Quebec will feel effects of Biden’s Inflation Reduction Act: report

The effects of the Biden administration’s push for renewable energy and battery technology investments will be felt in Quebec, according to a report released Thursday.

The report, conducted by the Institut du Québec (IDQ) and Alliance Switch, found Quebec will have no choice but to adjust to changes brought on by the Inflation Reduction Act (IRA).

Under the act, the U.S. will provide approximately $400 billion over 10 years to support climate change investments.

The American government’s plan to go green is “damn good news” in the fight against climate change, said Denis Leclerc, president and CEO of Écotech Québec and member of the Switch Alliance.

However, he says Quebec’s industry will have to adjust to the political reality of their imposing neighbour.

“Will our green economy companies, clean technologies, be more encouraged to set up shop in the U.S., because there will be tax incentives? The answer is yes.”

The IRA is not just a concern for the Quebec economy. The U.S. economic intervention will create significant demand that could benefit some suppliers and the mining sector, the report found.

However, government strategies must be adjusted accordingly, adds IDQ executive director Emna Braham. The Legault government may have to modify its strategy by abandoning certain segments of the battery industry to prioritize others.

This is particularly true for the production of battery cells, a step in the chain that Quebec has not yet succeeded at implementing in the province, said Braham.

“Quebec will find itself in competition with U.S. states that will have additional incentives to attract this type of investment. And so, we’re going to have to keep an eye on the evolution of the competitive context and see where it would be most judicious for Quebec to position itself.”

Canada has succeeded in tempering some of Washington’s protectionist aims by getting the IRA criteria extended to North American producers in several cases.

However, the North American preference will not benefit certain sectors in which Quebec hopes to distinguish itself. Indeed, the production of commercial vehicles, such as trucks or electric buses, is open to competition, so “we will be considered on the same level as Asian and European companies,” said Braham.


Quebec’s electricity could also lose its competitive advantage over American electricity, as the IRA is expected to increase solar and wind generation in the U.S. and lower prices.

In Quebec, electricity prices are expected to follow a reverse trend, with new supply expected to become pricier.

The question is how competitive Quebec electricity will be in this environment, said Braham.

“It’s something we’ll have to watch.”

The effect will be felt in the green hydrogen sector, as advances in solar and wind power could drive down the cost of producing green hydrogen. “If these predictions hold true, the competitive environment will become extremely challenging for Quebec,” the report reads.


That said, the adoption of the IRA bodes well for the critical minerals sector. In this regard, Quebec’s mining companies don’t have to fear American protectionism while supply is not sufficient to meet demand.

Faced with the climate emergency, Quebec shouldn’t “cut corners” by relaxing environmental regulations to speed up projects, Braham warns.

“The temptation could be to say that we want to reduce, in quotes, ‘regulatory constraints’ to speed up the production of critical minerals,” she explained. “What we’re saying is that, on the contrary, in a context where investors and governments are looking for organizations that are going to have good ESG [Environmental, social, and corporate governance] performance, well, the Quebec regulatory framework could be more of a competitive advantage than a constraint.”

This report by The Canadian Press was first published in French on March 9, 2023.  

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