Tax credits for clean technologies and growth fund in Canada

Canada: Tax credits for clean technologies and growth fund

The government of Canada announced yesterday that it is going to introduce refundable tax credits for clean technologies. The worth of these refundable tax credits is up to 30% of investment costs. The aim is to close competitive gaps with the United States in scaling up green technologies.

Also, Canada plans to launch a growth fund. This was first announced in April. A capitalization of $10.92 billion is planned by the end of the year. It should help mitigate the risks that private investors take on when investing in new technologies and infrastructure.

Tax credits will be available to investors in clean technologies

Canadian Finance Minister Chrystia Freeland in her so-called fall economic statement (FES), said that clean-tech tax credits will be available to investors in net-zero technologies, battery storage, and clean hydrogen.

According to Scott MacDougall, senior advisor at the Pembina Institute, a clean energy think tank, the new green transition measures are a step in the right direction, but they are still not enough.

Last month, Freeland promised an initial response to the US Inflation Reduction Act (IRA), which was signed into law earlier this year by US President Joe Biden. IRA includes generous incentives for consumers and businesses to make the low-carbon transition.

Canada also proposed a 2% tax on corporate stock buybacks, similar to a measure in the IRA. And again, the aim is to encourage corporations to reinvest their profits in their workers and business. At least that was announced in the FES.

The growth fund plans to help investors in carbon capture

The tax is expected to generate $1.52 billion over five years and will go into effect on January 1, 2024.

Robert Asselin, senior vice president of policy at the Business Council of Canada doesn’t think it’s well targeted in terms of encouraging business investments.

The growth fund plans to offer “contracts for difference,” which could help investors in carbon capture and storage mitigate the risk that a future government will abolish Canada’s carbon pricing system.

According to the document, Canada will include new measures in next year’s budget to boost advanced manufacturing competitiveness.