Question Period Note: Clean Economy Investment Tax Credits

Budget 2024 reaffirmed the Government’s commitment to building a thriving made-in-Canada clean economy, supported by six Clean Economy Investment Tax Credits (ITCs), four of which have now been enacted. These ITCs, which are expected to provide up to $93 billion in federal incentives over their lifetime, play an important role in attracting investment, supporting Canadian innovation, creating jobs and driving Canada’s economy toward net zero by 2050. The new government plans to move forward on the Clean Economy ITCs with modifications to the Carbon Capture Utilization and Storage (CCUS) ITC as well as Clean Technology Manufacturing (CTM) ITCs.

Beginning in 2021, the Government of Canada announced a series of six refundable Clean Economy ITCs. These ITCs will help Canada transition to clean energy while growing the economy and supporting green innovation. They will also provide businesses and other investors with the certainty they need to invest and build in Canada.
· The Government is moving forward on implementing and administering these ITCs, in support of a strong Canadian economy. These ITCs will also play an important role in building a net-zero economy in Canada by mobilizing additional investments in clean growth projects such as clean electricity, clean hydrogen, carbon capture, utilization and storage, clean technology manufacturing, and electric vehicles and batteries.
· The Government of Canada plans to modify the Clean Technology Manufacturing ITC to include critical mineral mine development expenses for brownfield sites, while broadening the list of priority critical minerals. This will accelerate how we get critical minerals from “rock to road” and will create well-paying jobs.

There are six (6) Clean Economy Investment Tax Credits (ITCs), four (4) of which have been enacted:

1. Clean Technology Manufacturing Investment Tax Credit (CTM ITC)
   The CTM ITC aims to encourage the investment of capital for clean technology manufacturing technology capital in Canada and received Royal Assent on June 20, 2024. It is a refundable tax credit of up to 30% of the cost of investments in machinery and equipment used to manufacture or process key clean technologies, and extract, process, or recycle certain critical minerals essential to clean technology supply chains. The rate is reduced to 20% in 2032, 10% in 2033, and 5% in 2034. After 2034 the ITC will no longer be available. The new government plans to modify the CTM ITC to include critical mineral mine development expenses for brownfield sites and expand the list of priority critical minerals. Le nouveau gouvernement prévoit de modifier le CTM ITC afin d’inclure les dépenses de développement des mines de minéraux critiques pour les sites industriels et d’élargir la liste des minéraux critiques prioritaires.

2. Clean Hydrogen Investment Tax Credit
   The Clean Hydrogen ITC provides between 15-40% in refundable tax credits for investments in clean hydrogen production based on the life cycle carbon intensity emissions of the hydrogen produced. The cleanest projects will be eligible for the highest tax credit rate. Enacting legislation received Royal Assent on June 20, 2024, and businesses can apply for the ITC for eligible expenses incurred after March 28, 2023, and before 2035. The credit will apply to both electrolysis of water projects and from eligible hydrocarbon projects (e.g. natural gas reforming projects), if emissions are abated with carbon capture utilization and storage. The Clean Hydrogen ITC can also be applied to equipment for converting clean hydrogen to ammonia, and the 2024 Federal Economic Statement announced methane pyrolysis would be added as an eligible pathway.

3. Carbon Capture, Utilization, and Storage Investment Tax Credit (CCUS ITC)
   The CCUS ITC aims to encourage the investment of capital in the development and operation of carbon capture, transportation, utilization and storage capacity in Canada. Enacting legislation received Royal Assent on June 20, 2024, and it is retroactively available to businesses that have incurred eligible expenses starting in 2022. The credit provides between 37.5-60% to eligible projects that permanently store captured CO2 in either dedicated geological storage or in concrete. Other storage pathways could be made eligible in the future if permanence of storage can be demonstrated. Eligible jurisdictions for geological storage of CO2 are currently limited to British Columbia, Alberta, and Saskatchewan, with others having the opportunity to be approved by the Minister of Environment and Climate Change.
   The federal platform commits to making Canada a world leader in carbon removal and sequestration by establishing Canada as a global hub for related technologies. It proposes to extend the full value of the CCUS ITC to 2035, support a broad range of carbon removal technologies and innovations, accelerate offset protocol development, and establish separate carbon removal targets for 2035 and 2040.

4. Clean Technology Investment Tax Credit
   The Clean Technology ITTC is a refundable investment tax credit of 30% for investment in clean technologies situated in and intended for use in Canada. Enacting legislation received Royal Assent on June 20, 2024, and is retroactively available to businesses for eligible expenses incurred after March 28, 2023, and before 2035. The tax credit applies to eligible equipment including but not limited to renewable energy, low carbon heating from solar and heat pumps, industrial zero-emission vehicles, etc.

5. Clean Electricity Investment Tax Credit
   The Clean Electricity ITC will be a 15% refundable tax credit to support and accelerate clean electricity investment and will apply to eligible expenses incurred after March 28, 2023, and before 2035. The tax credit will be available to certain taxable and non-taxable corporations, as well as provincial and territorial Crown corporations in eligible jurisdictions. An eligible jurisdiction is one where the provincial or territorial government has publicly committed to publish an energy roadmap to achieve net-zero emissions by 2050, inclusive of all energy sources, by the end of 2026.

6. Electric Vehicle Supply Chain Investment Tax Credit (EV Supply Chain ITC)
   The EV Supply Chain ITC is an investment tax credit of 10% available to Canadian taxable corporations investing in eligible building property related to three segments of the EV Supply Chain: 1) Electric vehicle assembly, 2) Electric vehicle battery production, and, 3) Cathode active material production. Once legislation is enacted, the tax credit would be available for eligible property that becomes available for use on or after January 1, 2024. Businesses that manufacture electric vehicles and their precursors are already able to claim the 30% CTM ITC on the cost of their investments in new machinery and equipment.

Non-applicable