Executive Summary
Natural gas plays a significant role in meeting the energy needs of Canadians: In 2023, it met just under 40% of our total requirements. This was reliable energy delivered to an estimated 25 million Canadians. Natural gas is also the largest source of energy for buildings and industrial energy use in the country.
All that energy comes over a resilient gas energy infrastructure system of approximately 585,000 km in length reaching right across the country. This infrastructure isn’t just for natural gas – it can and does deliver renewable gases, such as renewable natural gas or RNG to Canadians. It is early days for these alternatives however, and a federal ITC would provide a valuable boost to the efforts to integrate them into the system, and thereby deliver lower GHG emitting energy consistent with federal ambitions.
RNG, or renewable natural gas is indistinguishable from conventional natural gas. The primary component in each is the methane molecule, CH4. Using RNG requires no equipment upgrades for the end user, and it can be delivered by existing infrastructure and stored underground in Canada’s vast natural gas storage facilities.
RNG carries a low, and in some cases negative, lifecycle GHG emissions intensity. RNG is produced from waste from sources including landfills, wastewater treatment facilities, farm based digestors and forest products. RNG potential exists on farms, in cities, and at industrial facilities right across Canada, making it a pan-Canadian clean energy opportunity. The first RNG facility in Canada commenced operation over 10 years ago in British Columbia. At present, there are 22 operating RNG facilities in Canada.
Canada’s RNG potential is vast and largely untapped. It is estimated to be roughly equal to 40% of today’s total gas demand: that is the volume of natural gas consumed in the residential and commercial building sectors combined. Current RNG volumes in the gas pipeline system are less than 1% across Canada on average. Substituting 10 per cent of Canada’s current natural gas supply with RNG (and the Canadian industry has an aspirational target of 10% by 2030) would reduce GHG emissions by 26-37 megatonnes, depending on the source of RNG and its associated carbon intensity.
But to achieve this result, we need the proper investment conditions. RNG is incented in the US through measures introduced under the Inflation Reduction Act. Canada’s ability to attract RNG investment before others will be reliant on setting investment conditions that are competitive – a federal ITC is crucial to this.
The investment opportunity in Canada over the next decade is significant. CGA members forecast that between 2024 – 2035, the total investment in new RNG production facilities could be approximately $2-3 billion. This will build between 40-50 new production facilities.
Detailed in the proposal is an overview of the current natural gas and RNG markets and essential factors on which we recommend that Canada announce a new federal ITC for RNG that integrates with the existing clean technology ITC. Industry recognizes the fiscal implications of Canada’s ITC’s. As such we are amendable to an RNG ITC start date beginning in the 2027 tax year. In parallel, we would request a two-year extension of the ITC from 2035 to 2037.
We remain committed to advancing our shared objectives around energy affordability, Canadian competitiveness, and a lower emissions energy system, and we believe an RNG ITC will help on all three fronts. We hope you agree and can see to the introduction of the measure.
Thank you,
Timothy M. Egan
President and CEO, Canadian Gas Association
Chair, NGIF Capital Corporation
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