A BALANCED APPROACH TO REGULATION FOR ECONOMIC PROSPERITY (2025)
Issue
British Columbia's regulatory environment has become increasingly complex, creating barriers to investment, productivity, and economic growth. While regulation is essential to protect public interest, an overly burdensome framework hinders business development and economic competitiveness. A balanced approach to regulation is necessary to ensure both economic prosperity and public protection.
Background
A strong regulatory regime will protect the public interest, balance health and wellbeing, promote environmental sustainability, and provide a fair, honest approach to meet the needs of the economy. Common-sense reforms to our complex regulatory regime are needed to incentivize investment and lead to productivity growth.
In 2023, the Toronto Stock Exchange (TSX) recorded the largest foreign capital outflow on record, a staggering net sell-off of $48.7 billion of Canadian equities. [1]This raises a red flag for economists: investors have lost confidence in Canadian growth. The flight of investment from Canada’s equity markets is just a piece of a larger trend. At the end of 2023, while Canadian investment abroad had grown to $2171.3 billion, foreign direct investment in Canada had not kept pace, lagging at $1360.3 billion, leaving a net direct investment position of $811 billion,[2] nearly an order of magnitude greater than just 10 years prior.
As investment in Canada dwindles, so too does our GDP per capita. Real GDP grew 1.1% in 2023 – the lowest rate since 2016, related to the oil price plunge. While we saw gains in household spending and exports, lower business investment and declines in residential construction tempered that growth. An April 2024 report from Statistics Canada entitled “Canada’s gross domestic product per capita: Perspectives in the return to trend” notes that, “while the pace of economic activity has slowed, Canada’s population continued to expand rapidly. During 2023, Canada’s population grew 3.2%, an increase of over 1,271,000 people, roughly equivalent to the size of Calgary. With population growth outpacing output growth, GDP per capita has trended lower and is now 2.5% below pre-pandemic levels.”[3] Per individual in Canada, this is equated to a decline of about $4,200 per person below the trend line.
Unfortunately, acknowledging the problem will not provide solutions, and we cannot wish our way to productivity improvements. Boosting productivity hinges on sustained private sector capital spending. Over the past 30 years, fixed capital investment per worker has been the main driver of labour productivity growth. After a strong period from the 1990s to 2006, investment per worker declined, exacerbated by the 2014-2015 commodity price collapse. By 2021, investment per worker in business sectors was about 15% lower than in 2006. Weaker firm competition and decreasing entry rates since the mid-2000s further constrained investment, accounting for 30% of the decline. It is clear that Canada has work to do to create an investment-friendly, productivity-enabling environment.
With that understood, there is still a great opportunity within Canada for major projects, emerging industries, and sustained investment. Looking at the Clean Energy sector as an example, according to the Canadian Climate Institute, achieving net zero in Canada will require meeting electricity demand that is 1.6 to 2.1 times greater than it is now.[4] As they note, “this will require significant growth in generation facilities, transmission infrastructure, and distribution networks. This new electricity infrastructure must successfully pass through complex siting and approvals processes, the success of which depends largely on the extent to which local communities and the broader public support their development.” Indeed, they estimate that for every year from now to 2050, Canada will need to build over 10 gigawatts (10,000 megawatts) of new zero-emission electricity generation facilities. The federal government’s own estimates are that Canada’s climate investment gap is currently as high as $115 billion annually.[5]
Unfortunately, Canada does not have a strong reputation for enabling this necessary investment, while other jurisdictions seem to be successfully attracting it. For example, in 2023, the Calgary-based Parkland Corporation ended its plans to build a $600 million stand-alone renewable diesel complex in Burnaby, British Columbia. While the plan would have resulted in 1,000 jobs and approximately 6,500 barrels of renewable diesel per day (with one-eighth the carbon intensity of conventional fuels), the company cited “rising project costs, a lack of market certainty around emerging renewable fuels and the U.S. Inflation Reduction Act of 2022, which advantages U.S. producers” as their rationale for their decision not to proceed.
Looking at the resources sector, we know that critical minerals are essential to the transition to green energy. While traditional timelines could historically stretch to 15 years, partly due to the often overlapping and onerous review and permitting process, the 2022 Critical Mineral Strategy commitment to ‘one project, one assessment’[6] is a heartening one that the government might consider implementing across all major projects.
The Western Transportation Advisory Council’s 2024 Compass Report collected the thoughts, plans and expectations of Canada’s transportation executives. Over half (52%) of respondents perceive a deterioration in the business investment climate over the past 12 months. They attribute this largely to regulatory hurdles, high costs and government policies. A majority of these leaders (57%) rated the regulatory environment as poor, with concerns centred on restrictive regulations and long approval processes. One survey respondent, representing a railway operator, said, “It is tough to invest in a geography that has unpredictable rules. At any minute, things could change, and it never seems like they change to help business.” [7]
Other nations have provided powerful examples of governments using novel regulatory tools to mobilize the private sector to finance the massive construction of clean energy facilities. In particular, Germany provided an example of how feed-in tariffs can help accelerate the build-out of wind and solar facilities to contribute to major energy systems. [8]
Canada's current regulatory environment presents significant challenges to economic prosperity and our global reputation for investment. However, by adopting a more balanced approach to regulation across all sectors —one that protects public interests while promoting economic competitiveness—Canada can reverse its declining productivity and investment trends.
THE CHAMBER RECOMMENDS
That the Provincial Government:
- Implement an economic competitiveness mandate in regulatory decision-making to balance economic growth with public interest protections.
- Conduct regular reviews of BC’s regulatory framework, leveraging technology for regulatory design and review, with a focus on efficient implementation and identifying areas of regulatory overlap and duplication.
- Establish clear and predictable timelines for regulatory approvals to reduce uncertainty for businesses and investors.
- Expand the "one project, one assessment" model beyond critical minerals to all major infrastructure and energy projects to expedite responsible development.