kind of community building fund. That's a transfer, right? It's kind of money directly into local communities to support local projects. And they take their own decisions in terms of what those things are
And we have bilateral agreements with the provinces and territories which allow sort of the setting of an envelope and then provinces and territories to prioritize projects within that. And then we also have funding programs where communities, Indigenous or municipalities, Indigenous communities, non-profit organizations can apply directly to the federal government. And so, I think having that ability to kind of play in multiple different ways allows for different relationships and different dynamics to really surface and play out as we try to move projects forward.
Hugo Cyr: Herb, anything to add, yeah.
Herb Emery: Yeah, one way to also think about the increased number of players and interests who are involved and I think increasingly First nations in particular, especially when you have rights holders, not just stakeholders, it's a different discussion, but it leads to thinking that in the olden times, you could get a project built if you could show that the net benefit to Canada was positive. So, you if you built your pipeline across a bunch of places, there were people that were going to be displaced or impacted, but as long as there was more GDP and more jobs, you wouldn't let progress be upheld kind of thing. Now, what we're seeing is more demand for input from people who are going to be impacted or affected that's weighing in more on the decision, and just even the need for environmental assessment, impact assessment is sort of changing the nature of what projects are going to work. And with federalism, when we're starting to talk more and more about projects are going to go across provincial boundaries or through municipalities or through First Nations territory, you now have to have a different type of governance and negotiation and discussion in order to get the social license, I guess, is a term that gets thrown around to build that project and put it through.
And so, we've seen a couple of examples. One is Energy East wasn't able to navigate that. And so Energy East, which initially started with a lot of optimism, that it could be built, ran into a problem that it just wasn't politically acceptable for a lot of Canadians through which that pipeline was going to go to travel. And then in other cases, the Trans Mountain pipeline wound up being a federal purchase because of some of the dynamics that were going on with the private company and permitting to build. And again, one of the solutions we have to look at going forward with a lot of these large infrastructure projects, and I expect highways will start to also come into this, is just a better regulatory environment, a better stakeholder engagement environment, and really defining how we are going to combine all these diverse interests into getting to a decision, because we can't just use the old way of the net benefit rule.
Hugo Cyr: Thank you.
When we analyze regulation theories, we look at different instruments of regulation, different kinds of incentives, different ways of achieving objectives. We have talked a lot about public infrastructures since the beginning, but Herb, at the beginning of his presentation, also emphasized the importance of private infrastructures that fulfill public functions. Perhaps if you could talk a little bit about Infrastructure Canada's view of this report or the use of this role of public infrastructure in providing the overall infrastructure needed for the country. So, if you could tell us a little bit about how we see the role of public infrastructure being included in the overall supply of infrastructure that the country may need.
Alison O' Leary: So, I can, I'm happy to start and Herb, I'll leave you to speak to the privatization aspect since you raised that one. I think from an Infrastructure Canada perspective, our interest is really when it comes to public infrastructure. Herb, you spoke about the kind of infrastructure bank. So, there are opportunities to try to bring private sector investment into public infrastructure. I think public infrastructure is a really important kind of part of the package of all infrastructure. The global infrastructure in Canada.
So, thinking about things like an airport, pick a big city airport, privately owned and operated, but perhaps public infrastructure to get you to the airport and back might be actually an important way to connect those to pieces of private versus public, right? So, looking at that opportunities where the public infrastructure space and the public good might also coordinate with aspects that are more privately owned is certainly something that is important. I think you could also think about some highways in British Columbia, which are public infrastructure but don't have cell service along those highways. So, how do we incentivize the private sector to build cell towers along roads that if you don't have signal, can be a real challenge for public safety of people traveling along those roads? So, that's maybe an intersect that is worth kind of considering and thinking about.
But Herb, maybe you have something to add on this topic?
Herb Emery: Yeah, I'll do my best to answer, but after a lot of years in the west, I think I pick up enough words to get the gist. I think-
Hugo Cyr: I can reframe it very quickly. So, basically, what should be the role of private infrastructure in the global bundle of infrastructure that we need in Canada? And how should we, for example, the Canadian government policies in relation to infrastructure take into consideration that part of the offer?
Herb Emery: Well, I think that the shortest answer is that the Federal Government has too limited capacity to do much more than the kind of margins of what it's looking at relative to the scale of the transition we're about to go through with net zero, most of the capital we're going to need and most of the infrastructure is going to need to come from private finance and it's going to be incentivized I think, by federal government programs and policies. So, it sort of takes the federal government back to when it was small, relative to the scale of problem, when the country opened up the west, and you had to have a government without much cash and assets to figure out how to incent private construction and development and I think that that's sort of what we're looking at going forward but the federal government is going to have a lot of power to shape the conditions under which those companies build and operate and price, again, with the kinds of contracts that get written.
There's other cases too where the government tends to divest it, like as Alison said with the big city airports. And it's also the case with port authorities, is if there's a business development opportunity that isn't in the government's, isn't the government's strong point, then by divesting that operational piece into more private hands that are better at business development, it might allow the government owned asset to generate more revenue just with that sort of change in separation of ownership from the operation or the long-term lease. But again, these things will increasingly come up just by fiscal realities that the federal government is going to have a lot of pressure just to build the things that the private sector won't build, a lot of roads and sewers and water systems and things like that. You just can't get a revenue source easily attached to them other than local property tax.
The federal government is going to be under intense pressure to help with those things. So, when we start to get into energy systems, it's going to be private. When we start to get into, do we build more highways for cars or do we go back to rail, rail as one that could be more privately owned and operated? And so these are choices that we're going to see coming up if we ever go to a regulation like what they just saw in Europe, the ban of short haul flights, that would be the kind of thing that would incent a lot of rail construction and high-speed rail in particular.
So, again, the federal government, when we talk about these issues, can do a lot by mobilizing private capital and private companies, by just creating the correct environment to get the investment, but also shaping what it's going to look like to meet the national priorities. And again, if we do go to a corridor-based development from Quebec City to Windsor around rail, we also need to recognize we may be making decisions about regions that don't fit well with that model and are we going to put the money there? If you can get the private sector, who doesn't want to go there, then maybe they're done and so, this is the kind of issues that we have to have discussions about as a nation is, how much is private sector interest going to drive it? How much is public sector support?
Hugo Cyr: The last question was opening up the idea of infrastructure from public as a public good. So, looking at infrastructure within the government or infrastructure owned by the private sector, now one of our viewers asked us one of our viewers want to ask you, what are your views on natural capital and the role of the environment as a public good or as a public infrastructure, for example, natural flood defenses and so on?
Herb Emery: So, that's a great question because again, the challenge that we've always had with natural capital, including environment, things like wetlands, is it's difficult to monetize, whereas the destruction of it was easy to monetize, through housing development and things like that. So, really what you need is, that the, I'm trying to think of who the right definition of the owner is. It's not the crown owner, but there's some kind of societal ownership or stewardship that's required and the role of government is to really make sure that the regulations and choices are there.
So, if it's in our interest to have more wetlands for flood control and to not have development go into sensitive areas that are just going to cost us with that need for even more resilient infrastructure like along the coast, that's where we really need the government to sort of be making some harder choices. Now, historically, local governments have wanted the revenue for the most part, so we got lots of subdivisions built, we might have had lots of mines and things built similarly from the 1960s on because we needed jobs and we needed GDP was the imperative at the time.
But today, we're a relatively affluent society and the inclusive growth agenda might actually start pushing back against that kind of development and starting to ask governments to recognize the value of that natural capital in the project assessments and things like that, so that you don't discourage people who have a good project for society against one that has a much higher immediate return because they're going to build a bunch of condominiums in the wilderness. And there's some great work that's being done on that. I'm not the contributor to it. I'm a consumer of it, but it's a very complex problem and it really comes down to governments coming up with a mechanism by which they can recognize those values if they can't monetize them.
Hugo Cyr: Thank you. Alison?
Alison O'Leary: So, coincidentally, we last year launched a new program called The Natural Infrastructure Fund, which is a new space for Infrastructure Canada and really is looking at how natural infrastructure can be used for things like flood mitigation, for things like climate change adaptation, so talking about like green roofs, parks, natural aquifers, wetlands to help control flooding, things like that. So, I think there's a lot of reasons why some of those projects will be really interesting to see. Natural infrastructure can be less costly than traditional gray infrastructure, can also be more environmentally friendly, you're not moving concrete around, for example. But this is a new space for us as a department. It's really interesting. So, we did an intake for project applications that just closed not too long ago and we're sorting through them. It turns out this is a very popular opportunity for people, so we are again going to have to look at making difficult choices in terms of what selected. But I'm really interested to see some of the innovation that people are bringing forward about what natural infrastructure can do to help with some of the objectives that we think are critical going forward, and that may well give us, Herb, things that we can learn going forward for considerations down the road in the longer term.
Hugo Cyr: Well, thank you very much. We still have a few more questions, but unfortunately, time doesn't allow us to keep on going.
This is a conversation that will need to continue and will continue with this series. So I'd like to thank our panellists and all of you across Canada for participating in this event. I hope you enjoyed the event as much as I did.
Your feedback is very important us and I invite you to complete the electronic evaluation that you will receive in the next few days. The school has more events to offer you and I encourage you to visit their website to keep up to date and register to all future learning opportunities.
As Director General of the École nationale d'administration publique, the ÉNAP, also known as the Université conseil pour l'excellence du service public dans la Francophonie, I would like to thank the École nationale d'administration publique for inviting me. This collaboration allows us to make our institution better known, as it is not well known outside of Quebec, unlike in Francophone Africa where we have been active for over 50 years.
So, we offer services that are completely complementary to those of the CSPS and we obviously wish to multiply opportunities for collaboration with the CSPS, that is, the Canada School of Public Service. So, we are a university that only offers graduate and postgraduate credit courses in public administration and public policy; we also offer consulting services to support departments and agencies in different areas such as competency assessment, staffing assistance, organizational coaching, strategic plan development support, evidence-based consulting. Alison, you have stressed the importance of evidence in decision-making, public program evaluation, foresight services, the development of innovation labs, benchmarking services and so on.
In short, we are very proud to collaborate with the CSPS. The Canada School of Public Service has been playing for many years a crucial role in advancing excellence in the federal public service and we are proud to be able to collaborate with it in a complementary way to achieve our common goal of ensuring the highest quality public services possible.
So, once again, thank you all and have a wonderful day.
[The CSPS logo appears onscreen.]
[The Government of Canada logo appears onscreen.]