In grim news for the planet writ large comes relief and even encouragement for Canada’s efforts to attract green industries.
There should be no sugar-coating it: the tenuous state of the Build Back Better bill, the US$2.2-trillion legislation at the heart of U.S. President Joe Biden’s domestic agenda, is very troubling news for the global fight against climate change.
If the spending package is not revived, after swing-vote Senator Joe Manchin announced Sunday that he opposed it, the loss of its US$555-billion in proposed climate measures will make it virtually impossible for the United States – the world’s second-largest greenhouse gas emitter, after China – to hit its emissions-reduction targets. And it will erase any lingering hope that Washington, which once would have been at the forefront of any battle of this scale, can credibly provide global climate leadership.
Strictly as a matter of Canadian self-interest, though, there may now be a bigger window of opportunity to woo the kind of climate-friendly investment the U.S. bill was meant to help attract – and an imperative to take advantage of this moment in which Canada comparatively has its act together.
That applies in particular to the building of an electric-vehicle industry that federal and provincial officials have been aggressively courting – including in advanced talks with at least three multinational companies about new battery-manufacturing facilities – while frantically trying to fend off the protectionist elements of the Biden administration’s plan.
In an interview with The Globe and Mail shortly before Mr. Manchin dealt Build Back Better a potential death blow, federal Industry Minister Franois-Philippe Champagne gamely expressed confidence about persuading U.S. Democrats to modify their plans to introduce EV purchase incentives that would be partially contingent on the vehicles being made in the U.S. While Ottawa was threatening retaliatory trade measures, Mr. Champagne was more optimistic about convincing Washington that disrupting the highly integrated Canada-U.S. auto supply chain would ultimately raise costs for American industry and consumers.
But perhaps more relevant, after this latest twist in Washington, is the case Mr. Champagne has recently been making while jetting around North America and Europe trying to convince automakers to make EV investments in Canada despite U.S. protectionist attempts. By his account, it involves encouraging them to look past relatively short-term incentives, such as the proposed rebates, and toward more fundamental, long-term advantages.
The automakers have a “high sense of urgency” at the moment, he said, because they need to start making batteries in North America to power EVs that will be rolling off assembly lines around 2024. But imminent decisions about where to do that manufacturing, involving billions of dollars in capital expenditures, “will have consequences for the next 20 to 30 years.”
That argument to weigh long-term considerations – such as which location is most conducive to developing a “green supply chain” that climate-conscious consumers may increasingly demand in coming decades – probably becomes more compelling if the short-term incentives are no longer on the table.
True, as Mr. Champagne acknowledged, there will be some degree of subsidy competition regardless. State governments in the U.S. have long offered very generous public funding for the auto sector’s capital investments. Canadian governments have been increasingly willing to match them, which is one of the intended purposes of Ottawa’s new $8-billion Net Zero Accelerator fund.
But if the subsidization is more or less a wash, absent the protectionist subsidies, then the case for some of Canada’s other competitive advantages might be stronger.
Mr. Champagne points, for instance, to Canada’s relative abundance of non-emitting electricity generation, which could be prioritized by manufacturers that want to boast a low carbon footprint. By comparison, U.S. electrical grids maintain much heavier use of coal and other fossil fuels, and that may be slow to change absent the Build Back Better bill’s proposed spending on renewable energy. (To maintain this edge, Canada also needs to increase its spending on renewables and other clean ways of meeting growing electricity demand.)
He also points to recent Canadian investments in developing low-carbon steel and aluminum; to this country’s deposits of critical minerals, which could be extracted in more ethical and environmentally responsible ways than in many other countries; and even to the proximity of southwestern Ontario’s industrial heartland to upstart Canadian quantum computing companies that could eventually help optimize EV production and usage.
Some of these advantages are still rather aspirational, and the U.S. could make some of the same claims.
What the U.S. can’t credibly claim right now is a national government with the ability to develop and execute the strategies to make those dreams a reality.
So the more Ottawa and its provincial partners can demonstrate that capacity – the more they speak in one coherent voice about developing any and all supports needed to build green industries here, matching rhetoric with detailed policies in ways they haven’t always done to date – the more of an appealing contrast they should be able to strike.
That doesn’t mean Canadians should be cheering the possible demise of Mr. Biden’s climate plans, which stands to make it all the more difficult to avoid worldwide environmental catastrophe. It’s also very possible that, even with the protectionist concerns, all that green spending in the U.S. would create more trade opportunities for Canada than it threatened.
But there is not much that governments here can do about what happens in Washington. What they can control is their own readiness to seize low-carbon investments the U.S. may be passing up with its dysfunction.