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

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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. Now the U.S. government is offering a tax benefit to any such vehicle made in North America, not just 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 the manufacture of cars and trucks that run without gasoline.

Earlier this year, US President Joe Biden invoked the US 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 to provide more aid to Ukraine.

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

An “opportunity” for Canada

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 Actwhich 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 itsays Kirsten Hillman, the Canadian ambassador to the United States, in an interview with CBC News.

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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 Discord Tax Credit

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

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

An earlier version of the bill, titled Build Back Bettereffectively reserved a portion of the tax credit for vehicles assembled only in the United States.

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

But some US automakers say the new credit is largely unnecessary.

For a vehicle to be eligible for the maximum credit of US$7,500, its battery will have 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 battery components.

[Aucun véhicule] would only qualify for full credit when the new requirements come into effect. Zerounderlines, in a letter, a group of lobbying of the automobile industry.

An analysis by the Congressional Budget Office, a non-partisan body in the United States, reveals that 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 Canadian underground, the future of the industry?

This is 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 supply essential minerals, has already invested in Quebec.

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

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

According to Mr. Philipps, 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 reserves of lithium and manganese, compared to 3.1% of cobalt reserves.

At the head of the Canadian Vehicle Manufacturers Association, Brian Kingston says he is relieved by certain changes contained in the new American 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 purchase incentives. .

When it comes to a new North American supply chain, Kingston is clear: This one won’t appear overnight..

Based on text by Alexander Panetta, CBC News

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