Archived - Supplementary Document to the 2005-06 Departmental Performance Report (DPR) Regarding Implementation of the 2004-06 Sustainable Development Strategy (SDS)

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The Department of Finance's 2004-06 sustainable development strategy (SDS) was released in February 2004. The Department's two key sustainable development goals for this period were: ensuring intergenerational equity and more fully integrating economic, social and environmental considerations and objectives into policy making. To help focus the Department's efforts, the 2004-06 SDS identified four theme areas upon which to base action over the three year period: Building the Future; Integrating the Economy and the Environment; Integrating Sustainable Development in the Global Economy; and Greening Operations. The Department's sustainable development action plan sets out a number of objectives and targeted actions in each of these theme areas. The following table shows the results achieved for fiscal year 2005-06 for each targeted action.

Actions for 2004-06 Results Achieved in 2005-06

Key Issue 1: Building the Future

Objective 1a: Maintaining a Healthy Fiscal Climate
1a.1: Continue to pursue the Government's Debt Repayment Plan to ensure the federal debt-to-GDP (gross domestic product) ratio remains on a permanent downward track A budgetary surplus of $13.2 billion was achieved in 2005-06, bringing the federal debt as a share of GDP to 35.1 per cent, down from its 2004-05 level of 38.3 per cent.

Objective 1b: Building a Strong Society
1b.1: Ensure predictable and growing funding for health and social programs. The Government of Canada committed significant new funding for health and social programs over the course of the 2004-06 Sustainable Development Strategy. The Department is responsible for implementing a number of these commitments, including the 2003 Accord on Health Care Renewal, the 2003 Multilateral Framework on Early Learning and Child Care, the 2004 10-Year Plan to Strengthen Health Care as well as additional funding to provinces and territories to meet immediate pressures in post-secondary education, public transit and affordable housing.

The 2003 Health Accord provided $36.8 billion over five years for health, including $31.5 billion through increased transfers and $5.3 billion in new federal direct spending measures.

In support of the 2003 Multilateral Framework on Early Learning and Child Care (ELCC) Budget 2003 provided $900 million over five years for ELCC through the Canada Social Transfer (CST). Budget 2004 provided additional funding through the CST for ELCC of $75 million in both 2004-05 and 2005-06, bringing total support to $1.05 billion for 2003-04 to 2007-08.

In Budget 2005, the federal government committed an additional $5 billion over five years to provinces and territories for ELCC. Funding of $700 million for 2004-05 and 2005-06 was paid into a third-party trust and accounted for by the Government of Canada in 2004-05. The remaining funding was to be made available to provinces and territories between 2006-07 and 2008-09. Consistent with the provisions of the existing ELCC agreements with provinces, the Government provided one-year notice in February 2006 of the phasing out the agreements at the end of March 2007 and the introduction of the new Universal Child Care Benefit. The Government will provide the full payment of $650 million in 2006-07 to all provinces and territories, allocated on an equal per capita basis.

The 10-Year Plan provided $41.3 billion in new federal funding in support of provincial-territorial health care. As a result of this agreement, the Canada Health Transfer (CHT) was increased by a total of $35.3 billion over 10 years, reflecting an increase in the CHT base level to $19 billion in 2005-06, and the adoption of an annual six per cent escalator beginning in 2006-07. As well, the funding included $5.5 billion for a dedicated Wait Times Reduction Transfer as well as $500 million for additional investments in diagnostic and medical equipment. The legislation also provides for a parliamentary review on progress on the implementation of the Accord at the end of 2007-08 and 2010-11.

In 2005-06, the Government committed $3.3 billion in new funding to provinces and territories in respect of post-secondary education, public transit and affordable housing under the authority provided by Bill C-48, An Act to authorize the Minister of Finance to make certain payments, contingent on the 2005-06 federal surplus being greater than $2 billion.

On September 25, 2006, the Annual Financial Report was released and confirmed that sufficient funds were available to provide the entire funding of $3.3 billion to provinces and territories for these commitments. Payment was made to five third-party trusts for the benefit of provinces and territories on September 27, 2006.

1b.2: Improve the transparency and accountability of federal transfer support to the provinces and territories. Significant progress was made on improving transparency and accountability of federal transfer support effective April 1, 2004 when the Canada Health and Social Transfer (CHST) was restructured into two new block transfers: a Canada Health Transfer (CHT) in support of health; and a Canada Social Transfer (CST) in support of post-secondary education, social assistance and social services, including early childhood development, and early learning and child care services.

In addition, in order to improve the public awareness of transfer support and the federal contribution to health and social programs, the Department provided information to Parliament, through briefings and background material, and to Canadians, stakeholders, academics and the media, through communications material explaining increased federal support for health and social programs, as well as the new transfer structure.

1b.3: Ensure fiscal disparities are addressed through the equalization and Territorial Formula Financing programs. Over the last three years, the Department has continued to ensure that the Equalization and Territorial Formula Financing (TFF) programs address fiscal disparities. Over this period, a new framework for Equalization and TFF was announced in October 2004, which increased overall funding levels to $10.9 billion for Equalization and $2 billion for TFF in 2005-06, the highest levels ever reached by these programs. This amount is legislated to grow at 3.5 per cent in each subsequent year up to 2013-14.

At the same time, an Expert Panel on Equalization and TFF was established to provide the Government with advice on how total Equalization and TFF funding should be allocated among provinces and territories. Following the release of its final report, in June 2006, the Department will consult with provincial-territorial governments with a view to implementing proposals in Budget 2007. This will provide provinces and territories with long-term fiscal certainty in relation to Equalization and TFF payments for 2007-08 and subsequent fiscal years.

1b.4: Ensure the retirement income system remains sustainable and meets seniors' needs. Departmental work to ensure the retirement income system remains sustainable and meets seniors' needs continues. Federal and provincial officials have worked on analysis, research and advice to support the federal and provincial Finance Ministers' triennial financial review of the Canada Pension Plan (CPP) (which is to be completed in 2006).

The Department continued with the transfer of all CPP assets remaining with the federal government to the CPP Investment Board. The CPP Investment Board will be responsible for managing all the CPP assets beginning in May 2007.

Objective 1c: Implementing Key Federal Environmental Sustainable Development Priorities
1c.1: In the context of planning for future budgets, work with other federal departments and stakeholders to identify ways to address environmental sustainable development priorities. During the fiscal year 2005-06, there was no federal budget; however, Finance officials continued to work with other federal Departments on key environmental policy issues.
1c.2: Work with other government departments to evaluate federal horizontal management of water policy. A draft Federal Water Framework was developed in 2004 for working-level use among federal officials. The Framework provides a diagnostic of water-related issues in Canada, maps out the roles and responsibilities of federal departments regarding freshwater, and identifies priority areas for further attention in both a national and a global context. The Framework will be used to better understand and organize the roles of at least 19 federal departments and inform improvements to the Government's collective management of water policy. Further development of the Framework is on hold, pending the development of other broad policy frameworks at Environment Canada. The Department of Finance will use the Framework as a tool for analyzing any immediate water-related policy developments, and will participate in future efforts.

Key Issue 2: Integrating the Economy and the Environment

Objective 2a: Evaluating the Potential for and Developing Practical Uses of Economic Instruments
2a.1: Participate in further work in cooperation with other federal departments, other governments and stakeholders on the design of a system of covenants with the large industrial emitters sector to achieve reductions in their greenhouse gas emission intensities to help further Canada's climate change objectives under the Kyoto Protocol. Additionally, the Department will participate in work on potential mechanisms to facilitate a domestic and international permit-trading system. As part of its effort to evaluate economic instruments in relation to Canada's approach to addressing climate change, the Department of Finance participated in work undertaken by a number of departments on the potential design of a greenhouse gas emissions trading system, as well as production incentive programs for renewable energy.

In addition, Finance analysts attended workshops and seminars, and reviewed several reports on the state and trends of global emissions trading and renewable energy markets.

2a.2: Continue to participate in the Steering Committee and as observers at working group levels with the National Round Table on the Environment and the Economy on its Ecological Fiscal Reform program over 2003-2005. During the 2005-2006 timeframe, officials participated in the work of the National Round Table on the Environment and the Economy (NRTEE), including their Expert Advisory Group, steering committee for Ecological Fiscal Reform and various working groups.
2a.3: Continue to undertake analysis and research concerning the economic and fiscal implications of population aging. The Department continued its analysis and research on the economic and fiscal implications of population aging. Research included the effects of population aging on aggregate demand and productivity, on early retirement incentives and on age-related program expenditures. A number of presentations that discuss the economic and fiscal implications of aging were prepared and presented in various governmental and academic fora.
2a.4: Continue to keep abreast of the emerging literature related to population aging and its economic and fiscal impacts; develop and employ analytical tools (such as computable general equilibrium models, microsimulation models and econometric methods) to examine impacts associated with population aging and provide analysis of current and proposed policies. The Department continued to keep abreast of the emerging literature related to population aging and its economic and fiscal impacts and developed and employed analytical tools (such as computable general equilibrium models and econometric methods) in order to examine both impacts associated with population aging and to provide analysis of current and proposed policies. A computable general equilibrium model was further developed and was used to address various questions pertaining to population aging. Other models were used to conduct ongoing sensitivity analysis of the fiscal impact of population aging on provincial and federal governments. Results from these models were used in numerous presentations that were made and circulated both within and outside the Department. This work will continue to be important for the Department's contribution to sustainable development.
2a.5: Continue to evaluate research concerning environment-related tax measures. Assess the potential of proposals received from stakeholders for using the tax system to assist the Government in meeting its environmental objectives, with specific emphasis on the relative effectiveness of tax measures compared to other instruments that may be available within the context of the Government's other fiscal and policy objectives. The Department continued to evaluate research and proposals concerning environment-related tax measures in consultation with other government departments and stakeholders, including taxpayers, industry associations and environmental organizations.

A key tool used to support this evaluation was the Department's "Framework for Evaluation of Environmental Tax Proposals" which was published as Annex 4 to Budget 2005. The framework sets out the context and criteria that may guide the analysis of tax proposals, emphasizing the importance of comparative evaluation of alternative policy options. One of the first proposals to be examined through this tool was a revenue-neutral vehicle feebate that was evaluated by the National Round Table on the Environment and the Economy in its October 2005 report. The framework has also been used by some stakeholders in the development of their proposals.

Throughout the fiscal year, the Department conducted a number of analyses that were integral to a number of announced tax policy changes including the extension of accelerated capital cost allowance (CCA) treatment to certain forestry bio-energy equipment (November 2005).

Discussions and examinations also included other issues such as the tax treatment of transactions under a proposed emissions trading and offset system, eligibility for accelerated CCA and flow-through share financing, and tax issues relating to brownfield redevelopment.

Objective 2b: Increasing the Knowledge Base Through Integrated Decision Making
2b.1: Continue to maintain awareness of the departmental process for implementing the 1999 Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals (Strategic Environmental Assessment). Formal policies and procedures put in place in 2003 have resulted in significant improvement in implementing the Cabinet Directive on Strategic Environmental Assessment (SEA). The number of SEAs conducted rose from 3 in 2003 to 41 in 2004 to 79 in 2005. As well, attendance at the annual SEA training session was much higher in 2005 than in previous years, and included more senior officials than in the past. As a result of action at both the departmental and branch levels, officials are better equipped now than they were in 2003 to use SEA as a tool to ensure environmental considerations are given due treatment in policy proposals.
2b.2: Conduct research and analysis on environmental and natural resource issues. The Department has continued its efforts to improve the knowledge base on environmental and natural resource issues by conducting research and analysis. During the period 2005-2006, officer-directed research was conducted on such issues as climate change impacts and adaptation and CO2 capture and storage. Presentations were made on research results to interested staff within the Department. This work was useful in that it deepened the understanding of important topic areas, encouraged broader awareness, and allowed identification of cross-linkages to related policy areas, which in turn improves the development of policy recommendations.

Key Issue 3: Integrating Sustainable Development in the Global Economy

Objective 3a: Participating in Negotiating International Environmental Agreements
3a.1: Support initiatives to enhance the understanding of linkages between Multilateral Environmental Agreements and trade rules. The Department participated in the development of the Canadian position for multilateral negotiations on the relationship between existing World Trade Organization (WTO) rules and trade obligations set out in Multilateral Environmental Agreements (MEAs), as called for in the Doha Ministerial Declaration, and as re-affirmed by the Hong Kong Ministerial Declaration. Environmental subsidies have been raised in the context of the WTO Rules Negotiations, and the Department continues to actively participate in discussions of this issue, particularly with respect to Canada's efforts to improve the global governance of the common fisheries resources.

Objective 3b: Integrating the Environment Into Future Negotiations on Trade and Investment Agreements
3b.1: In conjunction with the Department of Foreign Affairs and International Trade (DFAIT), examine trade and environment linkages in the context of the World Trade Organization and trade negotiations. The Department worked with the Department of Foreign Affairs and International Trade (DFAIT) on the development of the Canadian position for multilateral negotiations on trade and environment as called for in the Doha Ministerial Declaration. Officials monitored or participated in the work of the WTO Committee on Trade and Environment (CTE) and contributed to the development of the WTO Draft Environmental Assessment, which identifies and evaluates likely and significant environmental impacts of trade negotiations at the WTO with the objective of integrating environmental considerations into the decision-making process.
3b.2: With DFAIT and Industry Canada, strive to promote free trade in the environmental sector and continue to review specific requests to remove tariffs unilaterally where they are identified as a significant disincentive to the acquisition of environmental technology products. The Department worked with DFAIT on the development of the Canadian position for negotiations as a follow-up to the Doha Ministerial Declaration. The Declaration calls for negotiations on the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services. In this regard, the Department provided input to Canada's Initial List of Environmental Goods that was submitted to CTESS for consideration in the negotiations pursuant to paragraph 31(iii) of the Doha Ministerial Declaration.

Objective 3c: Involving International Financial Institutions
3c.1: Work with other donor governments during the 14th replenishment of the World Bank/International Development Association's (IDA14) financing for the world's poorest countries to ensure that sustainable development issues remain high priorities (the replenishment negotiations are expected to begin in early 2004, with the three-year replenishment period to become effective in July 2005). The Department worked with other donor governments during the 14th replenishment of the World Bank/International Development Association's (IDA14) financing for the world's poorest countries to ensure that sustainable development issues remain high priorities. The replenishment negotiations formally concluded in April 2005, and the agreement became effective in July 2005. The Department consulted with other Departments and interested NGOs in developing an IDA14 negotiating position that stressed sustainable development as an operational priority. During the negotiations, Canada engaged with other donors to support this theme. One of the two pillars of IDA14's operating strategy is "Sustainable Growth". This pillar acknowledges the importance of sustainable development. IDA donors agreed that the environment plays a critical role in ensuring that development in IDA countries is sustainable and poverty reduction is lasting. IDA will aim to design its programs and projects with a view to ensuring long-term environmental and social sustainability and reducing the vulnerability of poor people to long-term environmental degradation.
3c.2: Undertake consultations in 2004 with interested Canadian non-governmental organizations to exchange views on how best to support sustainable development within the IDA14 negotiations and within the international financial institutions more broadly. The Department organised several consultations with interested NGOs throughout the IDA14 replenishment negotiation process on broad development issues, including sustainable development. These consultations were intended to inform the Department's negotiating position, as well as to facilitate the NGOs' involvement with the World Bank in its own public consultations. The Department also consulted with NGOs on broader development issues, including those raised by the independent review of the World Bank's activities in the extractive industries.
3c.3: Work with the Executive Boards of the World Bank and European Bank for Reconstruction and Development to support operations that promote sustainable development. The Minister of Finance is Canada's Governor at the World Bank, International Monetary Fund and the European Bank for Reconstruction and Development (EBRD). Canada's Executive Directors' offices, which represent Canada at these institutions, continued to stress the priority of sustainable development. For specific projects, such as the Baku-Tbilisi-Ceyhan (BTC) Oil Pipeline and the Nam Theun II Dam, Canada's Executive Directors actively pressed World Bank/IFC and EBRD managements to ensure that sustainable development concerns, including potential impacts on the environment and local communities, were adequately addressed. Canada also emphasised the institutions' role in sustainable development during policy discussions, most prominently in the World Bank's response to the Extractive Industries Review and the EBRD's revised Environment Policy. Canada also played an important role in the development of the International Finance Corporations (IFC) new Policy on Social and Environmental Sustainability, approved at the World Bank's Executive Board in early 2006, through our consultations with the NGO community and the IFC itself.

Objective 3d: Increasing knowledge and understanding of the relationship between financial services and international environmental practices
3d.1: Participate in upcoming events such as the annual UNEP Finance Initiative Global Roundtable and other corporate social responsibility events. The Department participated in various inter-departmental and external events on corporate social responsibility (CSR) and socially responsible investment (SRI) issues with regards to the financial sector in Canada and abroad. These included the Canadian Social Investment Conference in June 2005 and the UNEP FI Annual Global Roundtable Meeting on Finance and Sustainability in November 2005.

Objective 3e: Maintaining a dialogue with federal financial institutions on sustainable development and corporate social responsibility with a view to continually improving the annual Public Accountability Statements
3e.1: Maintain open dialogue with representatives of financial institutions on Public Accountability Statements. The Department has maintained an open dialogue with financial institutions subject to the PAS publication requirement, which was part of Bill C-8, the legislation reforming the framework for financial institutions that came into force in October 2001. Particularly, Department of Finance officials met with representatives from financial institutions that are subject to the PAS annual publication requirement in March 2005 to discuss their institution's challenges and opportunities associated with their PAS. Views on continued improvement in reporting on corporate social responsibility via the PAS were shared. The quality of the reports was a result of a successful dialogue between the Financial Sector Policy Branch and financial institutions.

Objective 3f: Informing and educating others interested in sustainable development on the merits of the Public Accountability Statements
3f.1: Participate in various interdepartmental and external events. Department of Finance officials continued to respond to inquiries from domestic and international stakeholders about the reporting requirements for financial institutions under the Public Accountability Statement Regulations. The Department provided input on sustainable development initiatives as they pertain to financial institutions as needed. During 2005-06, fewer inquiries were received.

Key Issue 4: Greening Operations

Objective 4a: Enhancing awareness of the environmental impacts of our operations and encouraging employee and management adoption of best practices
4a.1: Increase the proportion of employees participating in the ongoing promotion of SD principles in the workplace to 20 per cent by 2006.[1] Employee participation has increased by 9.33% from 2003 to 2006 through such activities as Earth Day, Environment Week, and the Green Citizenship Network (GCN). The overall participation rate is 13.12%. The Department will promote an Energy Efficiency and a Transportation event in the Fall of 2006 to further encourage sustainable ridership, and home and office energy efficiency improvements through a variety of interactive displays, events and seminars.
4a.2: Increase the number of requests for materials on greening initiatives, policies and achievements by 30 per cent by 2006.[2] Unique visitors to the "Greening the Office" InfoSite pages have increased by 20% in 2005-6 from 2003.[3]

Objective 4b: Developing tools and guides and maintaining existing programs to support the implementation of best practices
4b.1: Develop a tracking system to determine the baseline and benchmarks for the recommendation of environmentally preferred products and services by 2006. The TBS Contracting Policy Notice 2006-1 - Policy on Green Procurement is now in effect. The Department partnered with PWGSC to develop and deliver a green procurement training course for the Department's acquisition card holders. The Department's Integrated Financial Management System (IFMS) was modified to track and record green purchases.
4b.2: Develop and implement a strategy to reduce resource consumption by 2005. A resource consumption strategy was developed which focused on reducing the Department's use of energy, paper and its production of solid waste.Some concrete results include 800,000 less sheets of paper used, reduced hand paper towel use measures but no net energy consumption reductions have been perceived by 2005 calendar year.

1. From a 12-per-cent baseline of employees who participated in a Finance-endorsed event in 2003.[Return]

2. From a baseline of 1,300 requests for information on the Greening the Office intranet site in 2002-03.[Return]

3. The numbers may not be representative of actual requests since no other measure besides unique visitors to the greening office web page were tracked/recorded.[Return]