Canada would have a lot to gain from the new US climate law

Canada has a lot to gain with the new US climate law

Big changes are needed to adapt the auto industry to Washington's demands. Ottawa could play a role in this transformation.

With the recent passage in the United States of a major bill aimed at combating climate change, Canada could play a leading role in the transition to greener means of transport. .

The bill in question has thus made it possible to remove an irritant in relations between Washington and Ottawa, which had existed for several months, concerning the production of electric vehicles. From now on, the American government offers a tax advantage to any vehicle of this kind manufactured in North America, and not only in the United States.

Among the other provisions contained in this law , there is also a fund, worth several hundred million dollars, intended to give wings to a new local industry for the production of battery components for electric vehicles.

The United States is increasingly concerned that it will become dependent on its Chinese rival for the minerals essential to manufacture gasoline-free cars and trucks.

Earlier this year, U.S. President Joe Biden invoked the U.S. Defense Production Act to allow him to fund projects that would reduce Washington's dependence on rival nations.

The Head of State now has the money to do so: US$500 million is earmarked for this purpose in the new law, after another US$600 million was included in a recent bill. law to provide more aid to Ukraine.

These funds can now be used by the White House for the establishment of new providers for lithium, nickel, cobalt, graphite and manganese, as well as heat pumps.

On this side of the border, officials hope that some of this money will be invested to develop new projects for the production of battery components in Canada.

These officials cite a document, recently posted on the White House website, that specifically describes Canada as a domestic source of materials, under the Defense Production Act, and that discusses potential opportunities for cooperation in the critical minerals sector .

The way the bill is structured, there is a possibility that we could take advantage of it, says Kirsten Hillman, the Canadian ambassador to the United States, in an interview with CBC News.

This will fuel domestic production in the United States. And we also include Canada as a domestic source. So we anticipate that there will be joint opportunities.

The climate effectiveness of the new law, which in its most optimistic projections is expected to reduce emissions by around 3.4 billion tonnes of CO2 by 2030, depends largely on the speed when the many environmental and energy projects will be launched.

Among the sources of uncertainty was a tax credit that fueled tensions between the United States. States and Canada, to the point of pushing Ottawa to threaten to impose tariffs on American products.

An earlier version of the bill, titled Build Back Better, effectively restricted a portion of the tax credit to vehicles assembled only in the United States.

Automotive Parts Manufacturers Association President Flavio Volpe hints at a pitfall avoided when he talks about the more Canada-friendly provisions in the new bill. It may even be a chasm that has been avoided.

But some U.S. automakers say the new credit is largely unnecessary.

For a vehicle to qualify for the maximum US$7,500 credit, its battery will need to contain more and more components produced in North America; the rate must increase from 50%, in 2024, to 100% in 2028.

The problem is that North America produces few components of batteries.

[No vehicle] would qualify for full credit when the new requirements come into effect. Zero, underlines, in a letter, an auto industry lobbying group.

An analysis by the Congressional Budget Office, a non-partisan body in the United States, reveals that& #x27;a very small percentage of vehicles would qualify for the credit.

Over a 10-year period, barely one million vehicles would qualify. This represents less than 1% of the approximately 150 million vehicles expected to be sold in the United States during this decade.

The site of Lithium America North, in La Corne, could be part of the supply chain to manufacture batteries in North America.

That's it where the Canadian mining sector could come into play.

One ​​of the companies that would like to receive part of the money from the American government, in order to provide essential minerals, has already invested in Quebec.

Keith Philipps, president of Piedmont Lithium, a North Carolina-based company, says it is not yet possible to know what conditions will be set by Washington, let alone which projects the United States would like to fund.

His company holds minority shares in a lithium mine in Abitibi-Témiscamingue, where mining operations should begin next year.

According to Mr. Phillips, a similar mine would cost US$600 million if built in the United States; in his eyes, public money is a lifeline for projects that have rarely obtained bank loans.

In Ottawa, a $4 billion budget has already been announced to develop the essential minerals sector.

However, the country currently only has 2 .5% of known lithium and manganese reserves, compared to 3.1% of cobalt reserves.

Canadian Vehicle Manufacturers Association head Brian Kingston says he is relieved by some of the changes contained in the new US bill. But he is particularly concerned that manufacturers cannot meet the sales targets for zero-emission vehicles, set by Ottawa, without major transformations, whether in terms of charging capacity, energy infrastructure or even incentives to reduce emissions. #x27;purchase.

When it comes to a new North American supply chain, Mr. Kingston is clear: This one will not appear in a night.

Based on text by Alexander Panetta, CBC News

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