Thank you, Chair. It is an honour to be invited to present on these critically important issues.
We're hear to discuss the Inflation Reduction Act generally, and I will speak more specifically to the deployment of carbon capture and storage and how that relates to the United States and Canada.
First, in the recently passed Inflation Reduction Act, the United States significantly upgraded the 45Q tax credit for CCS in both value and ease of use, particularly by introducing the direct pay mechanism. The value for carbon capture was increased so that geologic storage is eligible for $85 U.S. per tonne, and enhanced oil recovery is eligible for $60 U.S. a tonne. In effect, the United States will now become the largest buyer of carbon in the world. That's unique and notable in that the United States sees that its role is to buy carbon at scale.
Second, the United States understands that to attract capital markets to carbon capture and carbon management generally, the economic signal needs to be strong and clear. If the government overpays for carbon in the near future, industry will create scale and, through economies of scale, reduce costs. Therefore, over the medium term, the government will end up getting more tonnes of CO2 per dollar committed, so policy certainty and ease of converting carbon credits into cash are two critical features of the Inflation Reduction Act.
Third, if Canada continues not to be competitive on CCS and carbon management, investment capital from Canada in our pension sector and the banks will in fact be deployed into the United States, creating industrial jobs there and helping the United States achieve their 2050 goals.
Fourth, Canada must increase policy certainty of carbon pricing through perhaps a contract for differences or a production tax credit, and increase the ease of converting carbon credits into money through either a contract for differences mechanism or a direct pay mechanism.
These themes of increasing certainty, increasing value and increasing the ease of turning carbon credits into cash are what Canada must be moving towards.
I want to conclude by saying that support for carbon capture is not a subsidy to oil and gas. It's a critical investment in reaching net zero. It's essential for the cement industry, the steel industry, the power industry and the ammonia fertilizer industry.