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Canada introduces investment tax credits for renewables

Canada’s new 30% tax credits for clean technology are designed to level the playing field with the United States and spur the adoption of green technologies.

From pv magazine USA

The Canadian government’s recently released 2022 Fall Economic Statement  introduces investment tax credits (ITC) for clean technologies and clean hydrogen that will help to spur the transition to net-zero energy and make the nation more competitive with the United States.

“Following the adoption of the Inflation Reduction Act in the United States, the need for a competitive clan technology tax credit in Canada is more important than ever,” said the government.

The clean-tech tax credits will be offered to entities that invest in net-zero technologies, battery storage, and clean hydrogen. The move follows passage of the US Inflation Reduction Act., which was signed into law in August by President Joe Biden. The IRA includes a 10-year extension of the ITC at 30% of the cost of the installed equipment, stepping down to 26% in 2033 and 22% in 2034. Years of uncertainty about the ITC created instability in the clean energy sector in the United States, but the 10-year extension is seen as the kind of assurance that US investors need in order to embrace clean technologies.

“While the IRA will undoubtedly accelerate the ongoing transition to a net-zero North American economy, it also offers enormous financial supports to firms that locate their production in the United States – from electric vehicle battery production, to hydrogen, to biofuels, and beyond,” the government said in the economic update. “Without new measures to keep pace with the IRA, Canada risks being left behind.”

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The new 30% Canadian tax credit will apply to investments in renewable energy generation and storage, as well as in as low-carbon heating and zero-emission industrial vehicles. The Canadian government is also planning a tax credit for hydrogen production, but the design of it has yet to be determined.

The tax credit is just an initial part of Canada’s response. The Canadian government said it has also proposed a 2% tax on corporate stock buybacks to “encourage corporations to reinvest their profits in their workers and business.”

“What Canadian workers need is a government with a real, robust industrial policy; a government committed to investing in the net-zero transition, to bringing in new private investment, and to helping create good-paying jobs,” said Chrystia Freeland, deputy prime minister and minister of finance.

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Source: pv magazine