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Biden’s climate plan earns green cred while avoiding Canada-style carbon taxes

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Biden’s plan offers a tax-rebate of up to US$7,500 for people who buy electric vehicles. The Liberals have a similar program but the credit tops out at $5,000

 With the long-awaited passage last month of U.S. President Joe Biden’s climate legislation, America now has a plan environmentalists say will significantly reduce emissions, vaulting the U.S. from a laggard to a leader on climate change.

 With the long-awaited passage last month of U.S. President Joe Biden’s climate legislation, America now has a plan environmentalists say will significantly reduce emissions, vaulting the U.S. from a laggard to a leader on climate change.

The Inflation Reduction Act, as the Biden administration’s bill is officially known, has a collection of measures, including efforts to lower drug prices and reduce forest fires, but it has nearly US$400 billion in spending on climate measures. Several independent forecasts agree it will reduce U.S. emissions by up to 40 per cent below 2005 levels by 2030, in line with Washington’s commitments under the Paris climate agreement — and the same goal Canada has pledged to meet.

Billions of dollars are in the bill for home retrofits and rebates for American consumers who buy solar panels or heat pumps. It includes tax incentives for companies that invest in renewable power plants, like solar or wind farms, but also nuclear plants and carbon capture facilities.

Eddy Pérez, international climate diplomacy manager with the Climate Action Network, said the U.S. bill has made greening the electricity grid a public priority.

“From the U.S. perspective, their point is climate investments are public investments and this is not something that we have seen in Canada yet.”

Canada’s Environment Minister, Steven Guilbeault, said he was pleased to see the U.S. bill clear the last legislative hurdles.

“We need the United States to be fully engaged, whether it’s on nature protection or climate change, to be able to hope to achieve the goals that we have collectively, so that’s really good news,” he said. “It’s going to stimulate the renewable energy clean-tech sector, which is also something we should all be happy about.”

The Liberals unveiled a tax credit for clean technology investments in the spring budget, planned as a 30-per-cent subsidy on qualifying investments, but the details have not been released so it is unclear if it will be as broad as the U.S. proposal. The U.S. credit starts at 30 per cent and can rise to as much as 60 per cent of investment.

Biden’s plan also offers a tax rebate of up to US$7,500 for buyers of electric vehicles. The Liberal government has a similar program but the credit tops out at $5,000. At current exchange rates, that makes the U.S. credit nearly twice as valuable.

The original version of the U.S. electric-vehicle tax credit was to exclude any vehicle not built in America, but pressure from Canadian diplomats and others appears to have changed that, allowing for vehicles manufactured in Canada to be eligible. Guilbeault said Canada’s electric-vehicle credit, while offering half the subsidy, has fewer conditions.

“There’s only about 20 vehicles that are now eligible for the U.S. rebate. In the case of Canada, right now, 50 vehicles are eligible for the Canadian rebate,” he said.

Guilbeault doesn’t discount the possibility Canada will be under pressure to add more subsidies to stay competitive.

“I think we need to be kept on our toes. I think it’s a good thing,” he said. “The fact that the U.S. is out there with this very ambitious plan is going to ensure that we stay on top of our game.”

The minister said he welcomes the U.S. investment, but says the Canadian government is still spending more than $100 billion on climate change efforts.

“In terms of per capita effort, what the U.S. has adopted is a third of what we’re doing in Canada. It is still significant, but even from an investment, a purely investment point of view, per person, we’re doing three times more in Canada than what the U.S. is doing.”

He also defended Canada’s carbon tax, despite the U.S. not implementing one, by arguing that Biden is doing what is politically possible in the U.S. — and Guilbeault thinks a federal carbon tax would stand less chance of passing in Washington.

Robert Hornung, president and CEO of the Canadian Renewable Energy Association, said reaching net-zero means greening the electric grid and creating much more energy to power electric vehicles and heat pumps that will be moved off fossil fuels.

“The U.S. has made a significant step forward here. They really stepped up their game. Canada’s going to have to do the same now and then have to figure out what steps it will take to ensure we remain competitive,” he said.

Canada’s carbon tax is set to continually rise over the next decade until it reaches $170 per tonne in 2030. Hornung said the industry needs to understand what happens after that, and says there are loopholes that still need to be closed for it to really succeed.

“Taking steps to make carbon pricing more stringent in the electricity sector can help drive more investment in renewable energy, providing clarity on the future of carbon pricing after 2030 drives more investment in renewable energy,” he said.

Hornung said every country is different and Canada doesn’t have to match the U.S. approach exactly, but many renewable firms conduct business globally and the new incentives will draw investment.

“It has a pretty heavy reliance on the use of incentives to drive investment in renewable energy and energy storage. And that is going to pose a challenge for Canada, because we don’t have an equivalent level of policy support,” he said. “The incentives are much more direct and tied to the people making these investments and so that’s a pretty strong draw.”

The U.S. bill puts the tax subsidies in place for 10 years, a move that it is hoped will allow industry players to make long-term investments. Pérez said he hopes the bill prompts those sorts of changes, but he is concerned about the political resolve in the U.S.

“In the United States, potentially, if, we get to a Congress that does not want to advance climate action, things could get much more difficult when it comes to meeting the U.S. 2030 target,” he said.

Source : National Post

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