With hundreds of billions of dollars, the Biden government’s offensive to encourage investment in renewable energy and the battery sector will have repercussions as far as Quebec. The Quebec industry will have no choice but to adjust, according to a joint report by the Institut du Québec (IDQ) and the Switch Alliance, published Thursday.
The United States is expected to provide approximately US$400 billion in financial support over 10 years to support climate change investments under the Inflation Reduction Act (IRA).
The intervention of the American government to make their economy greener is “cursed good news” in the global fight against climate change, comments the president and CEO of Écotech Québec and member of the Switch Alliance, Denis Leclerc, in interview. However, the Quebec industry will have to adjust to the political reality of their imposing neighbour, according to him.
“Are our businesses in the green economy, clean technologies, going to be more encouraged to settle in the United States, because there will be tax incentives, and the answer is yes. »
The IRA is not just a source of concern for the Quebec economy. US economic intervention will create significant demand that could benefit some suppliers and the mining sector, the report released Thursday said.
Still, government strategies will have to adjust accordingly, adds the director general of the IDQ, Emna Braham. The Legault government may have to modify its strategy by abandoning certain segments of the battery industry to prioritize others.
This is particularly the case for the production of battery cells, a step in the chain that Quebec has not yet managed to establish in the province, underlines Ms. Braham. “Quebec will find itself in competition with American states that will have additional incentives to attract this type of investment. And so, we will have to keep an eye on the evolution of the competitive context and see where it would be the most judicious for Quebec to position itself. »
Canada succeeded in tempering certain protectionist aims of Washington by obtaining the extension of the IRA criteria to North American producers in several cases.
However, the North American preference will not benefit certain sectors where Quebec hopes to stand out. Indeed, the production of commercial vehicles, such as trucks or electric buses, is open to competition. “We will therefore be considered in the same way as Asian and European companies”, underlines the general manager of the IDQ.
Electricity: the loss of a competitive advantage?
Quebec electricity could also lose its competitive advantage over American electricity. The IRA will lead to an increase in solar and wind energy production in the United States and allow for a reduction in prices.
In Quebec, electricity prices should follow an opposite trend, while new supplies should be more expensive than the heritage block. The question will be to see what will be the competitive position of Quebec electricity in this context, judge Ms. Braham. “It is something that will have to be monitored. »
The effect will be felt in the green hydrogen industry. Advances in solar and wind energy could lower the costs of producing green hydrogen. “If these predictions come true, the competitive environment will become extremely difficult for Quebec,” reads the report.
An appetite for mining
The passage of the IRA, however, bodes well for the critical minerals sector. In this regard, Quebec mining companies do not have to fear American protectionism when supply is not sufficient to meet demand.
Faced with the climate emergency, Quebec would be wrong to “cut corners” by relaxing environmental rules in order to speed up projects, warns Ms. Braham. “The temptation could be to say that we would like to reduce, in the regulatory constraints, in quotation marks, to accelerate the production of critical minerals, she explains. What we are saying is that, on the contrary, in a context where investors and governments are looking for organizations that will have a good ESG performance, well, the Quebec regulatory framework could be more of a competitive advantage than a constraint. . »