While the United States rolls out hundreds of billions of dollars in clean energy funding through the Inflation Reduction Act, Canada’s initiatives are a mess, says climate and energy analyst Chris Bataille.
“Transformative, near-zero emissions projects need to happen in Canada—we need the investment, we need the emissions reductions,” writes Bataille, an adjunct research fellow at the Columbia University Center on Global Energy Policy in an opinion piece for The Globe and Mail.
“And once we have mastered this and shown it can be done, Canada will become a source of service exports to help the world to do the same.”
He points to U.S. legislation—the “gargantuan” IRA, with its US$380 billion to $1.7 trillion for clean power and industry, the CHIPS and Science Act, and the Infrastructure Investment and Jobs Act—all designed to invest in American solutions and keep jobs in the U.S. Other countries, like those in the European Union, have moved to counter those subsidies with the Green Deal to stay abreast of investment opportunities.
“But what is Canada doing?”
Ottawa can claim to have allocated a lot of financial and political capital to decarbonization, but its efforts “simply have not been as effective” as programs and policies south of the border and overseas, Bataille contends.
The C$15-billion Canada Growth Fund (CGF), announced in the 2022 budget, is “a host of proposed investment tax credits for everything from clean electricity to carbon capture utilization and storage.” It has been gaining momentum since it was entrusted to PSP Investments earlier this year, a public sector pension fund manager. (Newly-named CEO Patrick Charbonneau says the fund has prioritized 20 possible investments in a pipeline of more than 60, reports the Globe.)
But the CGF, and other programs like the $8-billion Net Zero Accelerator fund, are not yet in operation, writes Bataille, noting that many of the opportunities presented in Canada’s investment tax credits still need to be signed into law.
“Industrial firms are caught in a quagmire of onerous, complicated, and unclear processes when trying to access our various transformative investment funds, with the disbursement of resources not keeping up with the pace of investment decisions,” he says.
The programs make it appear that Canada “is in the game” of attracting energy transition investments, “but the truth is, we are failing the net-zero investment certainty test.”
Bataille, who was a lead author for the industry chapter of the Intergovernmental Panel on Climate Change’s Sixth Assessment Report, says Canada must prioritize efforts to reduce climate pollution from high-emitting sectors like cement, metals, fertilizers, and jet fuel by aiming for net-zero production emissions. This will increase production costs, but by “surprisingly little” compared to the benefits.
“If Canada is going to provide a welcoming place for investment, and high-paying jobs for its citizens, then we need to help these industries to close the cost gap.”
Meanwhile, a federal body devoted to cleantech financing, Sustainable Development Technology Canada (SDTC), has had its funding powers frozen following a whistleblower complaint, Bataille notes. Innovation Minister François-Philippe Champagne announced the freeze earlier this month after an investigation raised questions about conflict-of-interest breaches and financial mismanagement. The House of Commons ethics committee has since agreed to hear testimony on the matter.
Companies say the freeze will disrupt the sector and have a “disastrous effect” on cleantech startups seeking financing, with uncertainty about the duration of the freeze raising cash flow concerns. Grants that have been announced will remain in place, but stakeholders worry that some projects will be picked up in the U.S. instead, amidst the surging investments there.
“If we’re not viewed as being supportive of early-stage companies, they’ll move south,” said Marty Reed, a partner at Evok Innovations, a cleantech venture capital fund with a portfolio of companies that received SDTC grants.
“I think we need to do a better job of keeping Canadian companies here and helping them accelerate,” he told the Globe. “Slamming the brakes on an absolutely critical piece of this ecosystem right now really would be catastrophic.”
Bataille likewise decries the freeze, while acknowledging that “in times of increasing debt levels and rising interest rates, Canada must be prudent in spending taxpayer dollars.” Still, Ottawa must “move ambitiously to secure a prosperous future in a global low-carbon economy for our children and, increasingly, ourselves.”
In addition to ensuring that tax credits are passed into law, Bataille urges Ottawa to announce an ambitious schedule to apply carbon pricing to all emissions and align its industrial carbon pricing benchmarks with national decarbonization goals. This move must be accompanied by policies that protect investments in emissions reductions.