Critical mineral tax credits and tripling of cleantech funding: A look at the Liberal platform on energy and climate change

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A re-elected federal Liberal government is proposing “to double” the tax credit for expenses incurred in exploration for so-called critical minerals, as part of its plan for Canada to tap its potential as a supplier of raw materials for the battery supply chain.

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The proposal, contained in the full Liberal platform that was unveiled on Wednesday, ties into a broader strategy, already underway, that envisions a dramatic energy transition away from fossil fuels during the next three decades, including a 40 to 45 per cent reduction of emissions, as measured in 2005, by 2030.

In effect, the Liberals’ platform reinforces many policies they introduced in recent years, proposing to increase the critical minerals exploration tax credit from 15 to 30 per cent, and to accelerate the transition away from conventional vehicles, with the percentage of new vehicles that must be zero emission by 2030 rising from 30 per cent to 50 per cent. They also plan to require oil and gas companies to reduce methane emissions by 75 per cent below 2012 levels by 2030 — up from mandated reductions of 45 per cent by 2025.

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“What we see is a continuation of the policies they have been investing in for the past five years,” said Merran Smith, executive director of Clean Energy Canada, a non-partisan think tank at Simon Fraser University in Vancouver.

But Smith said one thing that’s new in this election cycle is that all the major political parties including the Conservatives, propose massive reductions to emissions during the next decade. Indeed, by 2030, the Conservatives propose a 30 per cent cut, and the NDP is targeting a 50 per cent cut, while the Liberals’ proposal stands in the middle, at between 40 to 45 per cent below 2005 levels.

The Liberal platform in part touts many of the policies it has enacted in recent years. Its $8-billion net zero accelerator fund, aimed at helping heavy industries such as steel and aluminum decarbonize, has been used to create several high-profile, large scale public-private partnerships.

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For example, in conjunction with its mandate that zero-emission vehicles constitute 10 per cent of all new sales by 2025, 50 per cent by 2030 and 100 per cent by 2050, it has also worked with automakers to ensure zero-emission vehicles are manufactured in Canada. To that end, it has helped create roughly $6 billion in investments in electric and zero-emission vehicle industry in Canada from Ford Motor Company, General Motors Corp., Stellantis NV, Volvo Cars and others.

In July, the federal government made a string of announcements of investments from its strategic innovation fund: It offered funding to help retrofit coal-fired steel making operations to electric arc furnaces that vastly reduce carbon emissions. This included $420 million for Algoma Steel Inc. in Sault St. Marie, Ont., and $400 million for ArcelorMittal DoFasco GP in Hamilton, Ont..

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That month, the federal government also announced $439.8 million from its strategic innovation fund in support for public-private partnerships with several companies and the province of Quebec that it said would attract as much as $2 billion in investment in environmentally friendly aviation technology.

The Liberal platform also promised to eliminate fossil fuel subsidies by 2025 — a notoriously controversial proposal given there are arguments about what exactly qualifies as a subsidy, and what counts as typical government assistance to support industry and the economy.

It noted oil and gas emissions have risen 20 per cent since 2005, and now account for 26 per cent of Canada’s emissions, the largest of any sector, and proposed five-year targets and investment in carbon capture and storage to ensure emissions decline.

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“It seems they were relatively supportive of industry; they recognize it’s going to be continuing for decades,” said Charles Deland, associate director of research at C.D. Howe Institute in Calgary, an economist who previously worked for industry lobbying organizations.

The Liberal platform also offered up new policy proposals, such as the creation of a pan-Canadian grid council and a clean electricity standard to reach a net-zero emitting electricity system by 2035.

Another proposal would triple funding for “cleantech on farms, including for renewable energy, precision agriculture, and energy efficiency.”

Not all have been totally fleshed out yet: One part of the plan proposes to develop an investment tax credit of up to 30 per cent “for a range of clean technologies including low carbon and net-zero technologies with input from external experts on what technologies should be covered.”

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The platform also proposes “support and incentives for domestic procurement of Canadian clean technology.” That could include a wide range of companies, including companies that manufacture less-carbon intensive industrial products.

On a similar topic, the Liberals platform also discusses working with key trading partners, to create “Border Carbon Adjustments to imports from countries that aren’t doing their part to reduce carbon pollution and fight climate change.” It cites imports of steel, cement and aluminum as emissions-intensive industries, and suggests it would look to the European Union’s approach on this topic.

Of course, it’s not unusual for platforms to lack details, and most platforms are altered by the inevitable political realities that pop up and hamper or enable particular platforms.

Financial Post

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