Serious money is heading to Canadian industries looking to reduce emissions after the federal government announced its response to the US Inflation Reduction Act.
Spending commitments announced on Tuesday federal budget including tax credits for investments in clean electricity, clean technology production, and hydrogen, the total is expected to cost about $55 billion through the 2034-35 fiscal year.
The total tax incentives totaled nearly $83 billion in that timeframe when the carbon capture and storage credits and clean tech investments announced last year were taken into account, both with increases. light in this round.
The government says the funding is needed to boost clean economy spending from about $15 billion a year to the $100 billion needed a year. This spending is also needed to not fall behind as other countries roll out subsidies, most notably the $369 billion contained in landmark US legislation passed in last year.
Deputy Prime Minister Chrystia Freeland said: “During the most important period of economic transformation since the Industrial Revolution, our friends and partners around the world, led by the United States, are investing heavily. to build a clean economy,” said Deputy Prime Minister Chrystia Freeland when introducing the budget.
A senior government official in charge of the budget lock said that the tax credits are the backbone of this effort because they are an effective and stable way to deploy government support, while letting the region private decision-making.
Clean electricity is the biggest focus of the credits, worth $6.3 billion in the first four years starting 2024 and $25.7 billion through 2034-35. Notably, provincial companies and indigenous-owned corporations will be eligible for the credits.
This spending is intended to help drive more production, as well as better east-west grid connectivity to meet the expected doubling of electricity demand by 2050.
Michael Bernstein, chief executive of Clean Prosperity, said the clean electricity package was where the government could have done enough to meet its goals.
However, other areas of funding, including an $11.1 billion credit for manufacturing and $12.4 billion for carbon capture through 2034, may not be enough to close the gap. way with what the United States is offering, he said.
“It’s really one of those situations where your competitor has stepped up and said we’re going to offer an almost unimaginable amount.”
Canada has chosen to support the project with a focus on construction, while the US IRA covers operating costs with payments based on production volumes. Just as Canada is offering a single large soft drink, while the United States is offering a multitude of baby cup-sized soft drinks, meaning Canada needs to offer a sizable cup to compete, Bernstein said.
Since it doesn’t include activities, he said, Canada needs to quickly deliver the fallback carbon price it has promised to develop in the budget.
The so-called contracts for difference will provide certainty to the industry about carbon pricing and credit in the future, but so far they are still being consulted, as are a number of other key policies.
“What surprises me is that there is still a lot that remains undefined,” said Rachel Samson, vice president of research at the Institute for Public Policy Studies.
Along with contacts about the difference, she notes that little is known about how the $15 billion Canada Growth Fund is spent.
The government announced in the budget that the fund would be managed independently by the Public Sector Retirement Investment Board, with money starting to flow in the first half of the year, but gave no guidance on priority areas.
Samson says it’s good that the government isn’t trying to run the money on its own, but worries that pension fund managers are too cautious when it comes to putting money into the daring projects needed.
“We need more advanced, riskier projects.”
The government also pushed back on any commitments to biofuels such as sustainable jet fuel, which surprised Samson because Canada is currently exporting wood pellets as raw material and knows that companies are ready to do so. present projects.
The budget is also notable for what it is not for the oil and gas industry. While it adjusted last year’s carbon capture incentives, it hasn’t gone as far as some are pushing, while cutting emissions to produce hydrogen will likely eliminate most of the emissions. hydrogen project based on carbon capture.
“Petroleum hasn’t achieved as much as I think it wants in this,” Samson said.
The lack of funding comes as climate advocacy groups have opposed support for both programs as wasteful projects fail to achieve the required emissions cuts in the near term, and oppose support. for an industry that has reported record profits.
The government has also framed the budget as one of the fiscal constraints it hopes will allow private capital to do much of the heavy lifting to keep Canada afloat.
“Canada must either respond to this historic moment, this remarkable opportunity before us, or we will be left behind as the world’s democracies build the clean economies of the 21st century. ,” said Ms. Freeland.
© 2023 Canadian Press
