Canada drops the ball on climate 🌎
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Let’s talk about climate news…
…Because it’s getting hot in here.
Last week, U.S. President Joe Biden invited 40 world leaders to join him at a summit to discuss global climate action. This was a key milestone on the road to the United Nations Climate Change Conference (COP26) this November in Glasgow, Scotland.
Quick refresher – scientists determined we NEED to limit global warming to only 1.5 degrees C to avoid the potential major impacts of climate change. As a result, leaders around the world are setting ambitious targets around greenhouse gas emission reduction to get us there.
So, what did everyone decide?!
First thing’s first. Canada has increased its emission reduction target to 40-45% of 2005 levels by 2030. This new target crushes the old conservative policy created back in the 2015 at the Paris talks, where the goal was to only hit a 30% reduction. The U.S. has gone even further as to double the former Obama target and reach 50-52% emission cuts over the same time frame.
OK, how are we doing and how are we going to get there?
Aggressively cutting emissions isn’t exactly easy for a country deeply invested in oil and gas exploration and production, and things haven’t been exactly promising. A recent report from Environment Canada found Canada’s carbon dioxide emissions in 2019 increased 0.2% over the year prior. Current levels are also only down 1.1% compared to the 2005 baseline.
The good news is the recent budget released has a planned major investment in clean technologies like carbon capture and sequestration. The government has also pledged to increase the price of carbon steadily each year from $40/tonne today to $170/tonne in 2030 which will assist in the transition to a clean energy future.
Bank of Canada shows confidence in Canada’s post-pandemic recovery…
The Canadian economy is closing in on the end of the pandemic tunnel, or so the Bank of Canada thinks.
In its most recent statement, BoC announced its plans to scale back on monetary stimulus, slow rate of bond purchases, and increase interest rate sooner than planned (mid-to-late 2022 rather than 2023). These measures were originally introduced in 2020 as part of the Bank’s quantitative easing programme which was meant to help the economy recover from the pandemic fallout.
What led to this move?
Bank of Canada is betting on the economy’s resilience. Up until now, Canadian households and businesses have quickly adapted to COVID-19 restrictions and found new ways to work, buy and sell in the market. As vaccinations rollout, experts believe the upward trend will continue.
So. Are we out of choppy waters?
While the economy has witnessed positive signs in Q1, we are still living in a very real emergency situation. The variant-led third wave is testing the healthcare system and threatening the pace of economic recovery. This is why, for now, BoC has decided to cautiously hold interest rate at a low 0.25 per cent and monitor the economy closely until further notice.
All we know for sure is that everyone we know (including our friends at Bank of Canada) cannot wait to be done with this pandemic.
So about that #HotGirlSummer Housing Market…
Speaking at an event on Thursday, Finance Minister Chrystia Freeland says Canada needs to boost the housing supply to make prices more affordable.
The federal budget has committed $2.4 billion over the next five years with nearly $1.8 billion this fiscal year alone to tackle housing affordability. The federal government has also pledged to tax foreigners who own vacant homes in Canada.
The pressure for the federal government to tackle housing affordability comes on the heels of an overheating housing market in Canada. According to the Canadian Real Estate Association, the average sale price in March reached $717,000 (yikes), a year-over-year increase of 32 per cent (double yikes).
While interest rates are at rock-bottom levels, the Office of Superintendent of Financial Institutions (OSFI), a federal banking regulator, has expressed concerns that borrowers may have repayment problems when interest rates rise. The current market conditions aren’t great for lenders either as there is increased risk should economic conditions deteriorate.
The OSFI has proposed tightening the current stress test for mortgages in order to cool down the housing market. Tightening the stress test would mean borrowers would have to save more for a larger down payment, which would lower their mortgage amount, or opt for a cheaper house.
The federal government is also exploring a vacancy tax for foreign home buyers. The tax would address the primary concern of housing affordability by tamping down speculation and encouraging owners to rent out homes to add supply to the market.
Bank of Canada Governor Tiff Macklem has welcomed the proposals. As Macklem notes, “what we’re seeing in the market is that demand is running ahead of supply. A big part of the solution is to get supply to catch up with demand.”
Things we read and liked:
An investigation into Facebook and the January 6 Capitol insurrection.
On the topic of climate, did you know Bitcoin accounts for more electricity consumption than Argentina?
Former #MoneyCrushMonday interviewee, and the Globe and Mail’s Personal Finance Editor Roma Luciw compiles the 5 biggest money lessons the pandemic has taught women.
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