Canada rolls out tariffs on Chinese EVs
CTC #97 - Canada adds a 100% tax on Chinese EVs; what the best climate policies have in common; and more climate tech news
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This week, we’re back on the tariff train as Canada rolls out a 100% levy on Chinese-made EVs. We look at what other countries are doing, the factors behind the decision, and what Canada might be leaving on the table.
On the policy front, we look at what the most successful climate policies have in common, and what Canada needs to do differently to make an impact.
In other climate tech moves, MKB launches a new $145 million growth climate tech fund, Electra gets backing from the Pentagon for a battery materials plant, EVLO kicks off its first U.S. project, and Carbon Removal Canada calls for a national carbon removal target.
Let’s go!
POLICY
Canada rolls out China tariffs
What happened: In a move that surprised basically no one, Canada is aligning its EV tariff policy with the US and will impose a new 100% tariff on EVs made in China. The feds also plan to introduce a 25% tariff on steel and aluminum.
Why it matters: The import tax is intended to counter China’s “intentional, state-directed policy of overcapacity”. The feds say China has massively subsidized the production of EVs which allows Chinese carmakers to undercut competition.
The EU also introduced tariffs on Chinese EVs, but has structured them to reflect the specific subsidies provided by China. Duties range from 36% to 9% depending on the company.
For Canada, it’s a trade-off between protecting jobs in the auto sector while driving adoption of zero-emissions vehicles to meet our climate goals. The feds also want to stay in alignment with the U.S., our number one trade partner, before USMCA trade negotiations next year.
In context: The cost of EVs remains high in North America and Europe. The average cost of a new EV in Canada is ~$74,000 and there are only two models available for less than $45,000. Despite billions of government incentives, Ford and others have dialled back their plans to take on the EV market. Tariffs might be a pragmatic choice to align with the U.S., but it doesn’t look like they’re going to accelerate competition or drive down EV prices any time soon.
The move also risks opening up sectors across Canada, like agriculture, to trade retaliation from China.
What’s next: The feds are launching another 30 day consultation on potential restrictions across semiconductors, battery parts, critical minerals and solar panel components.
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CLIMATE CAPITAL
💧 VulcanX secured an investment from utility FortisBC to develop their zero-emissions hydrogen technology. VulcanX, which was spun out from the University of British Columbia, is developing a process to split natural gas into hydrogen using molten metal while producing solid carbon as a by-product.
💰️ Growth equity firm Mackinnon, Bennett & Company (MKB) closed $145 million for its third climate tech fund. MKB will focus on growth-stage businesses that are commercializing emissions reductions tech across energy, mobility, buildings and industry. The fund is backed by a $50 million investment from the Canada Growth Fund and participation from Caisse de dépôt et placement du Québec (CDPQ), Investissement Québec, and BDC.
💰️ Boann Social Impact announced investments in 13 impact funds, including climate tech investors Active Impact Investments, Cycle H2O, Spring Impact Capital and Renewal Funds. Boann is one of the fund-of-funds chosen by the feds to deploy their $755 million Social Finance Fund.
🔋 Electra Battery Materials received a grant for US$20 million from the U.S. Department of Defense to build a cobalt production plant in Ontario. The plant will be North America’s first refinery for producing cobalt sulfate, an active material in lithium-ion batteries. The grant is part of the department’s industrial strategy to develop a “more robust industrial base capable of meeting growing demand across both the defense and commercial sectors”.
☀️ Canadian Solar secured US$200 million in convertible notes from private investment firm PAG. Canadian Solar makes solar modules and runs large-scale solar projects, and will use the capital to improve its capital structure (by providing a mix of equity and debt) and fund project development.
MILESTONES & PRODUCT
🔋 EVLO Energy Storage commissioned its first utility-scale battery energy storage project in the U.S. The 3 MW project includes 16 EVLO units and will share data with the U.S. Department of Energy and national security-focused Sandia National Labs to demonstrate how battery storage can enable more renewable energy production.
🏍️ Bombardier Recreational Products (BRP) returned to the two-wheeler market with two new electric motorcycles. The Can-Am Pulse model is targeted for city riding, a rapidly expanding market around the world.
⛏️ QI Materials says it has discovered the first geologic hydrogen deposit in Canada. Naturally-occurring hydrogen could avoid the emissions from processing natural gas or energy-intensive electrolyzers.
NEWS
Policy winners
Credit: Recurrent Energy
What happened: New research has uncovered the most effective policies for climate action. Looking at more than 1,500 climate policies, a team of international researchers found 63 policies that were successful in reducing emissions.
The report found a few key patterns in which policies work:
Carrots & sticks: policies that include both incentives for cutting emissions and sticks for generating emissions tend to be more effective than relying on just one or the other.
Different reactions: Carbon pricing was more effective in industrial and electricity sectors that are dominated by businesses. Conversely, in industries where individuals play a bigger role (like buildings and transport), a mix of both carrots and sticks was most effective.
Developing vs Developed: Carbon pricing doesn’t work as well in “developing” nations, where markets tend to be more informal. There’s often no one to monitor or collect carbon prices.
Altogether, the successful policies cut emissions by 0.6 - 1.8 billion tonnes. Winning Canadian policies include Alberta’s industrial carbon pricing system and Quebec’s cap-and-trade system.
Why it matters: We have a good grasp on what’s driving climate change (burning fossil fuels), but not so much when it comes to what we should do about it. A large-scale study like this can help governments around the world accelerate climate policy by drawing on what we know works well.
Yes, but: While Canada’s industrial sector made the small list of global success stories, there’s a gap in our policy mix when it comes to sticks. The Canadian Climate Institute's 440 Megatonnes project found that more than 70% of Canada’s climate policies lean on incentives. A better balance between incentives and regulations or pricing is needed to make Canada’s climate policies effective.
The bottom line: There’s lots of room to level up, but it’s clear that climate policies are working. Explore the policy winners in this online portal.
IN THE NEWS
🇨🇦 A carbon removal call to action: Carbon Removal Canada is calling for the federal government to set a national target for carbon removal. Canada needs to set climate targets for 2025 by this December as part of the Net-Zero Emissions Accountability Act. A national target for carbon removal would commit the government to scaling up the best technology and provice a strong market signal to researchers and entrepreneurs.
💸 Renewable payday: Alberta municipalities will net more than $54 million in tax revenue from renewable energy operations this year. That’s up 93% from just two years ago. Wind and solar have the potential to provide long-term, stable income for municipalities that are often strapped for cash. But there’s a catch: Alberta’s pause on renewables is slowing investment, with more than 50 projects cancelled.
👀 Calling the shots: New records show that Enbridge and the Ontario government worked closely together on energy policy in the province. Enbridge helped craft the government’s decision to overturn a ruling by the provincial energy regulator that would have stopped Enbridge from passing the cost of new natural gas connections to homeowners.
BIG PICTURE
Just 8% of people have a good understanding of climate change, but most are anxious about it. (h/t Jack Bruner)
How the sausage gets made: Frontier publishes its playbook for buying carbon removal.
Meta is jumping on the geothermal hype train, buying up to 150 MW of power to offset the energy use from its U.S. data centres.
$5 billion worth of offsets in Germany’s carbon market may have overstated their emissions reductions - or don’t exist at all.
In a huge milestone, wind and solar are on track to produce more power than coal in the U.S.
Democrats want to lock in - and expand - Biden-era climate progress.
Top marine research orgs are calling for the U.S. to fund more research on ocean-based carbon removal.
COMMUNITY
📅 Climate Careers & Community. Join Montreal’s climate tech community to meet others who are passionate about climate solutions or explore new career paths. You'll also get to hear about upcoming events this group is organizing for the fall. August 29th, Montreal.
➡️ Discover more climate events.
🚀 Invest Together in Climate Innovation. Hosted by Spring in partnership with RBC, this initiative prepares Canada's Top 15 climate ventures for capital raising while equipping 20-25 investors with the essentials of early-stage impact investing. Both cohorts will collaborate on investment evaluation, impact measurement, due diligence, and more, culminating in a pitch event offering a minimum $100,000 investment.
➡️ Founders apply by Aug 30th. Investors apply by Sept 27th.
🗳️ Consultation: Clean Economy Tax Credits
The feds are seeking input on a number of measures from Budget 2024, including the Clean Economy Investment Tax Credits, capital gains changes, and the Canadian Entrepreneurs’ Incentive. Consultation closes September 11th.
💻 Cycle Momentum is hiring an Investor Community Lead to play a key role in building and engaging Cycle Momentum’s investor community. This is a great opportunity for connectors, relationship builders, and community-minded climate champions.
➡️ Find more open roles.
Thanks for reading,
Justin