Opinion: U.S. IRA is a game changer for Canada’s climate and energy security
March 23, 2023
By Bob Larocque
Bob Larocque, president and CEO of the Canadian Fuels Association, says the U.S. Inflation Reduction Act (IRA) has further weakened Canada’s investment climate for low-carbon transportation fuels.
Read his full statement, published on March 7:
“Canada has everything it takes to be a global leader in low-carbon transportation fuels – energy infrastructure, sustainable feedstocks and expertise – everything except for a competitive investment climate with the U.S.
The North American fuels market is highly integrated and Canada competes with the U.S. for investment. For over two decades, the U.S. has been implementing robust programs, such as tax credits, to attract investment in clean fuels. This has resulted in strong, clean fuels production capacity in the U.S., and Canada becoming more reliant on clean fuel imports.
Canadian Fuels Association (CFA) members are some of the largest producers of clean fuels today and, since 2020, members have been steadfast in their commitment to produce more clean fuels in Canada. Then came the U.S. Inflation Reduction Act (IRA) last summer, doubling down with a suite of new clean fuel production measures; including new, generous Production Tax Credits (PTC) for low-carbon road transportation fuels and sustainable aviation fuel.
This PTC is a complete game changer, dramatically tipping project economics in favour of clean fuel projects in the U.S. The PTC will also result in more Canadian-grown feedstocks being exported to the U.S., translating into significant, lost economic benefits to Canada and undermining our energy self-sufficiency.
And the timing could not be worse. CFA members have plans to implement large-scale renewable diesel, sustainable aviation fuel (SAF), hydrogen and ethanol projects – highlighting their commitment to clean fuels and support for Canada’s climate goals as we continue Driving to 2050. These projects, worth $8B and with the potential to deliver 10 MT of GHG reductions from coast-to-coast, are awaiting final investment decisions; but companies are re-evaluating the business case for building in Canada. Just last Friday, Parkland discontinued plans for a stand-alone renewable diesel facility in Burnaby, B.C., citing the IRA as a key factor.
This means that without investment parity, there is a growing concern that more of these projects are at risk of being delayed or being built in the U.S.
Parkland’s decision reinforces the need for an urgent response by the Government of Canada, and that is why we are calling for the introduction of a Clean Fuel Production Tax Credit in Budget 2023. This would apply to all clean fuels produced in Canada, including ethanol, renewable diesel, sustainable aviation fuel and hydrogen and provide the required investment certainty. Like the U.S., the credit rate would vary according to carbon intensity, meaning the higher the GHG reductions achieved, the higher the credit value.
The economic and climate benefits of clean fuel production in Canada would extend throughout the value chain, from agricultural and forestry feedstock providers to distribution, while decreasing our reliance on imports and creating thousands of direct and indirect jobs for Canadians. We cannot risk losing these added economic and climate benefits for Canada.
In a recent speech, Environment and Climate Change Minister Stephen Guilbeault said “The Inflation Reduction Act removes any doubt that we can stick with the status quo. It has made the rush for innovation in clean tech more competitive than ever.” Our transportation energy sector has been pivotal to Canada’s economic success for over a century. We have an opportunity to be a world leader in terms of clean fuel production while meeting Canadians’ evolving energy needs and climate goals.
Budget 2023 is a critical juncture. We must respond to the IRA or be left behind at the expense of our economy, energy and climate security.”
This article is part of Biofuels Week 2023. To read more articles on biofuels, click here.
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