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.