Former U.S. president Donald Trump’s attacks on the Biden administration’s signature climate law could shift much-needed investment dollars to Canada’s green energy industry, say analysts at RBC Capital Markets.

In a speech on Thursday, the Republican presidential nominee said U.S. President Joe Biden’s Inflation Reduction Act (IRA) “actually sets us back.” Trump vowed to “rescind all unspent funds under the misnamed Inflation Reduction Act,” if elected.

Passed into law in 2022, the IRA’s US$369 billion in planned public funding for energy security and climate change raised the profile of the United States as a destination for clean energy investment.

“We believe that U.S. election uncertainties could result in some investors shifting their focus to Canada,” RBC Capital Markets analyst Nelson Ng wrote in a note to clients on Friday. “Canada's supportive renewables policies provide an attractive landscape for renewable energy developers.”

American voters will head to the ballot box to elect a new president on November 5. The race between Trump and Vice-President Kamala Harris, the Democratic nominee, appears tight. A Yahoo News/YouGov poll last week favoured Harris (39 per cent) over Trump (36 per cent). ??

Ng acknowledges that Canada’s electricity grid is already “notably cleaner” than its neighbour to the south. Carbon-free sources like hydroelectric account for 80 per cent of Canadian power generation, versus 40 per cent in the U.S., which relies more heavily on natural gas and coal. However, he sees rising demand for electricity in Canada, coupled with net-zero policies, creating “many” opportunities for renewable development.

“Ontario, Quebec, British Columbia, Saskatchewan, and Nova Scotia are all actively pursuing renewable energy projects through various RFPs (request for proposals),” he wrote. “Looking at Canada's three largest electricity markets, we estimate that it could require well over 100 GW of new wind and solar capacity to satisfy demand growth over the next 25 years, in addition to some energy storage capacity.”

Investors shifting focus from the U.S. to Canada would benefit Quebec-based wind, solar and hydro developers Boralex (BLX.TO) and Innergex Renewable Energy (INE.TO), according to Ng. Both companies have major projects in development that could benefit from the Canadian Investment Tax Credit, which funds 30 per cent of eligible project costs.

“Although the U.S. renewable energy market is much larger than Canada's . . . Canada has become the main near-term development focus for renewable developers including Boralex and Innergex Renewable,” Ng wrote.

An influx of foreign investment in Canada’s renewable sector could help make up for a lack of financial support from the country’s major financial institutions. Last week, a report from climate advocacy group Investors for Paris Compliance found most big banks and pension funds in Canada are not investing in renewable energy at the level required to hit the International Energy Agency's 2030 target for limiting global warming.

A separate report by U.S. consulting giant McKinsey & Company found “corporate, public, and private equity investors are hesitating about deploying capital” in the U.S. and Europe.

What if Trudeau loses power?

RBC Capital Markets considered the impact of a Conservative government winning power from Prime Minister Justin Trudeau’s Liberals, which have promoted Canada as a champion of progressive climate policy.

“Except for Alberta, renewable energy is generally procured at the provincial level. We acknowledge that if a federal Conservative government comes into power in the next election, it could negatively impact the renewable energy sentiment in Canada, as it is generally viewed that a Conservative government is more supportive of fossil fuels,” Ng wrote.

"The most direct federal support for renewables is the recently established Investment Tax Credit, which provides a 30 per cent subsidy on eligible project costs,” he added.

"The Conservative Party has not made any direct statements about the ITC, but we expect the market to have concerns regarding the potential reduction or elimination."

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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