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Federal budget correctly links climate action with economic growth

VICTORIA — Mark Zacharias, special advisor at Clean Energy Canada, made the following statement in response to the federal government’s Budget 2022:

“Today’s federal budget was the first step toward realizing last week’s historic Emissions Reduction Plan to reach Canada’s 2030 climate target. It’s also the first Canadian budget that truly links climate action with economic growth. In today’s world, they are two sides of the same coin.

“A welcome surprise was the addition of $3.8 billion for critical minerals, including those that feed into clean technologies. This past month witnessed the announcements of numerous electric vehicle and battery manufacturing facilities across Ontario and Quebec. This new funding will help Canada realize its vision of building an “end-to-end” battery supply chain through which Canada can do it all, from sourcing the materials to building the parts, batteries, and clean cars.

“The Canada Growth Fund also follows this theme of linking climate and economic action, with $15 billion to diversify our economy and grow our exports while helping Canada meet its climate targets.

“As one of Canada’s highest-polluting sectors, transportation must be decarbonized in short order. The promised funding for zero-emission vehicle purchase incentives and charging infrastructure will help drivers shrink their carbon footprint and their fuel bills, though we await further details from Transport Canada regarding which vehicle models will be eligible for these rebates going forward. 

“There was also nothing included for used EVs, a platform promise this government has yet to realize. Similarly, while the budget focuses on helping suburban and rural EV drivers, there is a lack of support for drivers living in apartments where charging often comes with higher hurdles. In both these cases, we must ensure the shift to electric vehicles is not just affordable but also accessible.

“On medium- and heavy-duty vehicles, together responsible for 9% of all emissions in Canada, we’re glad to see the inclusion of a forthcoming purchase incentive—something that has not existed to date—but we note that the program should ramp up sooner than three years from now if we’re serious about getting these vehicles on the road.

“The generous tax credits provided to carbon capture, utilization and storage (between 37.5% and 60%) will no doubt draw a lot of attention. While CCUS plays an important role on the path to net zero—especially direct air capture, which receives the top-end tax break—we’d prefer to see this level of support directed toward electrification and clean technology (the latter only receives a proposed 30% tax credit, for comparison). That said, the exclusion of enhanced oil recovery from eligibility helps ensure this measure doesn’t increase oil and gas production.

“On the subject of electrification, just under $900 million over eight years has been earmarked for clean electricity, which does not match the scale of what’s required to meet Canada’s Clean Electricity Standard (a requirement for our electricity grid to be 100% clean by 2035) let alone the scale of electrifying the better part of our economy en route to a net-zero 2050. The federal government should work with provinces and regulators, who also share this responsibility, to ensure we can power the very future we’re planning.

“The funding included for buildings and infrastructure is a start, including a total of over $300 million set aside for a green building strategy and decarbonizing the construction sector. This money must now be clearly linked to a federal Buy Clean commitment and tied to future infrastructure investments. Canada is currently falling behind its American neighbours in this area.

“When all is said and done, this is a solid budget that lives up to the promise of last week’s Emissions Reduction Plan. Importantly, it links economic growth with climate action.

“While some will always look for reasons to stall clean energy investments, wondering if now is the time, our response must be unequivocal: now is the only time. No line item in this budget costs more than the climate crisis will cost Canada. No emissions-intensive industry has a future without a pathway to clean energy.

“We are not just building for the future—but also competing for strategic footholds in the present. We are competing with our largest trading partners as they invest billions to build out burgeoning new industries: electric vehicles, batteries, hydrogen, and more. And we are competing against climate change itself.”

KEY FACTS

Climate and clean economic measures in the budget total $28.2 billion, roughly half of new spending, with Budget 2022 fully funding the federal government’s recently released Emissions Reduction Plan

On the clean economy:

  • $15 billion toward the Canada Growth Fund, which aims to “reduce emissions and contribute to achieving Canada’s climate goals… diversify the economy and bolster exports by investing in the growth of low-carbon industries and new technologies,” and restructure critical supply chains in “areas important to Canada’s future prosperity.”
  • $2.2 billion to the Low Carbon Economy Fund over seven years as detailed in the Emissions Reduction Plan.
  • The government will engage with experts to establish an investment tax credit of up to 30% for cleantech development focused on net-zero technologies, battery storage solutions, and clean hydrogen.

On critical minerals and battery supply chain:

  • Up to $1.5 billion over seven years, starting in 2023-24, for infrastructure investments that would support the development of the critical minerals supply chain, with a focus on priority deposits.
  • $79.2 million over five years for Natural Resources Canada to provide public access to integrated data sets to inform critical mineral exploration and development.
  • The introduction of a new 30% Critical Mineral Exploration Tax Credit for specified mineral exploration expenses incurred in Canada. 
  • Up to $1 billion over six years on a cash basis, starting in 2024-25, to Innovation, Science and Economic Development Canada for the Strategic Innovation Fund. Combined with $500 million drawn from existing program funding, this will provide $1.5 billion in targeted support towards critical minerals projects, with prioritization given to manufacturing, processing, and recycling applications. The government will also explore potential opportunities to support the growth of the solar panel industry through this envelope.
  • $144.4 million over five years to Natural Resources Canada and the National Research Council to support research, development, and the deployment of technologies and materials to support critical mineral value chains.
  • $10.6 million over three years, starting in 2024-25, to Natural Resources Canada to renew the Centre of Excellence on Critical Minerals and help developers of critical minerals navigate regulatory processes and existing support measures.

On clean vehicles:

  • An additional $1.7 billion over five years to extend the Incentives for Zero-Emission Vehicles (iZEV) program until March 2025.
  • $547.5 million over four years to Transport Canada to launch a new purchase incentive program for medium- and heavy-duty ZEVs.
  • $400 million over five years to Natural Resources Canada to fund the deployment of ZEV charging infrastructure in suburban and remote communities through the Zero-Emission Vehicle Infrastructure Program. 
  • $33.8 million over five years, starting in 2022-23, to Transport Canada to work with provinces and territories on long-haul zero-emission trucks.
  • To decarbonize vehicles already on the road, $199.6 million over five years and $400,000 ongoing, to Natural Resources Canada to expand the Green Freight Assessment Program, which will be renamed the Green Freight Program.
  • $500 million in investments from the Canada Infrastructure Bank in large-scale urban and commercial ZEV charging and refueling infrastructure.

On clean electricity:

  • $850 million ($600 million to the Smart Renewables and Electrification Pathways program and $250 million for large clean electricity projects) toward growing clean electricity supply and modernizing Canada’s energy grid.
  • $25 million to Natural Resources Canada to establish Regional Strategic Initiatives to work with provinces, territories, and relevant stakeholders to develop net-zero energy plans.
  • $2.4 million to Natural Resources Canada to establish a Pan-Canadian Grid Council, which would provide external advice in support of national and regional electricity planning.

On carbon capture, utilization and storage:

  • $2.6 billion over the next five years—and then $1.5 billion annually until 2030—for companies that invest in eligible carbon capture, utilization and storage projects.

RESOURCES

Report | The True Cost

Submission | Submission for the Pre-Budget Consultations in Advance of the 2022 Federal Budget

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