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Canada’s 43rd Parliament – challenging times ahead for Canada’s chemistry industry?

Canada’s 43rd Parliament has now been elected. Over the coming months new Ministerial appointments will be made and the re-elected Trudeau government will deliver its Speech from the Throne.

The new Parliament brings with it much uncertainty – how will the Liberals govern in this minority situation? Are the opposition parties in a position to extract demands to ensure their support on confidence motions? Will the conditions allow the government to be sufficiently nimble in what increasingly looks like softening economic prospects amidst diminishing global trade prospects? Perhaps most importantly, will the Liberals be seen to govern in the interests of all Canadians and tamp down the flashpoints of increasing regional tensions across the nation?

While we don’t have foresight on such questions, we can predict with considerable certainty that it will be a challenging time for Canada’s chemistry industry and CIAC. Below, we touch on our priority issues, challenges we can foresee and the positions CIAC will be taking into our engagements with representatives of all parties in this minority Parliament.

Chemicals Management – We anticipate the government will quickly move to introduce amendments to CEPA 99 in response to the legislative review concluded in the last Parliament. As a leading stakeholder in the CEPA process, CIAC worked with other industries, non-governmental stakeholders, the government and the Minister of Environment and Climate Change’s office to ensure the Minister’s response to the legislative review would deliver continual improvement, while maintaining the overall risk-based approach embedded in CEPA and the Chemicals Management Plan.  CIAC will need to continue to advocate for such outcomes as the legislation is amended.

Plastics – Each of the Liberal, NDP and Green parties placed an emphasis on banning so-called ’single use plastics’ during the election campaign. CIAC will continue to be an active participant in the Canadian Council of Ministers of the Environment Canada-Wide Strategy on Zero Plastic Waste process and will continue to advocate strongly for actions, such as Extended Producer Responsibility, that will support the industry’s transition to a circular economy. CIAC will advocate for the government to introduce new legislation and not use CEPA and the Schedule 1 List of Toxic Substances as the legislative means for enabling federal actions. CIAC will also call on the government to fund technology development and deployment and modern infrastructure to support the circular economy transition.

Climate Change – Similarly, each of the above parties campaigned on a message of ‘accelerating climate action’. While supporting carbon pricing, CIAC will continue to advocate for approaches that maintain the competitiveness of Canada’s chemistry industry and that recognize that due to low-carbon feedstocks and electricity supplies, Canada’s industry produces some of the lowest carbon chemistries on the planet. As the federal government looks to recognize the global climate benefits of increased LNG shipments from Canada, we will be urging they consider the same for our chemistries.

Transportation – In response to another period of poor rail service performance in Winter 2019, the Canadian Transportation Agency acted with the new powers granted to it under Bill C-49. CIAC will be keeping a close watch on rail service performance in Winter 2020 and will work with stakeholders should further measures be required. CIAC will also be focused on its important Transportation Community Awareness Emergency Response (TRANSCAER®) program and its work with other stakeholders to build the capacities of first responders across Canada.

Investment Competitiveness – At times, the business and industry sectors acted as the punching bag for all parties during the election campaign. One-sided calls to ‘end corporate welfare’ were rallying cries for each of the party leaders. Nevertheless, provincial and federal governments heard and were responsive to CIAC’s message of chemistry investment opportunity over the past four years. At present, more than $12 billion in new chemistry investments are now underway, the vast majority of that in Alberta. Significant opportunity remains, however, and the new government and new Ministers will need to be fully informed about the opportunities and benefits for chemistry investments in Canada. Special consideration will be required to bring attention to the need for capital reinvestment in the chemistry sector in South West Ontario to ensure this $22 billion per year industry can continue to provide employment, taxes and social benefits for generations to come.

At CIAC’s most recent Board meeting, mere days before the election campaign, Impact Public Affairs President Huw Williams reviewed CIAC’s priorities and provided the sobering message that regardless of the election outcomes, the above five issues will feature prominently in the next Parliament, and likely for several Parliaments thereafter. These are generational issues that are unlikely to go away any time soon.  Mr. Williams went on to stress that the most important thing the industry can do is to engage broadly and across all parties with the newly elected parliamentarians to share the Good Chemistry and Responsible Care® message.

Based on CIAC experiences over the past four years, that has been a winning strategy and one we will double down on in this newly elected and highly complex 43rd Parliament.

Chemistry sector addressing plastic waste head on

As our leaders head to the G7 Summit in Charlevoix, Quebec on June 8 with the intention of proposing the “Paris Agreement for marine litter,” and as our colleagues at Plastics Europe and the American Chemistry Council propose aggressive targets to curb plastic waste, we are now at a decisive moment when it comes to public policy and the global plastics value chain.

I am confident that this inflection point will create conditions for optimism, innovation and meaningful progress in the Canadian chemistry and plastics sector, as we chart the way to a future with zero waste.

As part of this leadership, CIAC has partnered with the Canadian Plastics Industry Association and their members to announce the following waste reduction targets:

  • an aspirational goal of 100 per cent of plastics packaging is re-used, recycled, or recovered by 2040, and
  • an aggressive interim goal of 100 per cent of plastics packaging is recyclable or recoverable by 2030.

These targets will not be easy to achieve. They will require actions on behalf of all society. Likewise, the issue of marine litter requires all industry, every citizen and every government on the planet to come together.

We can all agree that plastics do not belong in the ocean, nor in any other water way – period. It is a significant waste of precious resources for plastics to be used once and then discarded as waste.

However, plastics remain central to our future. They are a key enabler to our modern and more sustainable way of living. They keep food fresher for longer, they make our cars and homes more energy efficient, they provide exceptional convenience and they do all that in a way that is cost effective and with clear environmental benefits over alternatives.

Industry, along with federal and provincial and municipal policy makers and other policy influencers, need to begin to work closer together to create the conditions where the value of plastics can be realized more than once, and in some cases multiple times across their lifecycle. Part of our role will include designing materials and applications for greater recovery, reuse and recyclability.

We also need to think globally. Neither Canada nor any other G7 nation is anywhere near being a significant contributor to ocean plastics litter. The nations that are key contributors need urgent technical and financial assistance to ensure access to modern, efficient waste management services which we in Canada largely take for granted.

In Canada and other G7 nations, we need to think differently about plastics and stop seeing them as a waste that needs to be eliminated. The chemistry industry is ready and willing to address this new challenge head on.

Chemistry sector leads the way in supporting Alberta’s economic diversification

After a tough few years following the global downturn in oil prices, numerous economic indicators now predict that Alberta is set to have one of the fastest growing provincial economies in Canada in 2018.

At CIAC, we are very pleased with the recent measures the provincial government has taken to help push Alberta’s economic recovery along. Their commitment to investing in the chemistry sector serves as a model for the rest of Canada and the rest of the provinces should pay close attention.

Last February, Alberta’s Energy Diversification Advisory Committee (EDAC) released a report recommending new investments in resource value-added chemical manufacturing to help put Alberta on the map for investors. The goals were to increase the value of energy resources, create jobs and attract new investment to Alberta through economic diversification and responsible development.

Days after these recommendations were made, the provincial government quickly moved to table Bill 1, The Energy Diversification Act, launching the second round of the Petrochemicals Diversification Program (PDP) and establishing a Feedstock Infrastructure Initiative.

Shortly after on March 22, the province reiterated its strong commitment to the chemistry sector in its 2018 budget.

The $500-million investment by round two of the PDP and the $500 million Petrochemicals Feedstock Infrastructure Program investment will ensure that Alberta’s resources are manufactured into high-value products before being sold to global markets.

These recent efforts to diversify the energy economy have already resulted in nearly $10 billion in completed, initiated and proposed chemistry projects in Alberta. These new initiatives should lead to a further $10 billion or more in new investments.

The chemistry sector is already a key contributor to Alberta’s energy value-add strategy in which natural gas liquids, such as ethane, and natural gas itself (methane) are converted into high-value chemicals and fertilizers. This strategy has resulted in $16 billion in sales and $8 billion in exports in 2016. We know that the industry also creates high-value jobs with multiplier effects – each job in the chemistry industry results in another five in related sectors and services.

Internationally, by adding value to Canada’s low-carbon energy resources, the chemistry sector helps Canada take a leadership position in meeting global climate challenges. But to do this, we need to enable our chemistry industry to remain competitive to thrive. No where else in Canada are we seeing direct investment supporting the chemistry industry as we are in Alberta.

Alberta’s support will help the chemistry sector to take advantage of our low-carbon feedstock and create wealth and opportunity for Albertans in a socially and environmentally responsible manner. The rest of Canada should stand up and take notice.

Chemistry industry needs federal engagement to win investment projects

As the Liberal government looks to attract considerably higher rates of foreign investment into innovative sectors with high growth prospects, more attention needs to be paid to Canada’s chemistry sector. Currently, there are more than $12 billion in investments representing four global scale chemistry projects awaiting decision by year’s end that would create hundreds of jobs, drive economic growth, and help the government reach its environmental targets. But, without the direct involvement of the federal government, Canada risks losing out on these, and future, foreign investment opportunities.

Globally, chemistry is a large, fast growing industry. In Canada, it is the fourth largest manufacturing sector with over $55 billion in annual shipments. Structured in highly efficient and consolidated clusters in areas like Sarnia, Ontario and Fort Saskatchewan, Alberta, the sector adds significant value to Canada’s energy and agricultural resources

Contrary to misconception, the industry is also highly supportive of climate action. Since 1992, Responsible Care® — the industry’s sustainability initiative — has driven significant improvements in the environmental performance of the sector, including the reduction of absolute greenhouse 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 the industry’s proven track record in providing jobs and improving environmental performance, Canada has struggled to win new investment opportunities. 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, 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, unfortunately we’ve seen less than a two per cent share.

Despite limited success to date, Canada does have many of the key ingredients for investment success in place – established and 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 in attracting billions in investments through Ontario’s $2.7 billion Jobs and Prosperity Fund which identified chemistry as a priority sector and Alberta’s Petrochemicals Diversification Program which attracted 16 proposals worth over $20 billion. Currently, there are two projects in Sarnia and two in Fort Saskatchewan with a total value of over $12 billion that are targeted for provincial investment support. Without sustained federal engagement, these projects face steep odds.

The potential for Canada’s chemistry industry is well aligned with the government’s economic growth objectives. If the Government of Canada engages today to help win existing investment opportunities, it could open the door for $10 to $20 billion in new investments in the years ahead.

A Trump presidency could mean anything but “business as usual’ for Canada’s chemistry industry

Since the stunning results of the U.S. election, I’ve been asked a number of times: “What affect do you think the Trump presidency will have on Canada’s chemistry industry and the broader Canadian economy?”

The easy answer, of course is that its too early to tell. And yet, the one thing we can say with some certainty is that the “business as usual” we are accustomed to, is unlikely to prevail.
Trump’s ‘no apologies’, ‘America first’ approach that has been the hall mark of his campaign and transition has raised expectations that the tepid economic growth over much of the past decade may give way to a renewed and more robust expansion in manufacturing sectors.

What does this mean for Canada’s chemistry industry? The business of chemistry continues to expand faster than broad-based GDP. And, with more than 60 per cent of Canada’s chemistry exports shipping to the U.S., there is good reason for us to expect a more bullish outlook in the months and years to come
But, there are also some potentially significant risks.

The first major area of concern is market access. Not only U.S. access to Canadian chemistry products, but also to primary, intermediate and finished goods produced in Canada. Canadian manufacturers purchase more than half of all chemicals produced in the country: from the auto sector, to the textile and forest products industries; to the energy sector, which is not only a significant consumer of our products, but also a important feedstock source. The domino effect from any disruption that impedes Canadian manufactured products and energy resources from reaching American markets is a threat to the well being of our industry. Whether its through renegotiation of trade agreements, tariffs, or an aggressive ‘Buy America’ strategy.

The second major risk would be adjustments to American taxation and regulatory regimes – changes that could put the U.S. even further ahead of Canada as a more attractive destination for investment. Changes in these areas could weaken or eliminate the one key advantage Canada has had for many years: competitive corporate tax rates (before US exemptions and adjustments) that are currently well below those of U.S. or other OECD jurisdictions.

The third risk is self-imposed in nature. With the exception of corporate tax rates, Canada’s competitiveness has been allowed to deteriorate as governments — at all levels and affiliations — have introduced a flurry of new regulatory activity that has imposed additional costs on business. At the same time, governments and society have been prone to near paralysis in decision making on major policies and projects. If this trend continues while the U.S. heads in the opposite direction, the impacts will be keenly felt.

If Canadian governments are unwilling to meet the competition head on and take measures to improve the investment climate, the downside risks of a Trump Presidency will far outweigh the upside opportunities for Canada’s chemistry sector.

Canadians and their governments have proven to be pragmatic and capable of course change in the past. With the New Year upon us, here’s hoping we remain capable of doing so in 2017.

Canada needs more chemistry

Bold leadership is needed to attract and win new investments

The flurry of consultations by various departments over the past summer was a clear indication that the Government of Canada is focussing on low carbon, innovative, economic growth.

An effective innovation strategy should foster the development of products, services and industries that can best capitalize on the natural resources and talent that already exist in our country. The chemistry industry is well positioned to deliver on these expectations, if Canada can build and maintain a competitive, long-term investment environment.

Written off as a mature industry decades ago, North America’s chemistry industry has experienced a dramatic resurgence following the advent of abundant, low-carbon feedstock associated with the shale gas revolution. Today, more than 270 projects are being tracked totalling over $250 billion in new investments, with more than 600 additional investments in the downstream plastics sector. This makes chemistry the fastest growing manufacturing sector in North America and the poster child for reshoring manufacturing.

This new feedstock means chemistry facilities can operate with half the energy demand and half the greenhouse gas emissions compared to older facilities fuelled by crude oil. Moreover, compared to coal-fed chemistry processes in China, this abundant and advantageously priced feedstock provides a ten to one energy and greenhouse gas advantage – to make the same finished product. The economic and environmental advantages of shale gas feedstocks are so great that European chemistry operations are now being retrofitted to receive feedstocks imported from North America.

This rapid re-tooling and expansion is a testament to the industry’s commitment to innovation, to adopting cutting-edge technologies, and to the reduction of carbon emissions. Other factors reinforce this view.

It is not a widely appreciated that more than 95 per cent of all products manufactured today rely on chemistry. Addressing the challenges of clean energy, air and water, and a sufficient supply of safe and nutritious food on a global scale is entirely dependent on chemistry-based solutions. From improved building insulation to lighter plastics for automobiles, and the production of solar and wind energy equipment, innovative chemistry products and processes are essential in helping society meet its needs while reducing its carbon emissions.

While there have been some important investments in recent years in Ontario, and Alberta is poised to attract additional investments, Canada has not kept pace with growth in the U.S. Based on historical patterns, Canada should have attracted $25 billion of new investment. Instead, only about one tenth of that has found its way here.

The good news is Canada is at least making the short lists for companies considering North American investments. Canada has market and feedstock access and has taken some measures to improve the country’s fiscal competitiveness with the 10-year extension of the accelerated capital cost allowance and lowering corporate tax rates. But, more is needed to create the winning conditions for investments. In the end, it is a winner takes all game.

By recognizing opportunities, partnering closely with the provinces and working to further strengthen the country’s investment climate, Canada can position itself as a destination of choice for sustainable investments.

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