Thank you, Chair.
Founded in 1891, the Canadian Electricity Association is the voice of the electricity business in Canada. It is comprised of public and private enterprises and represents the entire electricity value chain, from production to delivery to clients, from coast to coast.
Canada's electricity system is the envy of the world. It is over 75% non-emitting, thanks to hydro and nuclear generation. Only 24% of Canada's electricity is generated from fossil fuels like coal, oil, and gas.
Respecting the committee's request to focus on a single issue, my remarks today will focus on corporate tax policy, specifically on a suite of recommended changes to the federal tax system that can be applied to carbon capture and storage, or CCS.
Canadian consumers expect the electricity industry to continue to provide them with safe, reliable, sustainable, and competitively priced electricity that enhances their quality of life and responds to the shift away from carbon. Increasing demand, the transformation to a smart grid future, plug-in electric cars, and the electrification of mass transit in our urban centres will require the electricity system to grow and adapt.
These objectives pose a number of challenges given the industry's ageing infrastructure and escalating costs, not to mention the increasing rigour of regulatory requirements.
CCS technology has the potential to provide remedies to some of these challenges and Canada has an opportunity to be a world leader in this area. However, since CCS is not yet economically viable, it is essential to make changes to federal tax regulations to encourage the commercial development of projects using a variety of new CCS technologies.
CCS involves the removal of carbon dioxide from thermal generation. It requires a wide range of processes and equipment from pre- and post-combustion capture, oxy-fuel combustion, to pipelines that transport carbon dioxide from the capture plant facilities to the sequestration site. The requirements to implement CCS are great.
CEA recommends that budget 2010 make changes to the capital cost allowance rates of the Income Tax Act through the addition of two new provisions to schedule II of the regulations with respect to subparagraph (d) of class 43.1. The exact wording of our proposals can be found in our submission, and I encourage the committee members to reference the suggested changes as well as our recommended changes to investment tax credits. We recommend that ITCs be made available for CCS projects in a manner analogous to scientific research and experimental development projects, the SR&ED projects.
In addition to these necessary changes to the Income Tax Act, if Canada is to lead on CCS and clean energy, we must remain competitive. It's important to note the extent to which the U.S. already uses ITCs to promote CCS technology. Examples of U.S. action and incentives in this area include a credit of $20 U.S. per metric ton of carbon dioxide captured and disposed of in secure geological storage, and a credit of $10 per metric ton of carbon dioxide captured and used in enhanced oil or natural gas recovery and disposed of in secure geological storage.
In terms of investments in smart grid and clean energy initiatives, the United States, for example, spends millions on matching grants for smart grid technology as well as on loan guarantees for renewable energy systems. It also spends more than $3 billion on energy research, including CCS.
While the focus of our submission this year is on CCS, we do not wish to lose sight of what we feel are other critical tax issues. Principal among them is the need to address CCA rates for overall transmission and distribution assets, and CCA rates for smart grid initiatives, including smart meters.
The emerging focus on smart grid is revolutionizing the energy sector, and electricity is going to be at the centre of it all. The electricity system is the backbone of the Canadian economy, and its competitiveness and ability to attract capital should be supported.
Thank you. I look forward to your questions.