Latest developments in the United States, Canada and New Zealand

Latest developments in the United States, Canada and New Zealand

There continues to be significant developments in the sector across the globe. In this article we highlight some key changes in the United States, Canada and New Zealand. 

United States (US)

In March, the US and Japan announced a Trade Agreement to strengthen critical minerals supply chains between the countries. The Trade Agreement builds on the existing 2019 Trade Agreement between the countries and ensures that the US can reduce its reliance on non-ally countries for sourcing critical minerals for electric vehicle batteries. The Trade Agreement includes:

• Obligations not to impose prohibitions or restrictions on imports or exports of critical minerals between Japan and the US;
• Not imposing export duties on critical minerals exported between the countries;
• A requirement to discuss with each other domestic measures to address non-market policies and practices of other countries that affect the trading of critical minerals and the global supply chain; and
• Supporting each other to address supply chain disruptions.

The Trade Agreement complements the Inflation Reduction Act that includes green energy tax incentives like an advanced manufacturing production tax credit for producers of critical minerals and tax credits for the sale of electric vehicles. It’s important to note that the full benefit of the tax credits for the purchase of an electric vehicle only apply if a certain percentage of critical minerals in the electric battery are extracted or processed in the US or from a country that the US has a free trade agreement with. While technically the US doesn’t have a free trade agreement with Japan, this new arrangement is likely to meet the requirements of the Inflation Reduction Act.

Canada

The Government of Canada recently delivered its Federal Budget for 2023 that includes several initiatives for the mining industry. 

A new tax credit is proposed for critical mineral extraction and processing to accelerate investment in the sector. The tax credit rate would be up to 30% of the capital cost of eligible property (like machinery and equipment) associated with eligible activities that are acquired and available for use by 2034. Eligible activities include extraction and certain processing activities for lithium, cobalt, nickel, graphite, copper and rare earth elements. 

The budget also proposed to enable lithium from brines to be a mineral resource for the purpose of certain income tax concessions. The concessions will allow principal-business corporations that undertake certain exploration and development activities to issue flow-through shares and claim the Critical Mineral Exploration Tax Credits. 

The Canadian government has also announced a $1.5b Critical Minerals Infrastructure Fund to develop energy and transportation projects that support the development of critical minerals projects. 

In Ontario, the Independent Electricity System Operation has also launched a clean energy credit registry. This will enable companies to purchase and retire clean energy credits to meet their corporate ESG goals. These credits can be used to offset greenhouse gas emissions attributable to their Scope 2 electricity use emissions. The Registry also regulates the clean energy credit market, who can purchase and retire credits and how proceeds from the transfer of credits are to be applied. 

New Zealand (NZ)

A recent report has indicated that NZ households and businesses could pay an additional $7b in energy costs over the next 12 years if natural gas is aggressively phased out as part of achieving NZ’s carbon emission targets. The report identifies several options including carbon capture, utilisation and storage technology as key to delivering emissions reductions at limited cost.  

Offshore wind power is another option available to New Zealand given its unique location in the southwest Pacific Ocean. A recent report indicates that the Taranaki Bight and Foveaux Strait are both well suited to current offshore wind farm technology. To inform their policies NZ is closely monitoring the development of Australia’s largest offshore wind farm in Victoria. The biggest challenge for NZ is ensuring wind turbines do not adversely impact seabirds, marine mammals and fisheries.