Thank you, Madam Chair and the rest of the international trade committee, for the opportunity to join you here on the unceded traditional territory of the Algonquin Anishinabe people to discuss the impact that the American Inflation Reduction Act has on Canada's biogas and renewable natural gas sector.
For the purpose of my testimony, I will be referring to the Inflation Reduction Act as the IRA and to renewable natural gas as RNG.
The Canadian Biogas Association serves as the collective voice of Canada's biogas and RNG industry. Founded in 2008, the Canadian Biogas Association has over 180 member companies representing farmers, municipalities, utilities, technology developers, consultants, finance and insurance firms and affiliate organizations, all with a focus on building the biogas and RNG sector in Canada.
For those of you who may not be familiar with biogas and RNG, our product is a drop-in gaseous fuel that is lowering the emissions of Canada's energy system today, with over 300 projects providing low-carbon energy in every province. We call biogas and RNG a drop-in fuel because both are a form of methane, just like natural gas. The major difference is that the methane produced by our members comes from organic materials from farms and municipalities rather than from drilling into the ground. This difference in methane source translates into a significant drop in greenhouse gas emissions associated with its production.
As you know, the IRA has upended the investment landscape for the clean energy and clean technology sectors, bringing in generous production and investment tax credits as a means of kick-starting the American domestic industry. As this committee has heard throughout its study, these measures have made Canada an uncompetitive investment jurisdiction overnight, especially in the biogas and RNG sector. As my American counterpart recently stated, the IRA gives developers and financiers “certainty and a competitive edge that will fuel growth of the biogas and clean energy industry for years to come”.
To put it mildly, these new American tax credits have placed biogas and RNG projects in Canada, which were days away from their final investment decisions in August, permanently on hold. Canada must respond; otherwise, projects that hold immediate emission reductions will continue to be paused and/or go south of the border, where proponents can choose between a production tax credit worth 2.6¢ U.S. per kilowatt hour or an investment tax credit worth 30% of their project costs.
We recognize that Canada has started to lay the foundation of a robust response to the IRA's threat to our competitiveness. The Canadian Biogas Association strongly supports the investment tax credits for clean technologies and hydrogen that were introduced in the fall economic statement of 2022. These investment tax credits will help projects get built and bolster domestic clean energy security.
However, there is a crack in the foundation. Finance Canada did not include provisions for biogas and RNG in the fall economic statement's new clean technology investment tax credit. We know that the federal government is investing in the long-term decarbonization of the economy with hydrogen and other clean technologies, but leaving out a technology that is decarbonizing the gas Canadians heat their homes with every day is a major oversight. I have heard from my members that if biogas and RNG projects were included in Canada's new clean technology and hydrogen investment tax credits, they would be able to execute 80% of their projects. Without inclusion in Canada's response to the IRA, they have made it clear that it is unlikely that any new biogas or RNG projects will be built in Canada—not when they can receive favourable tax treatments in the U.S.
Our recommendation is an easy fix for Canada. Add biogas and RNG projects to the investment tax credit brought in by the fall economic statement and ensure that all low-carbon gaseous fuels are treated equally. This will put Canadian biogas and RNG projects on equal footing when it comes to competing for investment capital. It will help my members build projects, create jobs and reduce emissions with a proven technology.
Thank you for your time. I look forward to your questions.