The Liberals’ 2023 budget includes a 15 percent refundable tax credit for companies who invest in “clean electricity,” which the Parliamentary Budget Officer (PBO) estimates will reduce federal revenues by $6 billion over four years.
A new report published on June 29 states the Investment Tax Credit for Clean Electricity would be available for both taxable and non-taxable entities, including public utilities, as of the day of Budget 2024 for any projects that did not begin construction prior to the day of Budget 2023.
The credit would not be available after 2034, according to the Legislative Costing Note. The credit would apply to “eligible investments in non-emitting electricity generating systems, abated natural gas-fired electricity generation, stationary electricity storage systems and equipment for the transmission of electricity between provinces and territories.”
The PBO estimates that the cost of the credit would begin in 2024–2025 at $722 million, and then cost $1.562 billion in 2025–2026. The next two years, from 2026 to 2028 would cost $1.855 billion, and $1.887 billion respectively, with all estimates on an accrual basis as they would appear in the budget and public accounts. The total cost of the program would run an estimated $6.025 billion.
In a news release on April 5, Minister of Environment and Climate Change Steven Guilbeault said the tax credit was “transformational” and would “help produce, manufacture, or transition to clean energy in Canada, while supporting good jobs for the middle class and ensuring more vibrant communities across Canada.”
The government plans five tax credits in total, which will equal over $60 billion in the next decade. Besides the Clean Electricity tax credit, the federal government plans to introduce a refundable Clean Technology Manufacturing Tax Credit to cover 30 percent of costs in new machinery and equipment used to manufacture or process clean technologies and extract, process, or recycle critical minerals.
The federal government said it is also moving forward with the Clean Hydrogen Investment Tax Credit, first introduced in the 2022 Fall Economic Statement, with the stated goal to support between 15 and 40 percent of eligible projects’ costs to produce clean hydrogen.
The government said it will expand the Carbon Capture, Utilization, and Storage Investment Tax Credit to additional types of equipment used to capture carbon dioxide emissions for storage or other uses in industrial processes.
Finally, Ottawa announced it plans to expand eligibility for the refundable Clean Technology Investment Tax Credit to include geothermal energy systems, which the government suggests will contribute to growth in Canada’s “clean technology sector.”
“There has never been a more impactful budget in the history of Canada to fight climate change and create a clean, electrified economy,” stated Guilbeault.
“This budget outlined over $80 billion in new measures to fight climate change, starting with five major new tax credits to accelerate clean tech in Canada. This brings the total of everything we are doing to fight climate change to $200 billion,” he added.