Thank you, Madam Chair.
Good morning, members of the committee. Thank you for inviting me here today on behalf of the cement and concrete industry to discuss the impact of the U.S. Inflation Reduction Act.
First, here are a few facts about my industry.
Concrete is the world’s most used and most important building material. It is the foundation of economic growth and infrastructure in communities large and small, providing a cost-effective, reliable solution to building durable roads, bridges, water mains, sidewalks, schools, hospitals and community centres, and the list goes on.
Our industry generates more than $76 billion in annual economic activity and employs over 158,000 Canadians in good-paying jobs in communities across Canada. However, making the cement that holds concrete together produces a lot of carbon pollution—about 1.5% of total emissions in Canada and 7% globally. For our industry, the scientific and economic imperative is clear: We need to transform our industry for the net-zero future.
That’s why we were the first industry to join Canada’s net-zero challenge, committing to full transparency on how we plan to meet our targets. However, we can’t do it alone. Last month, we released a road map to net-zero concrete in collaboration with the Department of Innovation, Science and Economic Development, a first-in-kind collaboration, with a goal to avoid 15 megatonnes of carbon emissions by 2030 and to map the combination of technologies, fiscal incentives and regulatory and policy frameworks needed to decarbonize heavy industry.
We have already made significant progress, and there is still some low-hanging fruit remaining to be harvested, but with approximately 60% of our emissions resulting from the immutable chemistry of making cement, we know deep investments in innovative and expensive technologies, such as carbon capture, utilization and storage, or CCUS, are unavoidable if we are to achieve net zero.
Canada is already a leader in CCUS technologies, and the cement sector is at the heart of much of that investment, but the barriers to commercialization remain daunting. To give you an idea of the magnitude, for the capital needed to build a carbon capture plant in Canada or the U.S., a company could build two new cement facilities in China. Simply put, building a capture plant is greater than the value of the cement facility itself.
Recognizing market barriers to CCUS, governments around the world have entered the race to commercialize the technology and reap the benefits of emissions reductions and improved economic competitiveness for industry through the low-carbon transition. While Canada is off to a good start with the net-zero accelerator fund and a proposed investment tax credit for CCUS, the enactment of the Inflation Reduction Act means the U.S. has rapidly sprung ahead in the race.
The IRA introduces more than $369 billion in incentives for clean energy and climate-related program spending, including funding to encourage CCUS projects, which creates a significant risk that companies wanting to invest in emissions-reducing technology in Canada are at a competitive disadvantage vis-à-vis their U.S. counterparts. In addition to the significantly larger funding amounts offered under the IRA, one of the biggest gaps it fills is the production value gap. It provides a predictable return on investment by paying producers for each tonne of CO2 sequestered.
In comparison, Canada’s efforts have focused only on upfront capital subsidies, leaving investors exposed to unpalatable operational risks in an environment where, despite the carbon tax, the production value of captured carbon remains entirely unpredictable. In other words, investors in U.S. projects can now calculate with confidence what the long-term ROI on a CCUS project will be, making Canadian investments significantly riskier in comparison. Cement companies, like many industries in Canada, are part of large multinationals, and Canadian divisions must compete within their companies for projects.
Canada has been successful as a destination of choice for internal allocation of capital to CCUS projects and in fact is home to two of the most advanced full-scale CCUS projects in our sector—one in Edmonton and the other in the Bow Valley region of Alberta. If Canada wants to remain competitive, capital supports must be paired with a well-designed market surety mechanism, such as carbon contracts for difference, as proposed in the fall economic statement.
We welcome the federal government’s commitment to seizing the opportunities provided by a net-zero economy, but thoughtful and well-designed implementation of these incentives will be needed for Canada to remain a first choice for the trillions in private capital waiting to be invested in clean technologies around the world. Budget 2023 is our next opportunity to course correct and provide Canadians with the economic and environmental benefits from the low-carbon transition. The opportunity is within our reach. We need to take it, and quickly.
Thank you.