Canada needs to respond to American Inflation Reduction Act: Minister

Natural Resources Minister Jonathan Wilkinson says U.S. President Joe Biden’s climate-spending-heavy Inflation Reduction Act (IRA) creates disadvantages for Canada as the neighbouring nations compete for investment dollars to fund transitions to cleaner energy.

Speaking at a Canadian Club Toronto event on Tuesday, Wilkinson said he told White House officials that while he supports the legislation, “you have now created a playing field that is not level, and we are going to have to look at how we level that out.”

His remarks follow comments from Finance Minister Chrystia Freeland last week. She told reporters in Windsor, Ont. that Ottawa’s fall economic update and spring budget will include responses to “elements” of the U.S. IRA legislation. Wilkinson did not confirm that timeline on Tuesday.

Biden signed the roughly US$700 billion plan into law in August. It includes US$369 billion in public funding for energy security and climate change over the next decade, the largest climate investment in U.S. history. The IRA spans tax credits for electric vehicles, home solar panels, more efficient appliances, as well as measures to support grid-scale batteries and wind turbines.

“I’m not going to tell you when we’re going to respond,” Wilkinson said. “But we will need to respond. Because at the end of the day we want to ensure there is a competitive place for folks to make investments in Canada.”

He notes that Canada has for years been more active on climate policy than the United States, particularly during former President Donald Trump’s time in office.

“The United States for six years did very little on the climate plan at the federal level,” he said, adding that state-level policies did advance during those years.

“There was a long period of time where nothing was done. So there are big chunks of the (IRA) which are essentially catching up to many of the things that we’ve done.”

However, critics have said Biden’s IRA puts Canada at risk of being left behind as each nation seeks cleaner energy. Wilkinson said in some cases, the IRA goes beyond government incentives available in Canada. Measures related to hydrogen, battery manufacturing, and minerals processing are expected to present the biggest competitiveness challenges for Canada, he said.

Wilkinson also pointed to fundamental differences in his government’s approach versus the U.S., particularly as it relates to non-spending measures. Those include the federal government’s carbon price policy, efforts to phase out coal, and the clean fuel standard.

“The Americans are using one tool,” he said. “In Canada, we have looked at a balanced approach.. and we have spent money. In the United States, they’ve made a decision they’re just going to spend money.”

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

Download the Yahoo Finance app, available for Apple and Android.