Canada’s Response to the Inflation Reduction Act Remains to Be Seen
Ottawa, October 11, 2023 – Canadian Manufacturers & Exporters (CME) and its members are concerned with Canada’s slowness in introducing the winning conditions to enable Canadian manufacturers to compete with the U.S. Inflation Reduction Act (IRA). Although the federal budget promised last year measures to support the sector, it is now clear that Canadian companies are still fighting an unequal battle and many investments remain on hold due to the lack of concrete action from Ottawa.
Introduced by the United States in August 2022, the IRA offers significant financial incentives to companies in the clean economy sector, promising a support of US$369 billion over 10 years, and is already attracting massive investment to the U.S. And this doesn’t include other economic measures such as Buy America, or the Chips and Science Act.
Nevertheless, CME welcomes positively the Canadian government’s announced major investment in the battery industry. While the fiscal measures are a first step towards stimulating this promising industry, they fail to encourage the growth and capital investment for manufacturing companies already established from coast to coast.
Status of the Canadian response to IRA
| Tax credit | Status |
| Clean Electricity Investment Tax Credit | Draft legislation pending |
| Clean Technology Manufacturing Investment Tax Credit | Draft legislation pending |
| Clean Hydrogen Tax Credit | Draft legislation pending |
| Carbon Capture, Utilization and Storage (CCUS) Investment Tax Credit | Draft legislation tabled |
| Clean Technology Investment Tax Credit | Draft legislation tabled |
CME proposals to help Canadian manufacturers remain competitive
Given that the IRA has been in place for almost a year, CME makes three key proposals:
- Move forward as quickly as possible with legislative proposals for the three remaining ITCs, including the one for manufacturers, as a counterweight to the IRA;
- Encourage all federal MPs to work with the Canadian government to get initiatives underway as quickly as possible, starting with the next budget update;
- Make the three ITCs easy to understand, clear, and concise to give manufacturers predictability and allow them to plan projects, innovations, and investments as quickly as possible.
Quote
“For the United States, the IRA is delivering results in terms of attracting investment in manufacturing, and has been available for over a year now. Given the fierce competition, particularly for the development of the green economy, Canada needs to step up its game. Our businesses are still unable to plan investments in Canada, and for many of them, carrying out projects in the United States would even be a more advantageous option. Canada is falling further behind every day, and we urgently need to put in place a strong and appropriate response before the situation gets out of hand.”
Dennis Darby, President CEO, Canadian Manufacturers & Exporters
About Canadian Manufacturers & Exporters
Since 1871, Canadian Manufacturers & Exporters has been helping manufacturers grow at home and, compete around the world. Our focus is to ensure manufacturers are recognized as engines for growth in the economy, with Canada acknowledged as both a global leader and innovator in advanced manufacturing and a global leader in exporting. CME is a member-driven association that directly represents more than 2,500 leading companies who account for an estimated 82 per cent of manufacturing output and 90 per cent of Canada’s exports.