Determining chemistry’s role in Canada’s low carbon future

“How can we reconcile our ambitions to grow Canada's chemistry sector at a time when the nation has made a commitment to reduce its greenhouse gas emissions by 30 per cent below 2005 levels by 2030?”

That is the key question Bob Masterson, President and CEO of the Chemistry Industry Association of Canada (CIAC) chose to answer in an upbeat presentation to the Alberta Industrial Heartland Stakeholder Conference in Edmonton on January 25. 

He emphasized that determining chemistry's vital role in Canada's low carbon energy future goes to the very heart of determining the future of the chemistry industry in Canada. 

Masterson noted that Canada's advantage includes the type of feedstock utilized – natural gas, for example, as opposed to other jurisdictions that make the same chemicals using coal as a feedstock – meaning that right from the beginning our chemistry industry is cleaner, more efficient and less carbon emitting.  In fact, Masterson pointed out recent recommendations for lowering GHG emissions of chemistry producers in Europe look a lot like what Canada already has in place. 

“What I want you to understand clearly and be able to communicate to others is that Canada is uniquely advantaged to respond to the growing global demand for innovative, low carbon products, while at the same time addressing the climate change challenge both in our own sector, as well as in others.”

Masterson concluded by noting that to grow and sustain Canada's low carbon chemistry sector, what is ultimately needed are more supportive policies that promote investment and growth in the sector. 

“When it comes to climate change, the world truly needs more, not less, good chemistry, and more not less, made-in-Canada chemistry.”

CIAC attends Alberta Pre-Budget Consultation in Calgary

The Chemistry Industry Association of Canada (CIAC) was invited to participate in an Alberta government pre-budget consultation on Wednesday, January 17, 2018, hosted by Joe Ceci, President of the Treasury Board and Minister of Finance, and Marg McCauig-Boyd, Minister of Energy

This session was part of a broader consultation effort and included representatives from oil and gas (upstream, pipelines, and service companies), electricity producers, labour, and the chemical manufacturing sector.

Minister Ceci provided context to this year’s budget challenges highlighting the historic dependence on resource revenue to fund government spending. While there are signs of growth in the province’s economy, tax revenue to government is lagging due to lower commodity prices and the corresponding impact on royalties and corporate income taxes. The Minister indicated a shift in the coming provincial budget to one of government spending restraint, reduced expenditures while maintaining a focus on core programming, and starting on a path to get back to balance between government spending and revenue.

CIAC focussed its comments on two issues of importance to the chemistry sector in Alberta. First, in addition to reducing government expenditures, the government needs to focus on growing new incremental investment in the value-add chemical manufacturing sector. We have missed the current wave of new investment from our sector in the U.S., and through its response to the pending recommendations from the Energy Diversification Advisory Committee (EDAC), we would like to see a longer-term plan for improving the competitiveness of new investments in Alberta. 

We need to shift from a singular focus on maximizing resource revenue (market access) to one that includes maximizing the impact of Alberta’s oil and gas resources through increased chemical manufacturing in the province. We compete with other jurisdictions for new investment and all levels of government in Canada – municipal, provincial, and federal – need to work together to improve investment competitiveness in Alberta. 

Second, Alberta needs to work with the federal government to understand the impacts of U.S. corporate tax changes relative to maintaining the competitiveness and historical advantage in the combined federal and provincial corporate income taxes. More specifically, we drew attention to the U.S. tax measure for a 100 per cent Accelerated Capital Cost Allowance (ACCA) for five years. The U.S. approach to ACCA is better and broader than what is currently in place in Canada and Alberta. We reinforced our earlier advocacy to Alberta Treasury Board and Finance to work with the federal government to introduce a 100 per cent ACCA for a minimum of one full business cycle of seven years to specifically apply to upgrading resources into manufactured products.

Overall, the Ministers heard from a broad cross-section of Alberta’s energy industry and a dominant theme of discussion focused on improving business competitiveness in the province through both fiscal and non-fiscal measures.

For more information, please review our submission to the federal budget process: Driving Canadian Growth in the Global Chemistry Sector

CIAC voices budget recommendations to Ontario’s Finance and Economic Affairs committee

On January 17, 2018, CIAC President and CEO Bob Masterson addressed Ontario’s Standing Committee on Finance and Economic Affairs. The committee was in Ottawa on their province-wide pre-2018 budget consultation tour.

Masterson’s key message was that only robust economic growth, driven by new investment, would provide the economic opportunities and prosperity Ontarians want and desire.

He reminded the committee the chemistry industry already plays an important role Ontario’s fiscal equation — a $22 billion industry directly employing 45,000 well-paid employees — but noted that more has to be done to retain and attract new investment dollars from the global chemistry industry. In fact, Masterson noted, the province should be attracting a larger portion of the North American chemistry industry investments.

“We would have expected to see 12 to 15 global scale investments totalling $15 billion or more. Instead, until late last year, the province saw no global scale investments, and only about $1.5 billion or 10% of expectations in capital investment.”

CIAC’s recommendations are focussed squarely on improving Ontario’s fiscal and regulatory policies to make the province the “jurisdiction of choice” for new chemistry industry investments.

Read our submission to learn more: Ontario Chemistry Industry 2018 Pre-budget consultation.

Pre-Budget Consultations — Driving Ontario growth in the chemistry sector

As part of the pre-budget consultation process, CIAC recently submitted its recommendations on the 2018 Ontario Budget to the Standing Committee on Finance and Economic Affairs. The chemistry industry is the fastest growing manufacturing sector in North America. There is an urgent need for action that the 2018 budget could address in concert with the federal government to ensure Ontario does not miss out on investment opportunities in the future.

The global chemistry industry is a story of innovation and incredible growth that is well in excess of global GDP growth rates. Bold, timely and co-ordinated action by the Ontario and federal governments is urgently needed for Canada to capture the existing opportunities.

Key recommendations include:

  1. Maintain the chemistry sector as a priority sector within the Province’s economic development strategy, and its eligibility for investment support within the Jobs and Prosperity Fund and other investment attraction initiatives
  2. Implement CIAC recommendations provided in the Red Tape Challenge Chemical Manufacturing consultation to streamline and modernize outdated, redundant and unnecessarily costly, complex and time-consuming regulations
  3. Advocate for and match federal measures to:
  • At minimum maintain the historical advantage in the combined federal/provincial CIT rate for manufacturing and processing to address the impact of upcoming U.S. CIT cuts.
  • Make the 10-year extension of the Accelerated Capital Cost Allowance (ACCA) permanent for manufacturing and processing and broaden the coverage of eligible capital assets to signal Canada is welcoming new investments in value-add resource upgrading. 
  • Introduce a 100 per cent ACCA for a minimum of one full business cycle of seven years to specifically apply to upgrading resources into manufactured products.

There is an urgent need for action in the 2018 Ontario Budget to ensure Ontario does not miss out on investment opportunities in the future.  Only a competitive business environment and a welcoming public policy environment will attract our fair share of new investment and create the high value, long-term sustainable jobs that the chemistry sector generates.

You can view the submission here

 

Industrial chemical industry data shows strong performance for first half of 2017

On September 1, the Chemistry Industry Association of Canada (CIAC) released a new report titledIndustrial Chemical Industry: Performance Snapshot – First Half of 2017. Overall, industrial chemicals had a strong first half. In the second quarter, all metrics were up except for railcar loadings, which was down slightly.  Data mostly points to the performance being led by improvements in product pricing. 


Key highlights from the report include:
  

  • Shipments increased 13 per cent in Q2, the second successive quarter of 13 per cent growth. This performance was driven by very strong growth in petrochemicals and good growth in inorganic chemicals and other organic chemicals.  Synthetic resin shipments remained unchanged.
  • Exports for industrial chemicals rose 5 per cent in the first half. Again, petrochemicals led the way with a big surge compared to 2016.  Other organic chemicals and synthetic resins also showed good growth. Inorganic chemical exports fell by 5 per cent repeating the trend that was seen in the Q1 where shipments rose but exports fell.
  • Industrial chemical GDP rose by 2 per cent in Q2 reversing declines that had occurred over the previous two quarters.
  • The quarter-over-quarter change in rail car shipments was down slightly (1 per cent) in Q2.  Volumes have been fairly constant since 2013 with some seasonal variations. 
  • Operating profits remained strong, at $850 million for the quarter and at $1.7 billion for the first half, up slightly from the same period in 2016.   

For comparison, the Q1 report was released in June and can be found here

New Strategic Innovation Fund will drive major investments in Canada’s chemistry sector

On June 5, Innovation, Science and Economic Development Minister Navdeep Bains launched the Strategic Innovation Fund, a new program to attract and support business investments across all sectors of the economy.

Announced in Budget 2017, the $1.26 billion fund is intended to attract and support high-quality business investments across all sectors of the economy.

The announcement and the new fund were warmly welcomed by the Chemistry Industry Association of Canada (CIAC). 

“Consistent with the articulated goals, this fund will assist in attracting and retaining large scale chemistry investments in Canada,” said Bob Masterson, CIAC President and CEO. “Today, more than $12 billion in chemistry investments are under consideration and approaching final investment decision.” 

These projects are identified as economic growth priorities for the provinces of Ontario and Alberta.

“Engagement and support by the federal government sends an important signal to project investors, indicating that Canada is open for business for global scale investments in the chemistry sector,” Masterson added.

CIAC has long been an advocate for allocation of federal funding programs through a merit-based process open to all sectors, rather than restricting opportunities to a small number of targeted sectors. CIAC also continues to call on the federal government to ensure its identified economic growth priorities are well-aligned with those of major economic growth regions such as Ontario and Alberta.

In the past year, those provinces have placed priority on attracting global-scale chemistry investments through: 

  • Ontario’s $2.5 billion Jobs and Prosperity Fund; and
  • Alberta’s $500 million Petrochemicals Diversification Fund, which attracted sixteen expressions of interest totalling over $20 billion in new investment. 

CIAC looks forward to working with its member-companies to facilitate access to the new fund. CIAC will continue to work with the federal government to identify additional measures to attract a growing share of the significant new investments taking place in the global chemistry industry. 

Op-ed: Feds should pay more attention to Canada’s chemistry sector says CIAC President

On April 10th, 2017, the Hill Times published an opinion piece titled: “Feds should pay more attention to Canada’s chemistry sector,” by CIAC president and CEO Bob Masterson. This is the op-ed reproduced in full. 

As the Liberal government looks to attract considerably higher rates of foreign investment into innovative sectors with high growth prospects, significantly more coordinated attention needs to be paid to Canada’s chemistry sector. There are immediate opportunities to attract more than $11-billion in investments through four global scale projects. These projects would create hundreds of jobs, drive economic growth, and help the government reach its environmental targets. It is nearly certain that none of the anticipated, nor possible future projects, will advance without the direct involvement of the Government of Canada.

The chemistry industry is a proven solution to all the government’s objectives and with similar federal involvement in the chemistry sector investments the Liberals will be able to tick off not only a small win for themselves, but most importantly, for Canadians.

Globally, the chemistry industry is a large, fast growing industry providing critical inputs to 95 per cent of all manufactured goods on this planet. In Canada, chemistry is the fourth largest manufacturing sector with more than $55-billion in annual shipments, and is the second largest manufacturing exporter with 70 per cent of all shipments traded internationally. Structured in highly efficient and consolidated clusters, such as in Sarnia, Ont., and Fort Saskatchewan, Alta., the sector adds significant value to Canada’s energy and agricultural resources. Canada’s chemistry sector is also highly skilled. Thirty-eight per cent of the sector’s 90,000 employees hold university degrees, second only to Canada’s IT sector, and earn average annual salaries twice that of Canada’s manufacturing sector.

Contrary to misconception, the industry is also highly supportive of climate action. More than 30 years ago, Canada’s chemistry industry, with the assistance of its toughest critics, developed the Responsible Care initiative. Born in Sarnia, Responsible Care® is now a global success story practised in 62 countries around the world. Since 1992, Responsible Care® has driven significant improvements in the environmental performance of the sector, including the reduction of absolute green house gas (GHG) emissions by 68 per cent and a decrease in the release of toxic substances by 86 per cent. In turn, the industry is also the central solutions provider for innovative emissions reductions activities in other sectors, including transportation, buildings and agriculture.

Unfortunately, despite its proven track record on providing thousands of Canadians with high-paying jobs, adding billions to the Canadian economy, and reducing GHG emissions on its own, Canada has struggled to attract global investments in chemistry due to a lack of support from the federal government. Over the past five years, more than 300 global scale projects worth over $US 250 billion have been completed, are underway, or have been announced in North America, with 70 per cent of those representing foreign direct investment. Nearly all those investments, however, have occurred in the United States. Canada is lagging far behind its historical 40-year performance which traditionally saw our country capture a 10 per cent share of all North American chemistry sector investments. Canada should have had at least 30 global scale investments worth over $30-billion, but this has not been the case.

Despite limited investment success to date, Canada does have many of the key ingredients for investment success in place—established and highly integrated clusters, a talented workforce, access to low-carbon, cost-advantaged feedstock, and proximity to key markets. The Governments of Ontario and Alberta have identified this economic potential and have taken the lead on attracting billions in investments. Ontario’s $2.7-billion Jobs and Prosperity Fund identified chemistry investments as a priority sector and Alberta launched the Petrochemicals Diversification Program which attracted 16 proposals worth over $20-billion. Currently, there are two projects in Sarnia and two in Fort Saskatchewan with total value of over $12-billion that are targeted for provincial investment support. Without sustained federal engagement in the sector and these projects, however, they face steep odds to advance.

The federal government’s interest and involvement is urgently needed if we are to have a reasonable chance for successful final investment decisions in 2017. If we can be successful in attracting these large-scale investments, it is calculated that the sector has further opportunities to attract an additional $10-billion to $20-billion in future years. As the Liberal government continues to balance climate change targets and economic goals, Canadians are continuously looking for greater opportunities. Last week the prime minister was in Windsor to announce his government’s financial support for Ford, amounting to $1-billion in investments. That pales to the opportunities that are sitting at Finance Minister Bill Morneau’s and Innovation Minister Navdeep Bains’ doorstep. The chemistry industry is a proven solution to all the government’s objectives and with similar federal involvement in the chemistry sector investments the Liberals will be able to tick off not only a small win for themselves, but most importantly, for Canadians.

Budget 2017: a missed opportunity to advance chemistry sector investments and innovation

On March 22, 2017, federal Finance Minister Bill Morneau tabled the government’s second deficit budget since their election in October 2015. Overall, Budget 2017 shows that government spending will continue to increase, with no plan to return to a balanced budget.  However, a decline is projected in annual deficits due to a combination of rising revenues and moderate growth in expenditures. 

While Budget 2017 reaffirmed the government’s commitment to invest in trade infrastructure and expand trade corridors, the Chemistry Industry Association of Canada (CIAC) was looking for additional support for the sector in terms of tax measures or targeted investments.

“Canada’s chemistry industry stands poised to make $12 billion in new capital investments in 2017, and we had hoped this budget would provide some indication that the Government of Canada would partner with our industry and the provinces to ensure these investments can move forward,” said CIAC President and CEO Bob Masterson.  “While this doesn’t seem to be the case at this time, CIAC looks forward to continuing to work with elected and government officials to ensure our industry’s continued growth, and contribution to the Canadian economy.”

Key highlights for the chemistry industry are:

  • Building Canada’s Trade Infrastructure and Governance Regimes by giving Treasury Board Secretariat $6 million over three years for regulatory coordination with trade partners, and creating a National Trade Corridors Fund ($2 billion over 11 years) to target congestion and inefficiencies at marine ports as well as along the busiest rail and highway corridors around urban centres across the country.

  • Enhancing Canada’s Intellectual Property Regime to help ensure the system is modern and robust and supports Canadian innovations in the 21st century.
  • Clarifying the government’s climate leadership vision by promising to release a consultation paper containing the technical details of the proposed federal carbon pricing backstop mechanism.

To learn more about Budget 2017: 

Budget Speech: http://www.budget.gc.ca/2017/docs/speech-discours/2017-03-22-en.html
Budget Documents: http://www.budget.gc.ca/2017/docs/download-telecharger/index-en.html

Chemistry industry sees manufacturing growth key to economic recovery in Alberta’s Budget 2017

The Chemistry Industry Association of Canada (CIAC) recognizes that during the sustained economic downturn impacting Alberta, the path to balance spending and revenues depends on improved energy pricing and encouraging new growth projects in the province. New value-add manufacturing from all sectors, and specifically the chemistry sector, will help diversify the economy, add value to the province’s resources, and increase Alberta’s revenues.

In Budget 2017, CIAC noted several references of ongoing confidence in recent and projected new investments in the manufacturing sector – including those announced under the province’s Petrochemicals Diversification Program – as crucial components that will help anchor economic recovery in Alberta. 

“There are tremendous opportunities ahead of us,” said CIAC President and CEO Bob Masterson, “with a number of potential investments that will help diversify Alberta’s economy, and deliver jobs and economic growth for the province and all Albertans.

“CIAC looks forward to continuing to work with the Alberta government in 2017, and will continue to encourage all levels of government to work together to secure the competitiveness advantages needed to attract new investment.”

To learn more about Budget 2017:  
https://www.alberta.ca/budget.aspx

Ontario’s 2017 budget needs to strengthen the province’s competitive business environment to attract investments

In advance of drafting the 2017 Ontario Budget, the Chemistry Industry Association of Canada (CIAC) has been actively engaged in key advocacy initiatives on behalf of its members. On January 20th, Don Fusco, CIAC Director, Government and Stakeholder Relations – Ontario, had the opportunity to address the Standing Committee on Finance and Economic Affairs. The full submission can be found here.  

In his remarks, Don reinforced the chemistry sector’s current investment activity occurring elsewhere in North America and acknowledged that only a competitive business environment will attract new chemical investments and create long-term sustainable jobs in Ontario. For the province to attract its fair share of new investments being made in North America, CIAC recommended: 

  1. Taxation 
    • Maintain the corporate tax rate for manufacturing at 10%. 
    • Advocate for, and match, federal government actions to: 
      • Make the 10-year extension of the Accelerated Capital Cost Allowance (ACCA) permanent for manufacturing and processing. 
      • Introduce an investment tax credit or 100 per cent ACCA for a minimum of 10 years to specifically apply to upgrading natural resources into manufactured products. 
  2. Environmental Regulation 
    • Ensure that the Cap and Trade program does not impair Ontario’s competitiveness relative to other jurisdictions, particularly the U.S.
    • Address uncertainty beyond 2020. 
    • Reduce the time taken to receive Environmental Compliance Approvals. 
  3. Investment Attraction and Burden Reduction Efforts 
    • Maintain the chemistry sector as a priority sector within the Province’s economic development strategy and its eligibility for investment support within the Jobs and Prosperity Fund and other investment attraction initiatives. 
    • Modernize Ontario’s regulatory system to reduce compliance costs and eliminate duplication.  
  4. Integrity of Industrial Lands 
    • Develop and apply a buffer zone regulation to Municipalities which would explicitly enshrine public safety practices and Ontario’s manufacturing heritage. 
  5. Industrial Electricity Rates and Feedstock
    • Put the province on a path toward having industrial electricity rates that are more competitive with other jurisdictions.
    • Introduce industrial electricity policy that incentivizes plant expansions and new investments.
    • Ensure Ontario manufacturers continue to maintain long-term, unimpeded access to abundant, cost-advantaged natural gas and natural gas liquids feedstock supplies. 

There is an urgent need for Ontario to create a sound strategy to revitalize manufacturing in the province, and CIAC looks forward to working with government and industry stakeholders to strengthen the province's manufacturing sector.