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Future Economy

Creating a Canadian Advantage: Policies to Help Canada Compete for Low-Carbon Investment

July 2023
By Bentley Allan, Michael Bernstein

There is a risk that Canada could miss out on the huge opportunities available in the low-carbon transition because our investment environment is less attractive than that in the United States. In particular, the US Inflation Reduction Act (IRA) has opened up a wide gap between the revenue available from public-policy sources for new low-carbon technology deployment in Canada versus the US.

Creating a Canadian Advantage looks at ten low-carbon technology cases and recommends two policy options to address this imbalance: a systematic narrowing of revenue gaps by converting uncertain carbon market revenues into bankable revenues, using a policy like contracts for difference; and the strategic deployment of production tax credits as part of an industrial policy push in high priority sectors.

This working paper reports the preliminary findings of an ongoing research project to analyze the differences in policy-based economic incentives for decarbonization in Canada and the US. These findings may be refined as the research evolves.

In July 2023, a number of updates have been made to this new version of the paper:

  • All of the new investment tax credits announced in the 2023 federal budget are now included. We have also updated some additional assumptions in the calculations based on feedback from the previous version.
  • Our policy recommendations have been updated to reflect the 2023 federal budget.
  • New sections have been added on critical minerals and wind power.
  • The sections have been reorganized to clearly illustrate which technologies stand to benefit from changes to industrial carbon pricing systems, and which do not.

 

In addition, new appendices have been added that describe the eligibility of greenfield versus brownfield investment in different provincial carbon pricing systems, and list provincial and state incentives for various project types.

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Download Appendix B
Download Appendix C

About the Authors

Bentley Allan, PhD

Transition Pathway Principal

Bentley Allan, PhD, is a Transition Pathway Principal at the Transition Accelerator, as well as an Associate Professor of Political Science at Johns Hopkins University. Dr. Allan is an award-winning scholar who has written on the dynamics of international order, science and politics, climate policy, and the political economy of decarbonization. He provides regular advice to government and industry on geopolitics, industrial strategy, and policy.

He has co-lead the development of three sector strategies and roadmaps in collaboration with industry partners. He is the co-coordinator of the Centre for Net-Zero Industrial Policy which advances research and action to strengthen and mobilize Canada’s expertise in modern industrial policy, enabling strategic collaboration between government, industry, indigenous communities, labor, and financial institutions in pursuit of good jobs and a competitive economy.

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Michael Bernstein

Executive Director

Michael Bernstein is the executive director of Clean Prosperity, a Canadian non-profit that works toward practical climate solutions that reduce emissions and grow the economy. Michael is an economist by training. He is an advisor to elected leaders across the political spectrum, and a frequent commentator on climate policy. He was named on The Hill Times’ Top 100 Lobbyists List for 2021.

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Cite as: Allan B. and Bernstein M. (2023). Creating a Canadian Advantage: Policies to help Canada compete for low-carbon investment. Transition Accelerator and Clean Prosperity. Version 2.

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