Question Period Note: Strategic Innovation Fund [SIF]: Critical Minerals

How is the Strategic Innovation Fund (SIF) supporting the development of critical minerals in Canada?

• Critical minerals are central to several major high-demand global industries, like clean technology, health care, aerospace, and computing.

• Canada’s abundance of several valuable critical minerals provide the opportunity to grow to become a global leader in this space. Investments in key value chains also support Canada’s transition toward a net-zero emissions economy.

• Budget 2023 announced $500 million to the Strategic Innovation Fund to support the development and application of clean technologies. A further $1.5 billion in existing resources will be directed towards projects in critical minerals, clean technologies, and industrial transformation.

• Budget 2023 also included several new tax credits for companies to support a greener Canadian economy.

• Canada has deposits of 31 critical minerals that can be utilized for the sustainable economic success of Canada and our allies, and to position Canada as the leading mining nation, as set out in the Canadian Minerals and Metals Plan. Canada currently produces 21 of the 31 critical minerals listed, with a global value estimated at $880 billion in 2019.

• Canada has been in a race for global leadership in this sphere since the Canadian Critical Minerals Strategy was released in December 2022, by Natural Resources Canada (NRCan).

• Given the urgent need to develop Canada’s critical minerals supply chains, early efforts will focus on the following six minerals: lithium, graphite, nickel, cobalt, copper, and rare-earth elements. These minerals have been selected because they offer the greatest economic growth and employment opportunities across the country, including for Indigenous peoples, along the entire value chain (exploration, mining, processing, manufacturing, and recycling).

• Budget 2022 announced up to $3.8 billion over eight years, starting in 2022-23, to implement Canada’s first Critical Minerals Strategy. This includes $1.5 billion from the Strategic Innovation Fund to expand Canada’s manufacturing, mineral processing, and recycling capabilities across critical minerals supply chains. These are essential to the technologies needed to support Canada’s transformation to a net-zero emissions global economy.

• During the August 2022 visit of the Chancellor of Germany, the Prime Minister reiterated Canada’s commitment as a key partner for cooperation in addressing Europe’s energy needs now and in the years to come, including through strengthened cooperation on critical minerals.

• In August 2022, Canada signed two new Memoranda of Understanding (MOUs) with German automotive manufacturers Volkswagen AG and Mercedes-Benz AG to advance collaboration in Canada across the automotive, battery, and critical minerals sectors (in areas such as battery manufacturing, critical minerals supply, and cathode material production).

• On March 13, 2023, Volkswagen announced that its subsidiary, PowerCo, will establish an electric vehicle (EV) battery manufacturing facility in St. Thomas, Ontario, Canada.

• The Team Canada approach to critical minerals is forward-looking, iterative, and long-term. Implementation has begun and will continue over several years, in collaboration with federal, provincial, territorial, Indigenous, and industry partners.

• The Strategic Innovation Fund (SIF) is an important tool for supporting industrial transformation, with advanced-stage projects across sectors. These investments will advance the development of value chains, enabling the transition towards a green and digitized economy.

• Developing Canada’s critical mineral value chains can boost the competitiveness of the mining and metals sector, grow the national economy, and create well-paying jobs for Canadians.

• A number of projects funded through the critical minerals envelope of the SIF are expected to be located in rural and remote parts of the country, resulting in significant economic activity, including high-paying and high-skilled employment opportunities for these regions.

• Budget 2023 introduces a number of new tax credits to support greening the economy, specifically:
o a 30% tax credit for costs of investments in new machinery and equipment used to manufacture or process key clean technologies, and extract, process, or recycle key critical minerals;
o a 15% refundable tax credit for investments in clean electricity generation, storage and transmission;
o a Clean Hydrogen Investment Tax Credit of between 15-40%, scaled to support projects delivering the cleanest hydrogen; and
o extending and expanding eligibility for existing tax credits to nuclear and geothermal energy systems.