Thank you, Chair and members of the committee. It's an honour to participate in your important work.
The devastating impacts of climate change seen in Canada, the United States and around the world in the last year underscore the critical need to meet the Paris Agreement goal of limiting global warming to no more than 1.5°C. However, it's clear from the global stocktake recently released by the climate convention that countries must substantially increase their ambition and accelerate their transition to a clean energy economy to meet the Paris goals.
North America must contribute by cutting emissions 50% from peak levels by 2030 and reaching net-zero emissions by mid-century, and it should do so in a way that leaves no one behind by charting a just transition for workers and communities.
There are five pillars of this transformation that many studies recognize as essential. First is to increase the efficiency of energy use. Second is to electrify as many end uses as possible, including road transport and low- to medium-temperature heat. Third is to achieve a 100% clean electricity system. Fourth is to decarbonize remaining fuels with hydrogen and selected use of biomass wastes such as residuals from agriculture but, in my view, not crops. Fifth is to implement natural and technological carbon removal to compensate for remaining emissions.
In the United States, the Inflation Reduction Act combined with the Bipartisan Infrastructure Law and the CHIPS and Science Act create powerful incentives to make progress on each of these pillars. Here are just a few of the key provisions.
For pillar one, the IRA includes tax credits for residential energy efficiency upgrades and a greenhouse gas reduction fund targeting projects in disadvantaged communities. For pillar two, the IRA includes consumer tax credits for electric vehicles and heat pumps. For pillar three, the IRA includes a choice of production or investment tax credits for wind, solar and other new zero-carbon electricity sources as well as a production tax credit designed to keep as much existing nuclear power online as possible. For pillar four, the Bipartisan Infrastructure Law includes investments in hydrogen hubs, and the IRA includes a performance-based production tax credit for clean hydrogen and enhancements to the tax credit for carbon capture and sequestration. Finally, for pillar five, the Bipartisan Infrastructure Law includes investments in direct air capture hubs, and the IRA includes enhancements to the tax credit for direct air capture.
The IRA is designed to promote a just transition by requiring prevailing wages for most projects to be eligible for the full tax credit and through provisions designed to promote a manufacturing renaissance in North America on clean energy technologies.
Early indications are that these policies are having a tremendous impact. As Mr. McGowan said, it's a tremendous success. Research by the Rhodium Group and MIT found that over $200 billion of investment occurred in the last 12 months, an increase of 165% over the level of investment just five years ago. While it has been widely reported that the IRA will invest $369 billion in federal resources over 10 years, that was a preliminary estimate that assumed little acceleration of the clean energy transition. A more recent estimate by Goldman Sachs suggests that the IRA will invest over $1 trillion of federal resources and that most of those investments will be matched by at least two dollars in private investment for each dollar of federal investment, for a total of over $3 trillion.
Nonetheless additional policies will still be needed for the U.S. to meet its climate goals. A study released by Princeton University this summer found that current policies in the U.S., including those of the IRA, will likely reduce emissions to about four billion tonnes in 2030, or to about 40% below their peak levels in 2005. While that represents tremendous progress, it still leaves an emissions gap of about 800 million tonnes that will need to be closed with additional policies, such as regulations to cut carbon emissions from power plants, motor vehicles and large industrial facilities.
Supply chain bottlenecks and siting and permitting challenges will also have to be overcome to deploy clean energy technologies at the speed and scale needed to meet the U.S. emissions reduction targets.
Overall recent legislation in the United States has initiated a race to the top in clean energy technology. This is a race we all win if everyone joins in.
Thank you very much.