Last week, the American law containing proclimate measures entitled Inflation Reduction Act of 2022, which was believed to have been abandoned for lack of support in the Senate, was finally the subject of an agreement in Washington, with the belated rallying of the Democratic Sen. Joe Manchin of West Virginia.
Without the active leadership of the main historic emitter of greenhouse gases, and the second largest emitter after China, it would have been difficult to maintain any hope of achieving the objectives of the Paris Agreement, signed in 2015.
This pro-climate law, accompanied by some $370 billion over ten years, gives pride of place to non-emitting energies (wind, solar, geothermal, but also nuclear) thanks to tax incentives. Citizens are not forgotten, credits are provided for the purchase of electric vehicles and heat pumps.
The plan also contains measures desired by the hydrocarbon industry in favor of CO capture/storage technologies2, and hydrogen. These two sectors are lifelines for this industry for the survival of its business model based on the extraction, transport and sale of energy products in gaseous or liquid form. CO capture/storage technology2 indeed allows the combustion of oil and gas, but to trap the molecules of CO2 in order to avoid their release into the atmosphere, then to store them in underground geological formations.
The International Energy Agency (IEA) recognizes this technology as one of the promising ways to decarbonize economies. But this approach is decried by many as a maneuver by the industry to pursue its activities, when we should seek to rule it out definitively.
As for hydrogen, the European Union is leading the way, with its firm desire to get rid of fossil fuels from Russia. Its REPowerEU plan, unveiled in May, aims by 2030 to produce ten million tonnes of hydrogen generated by renewable energies in the country.
Unlike renewable energies, these two technological approaches have not yet reached a high enough level of commercial development to confirm them as all-round solutions to the climate emergency. Only over time will determine their true significance in efforts to reduce greenhouse gas emissions.
Supply chains
The American law also intends to accelerate the establishment of supply chains linked to the energy transition outside the bosom of China, which occupies a dominant position in this sector, in particular on the side of solar panels and batteries.
The invasion of Ukraine has shown how risky it is for countries to put themselves in a situation of energy dependence on states led by strategic rivals, placing their geopolitical ambitions above commercial considerations. Talk to Germany, which, due to gas supply uncertainties from Russia, its main supplier, is set to face gas rationing this winter.
The United States, Europe and Canada want to put an end to this domination of China. As proof, they announced in June the establishment of a Mineral Security Partnership to increase the reliability of supply chains for these activities.
Despite the protectionist sentiment reigning in the United States, the adoption of this pro-climate law responds to the wishes of the Canadian automotive and mining industry, since it applies to North American producers and those with which the United States has a free trade agreement, including Canada.
This is good news for Quebec, a reliable trading partner with a stable and predictable political framework. The American law will give impetus to the North American electricity storage industry, and therefore batteries, a central pillar of the success of the energy transition. Quebec, as we know, intends to become a crossroads for this industry (production, recycling).
However, as Desjardins points out in a note published in March, it will not be easy: the competition is fierce, and often has considerable resources at its disposal. But the enthusiasm is there, with recent announcements, particularly in Bécancour, which is counting on its port and its leading industrial park to attract leading players.
As Desjardins concludes, the big challenge now is to maintain this momentum in order to consolidate Quebec’s place in this infinitely promising industry.