U.S. Inflation Reduction Act impacts for propane sector

The CPA has been collaborating with the Propane Education and Research Council (PERC) and the National Propane Gas Association (NPGA) to support the use of low-emission propane in energy transition discussions, both in the U.S. and Canada. There are many lessons that can be learned across the border, including the recent U.S. Inflation Reduction Act (IRA).

The IRA is an incentive-based approach as opposed to a regulatory or "stick” method being used by the Canadian government. The CPA has lobbied the federal government to follow a similar approach to the U.S. (as evidenced in our oil and gas cap and the methane amendment submissions).

The IRA was signed into law in August 2022 and provides subsidies for certain sectors of the economy to incentivize growth and create jobs. There are many giveaways for electrification in the IRA, but there are also other provisions that promote an all-of-the-above approach to solving the emissions reduction goal.

The IRA offers the following opportunities for propane:

• The Alternative Fuel Tax Credit ($0.37 credit for each gallon of propane sold in the transportation sector, including off-road vehicles like forklifts).
• Extension of second-generation biofuel incentives (applies to the production of rDME, which can be deployed to reduce the carbon intensity of both conventional and renewable propane).
• Alternative fuel refuelling property credit (propane refuelling infrastructure qualifies for this credit).
• Diesel emissions reductions (provides the Environmental Protection Agency with $60 million for Diesel Emissions Reduction Act grants for projects addressing diesel emissions from the goods movement facilities (e.g., airports, railyards, and distribution centers) and from vehicles servicing those facilities. This provision provides additional funding for DERA, which funds clean school bus rebates along with other general diesel emission grants).
• Clean fuel production tax credit (could encourage more production of renewable propane [RP]).
• Energy infrastructure reinvestment financing (this provision may be utilized for funding for propane/RP along with DME/rDME infrastructure). 

However, there are several threats to the propane sector identified by the NPGA in the IRA, including but not limited to:

• provisions solely funding heavy-duty electric vehicles
• provisions aiming to electrify ports instead of an all-of-the-above approach
• potential for gas bans
• funding is specific toward electrification and subsidizing the EV vehicle production market
• significant amounts of funding for the development and deployment of electric technologies for homesteads
• provisions that increase the cost of propane feedstocks 

The CPA will continue to collaborate with PERC and NPGA on this important issue.