As Canada forges ahead on its commitment to achieving net-zero emissions by 2050, Atlantic Canada looks poised to play a central role in this transition.
To support a highly anticipated green hydrogen industry, Nova Scotia has already set a goal of leasing sites for 5 gigawatts of offshore wind energy by 2030.1 Newfoundland and Labrador has expressed similar ambitions in developing onshore wind and green hydrogen. Recently announced financial support now appears to be on the way.
On November 3, Hon. Chrystia Freeland, Deputy Prime Minister and Minister of Finance, released the 2022 Fall Economic Statement, proposing two major investment tax credits impacting the clean energy industry, in what is seen as Canada's answer to clean energy mechanisms introduced by the Inflation Reduction Act in the United States.
The Investment Tax Credit for Clean Technologies is a proposed refundable tax credit of up to 30 per cent of the capital cost of clean technology investments. This includes investments in: electricity generation systems such as offshore wind and tidal energy generators; battery storage systems; and low-carbon heat equipment such as solar heating or air-source heat pumps.2
The credit will be first available in 2023, phased out starting in 2032 and expiring by 2035. Incentivizing the creation of clean energy jobs is a primary focus of the credit and certain labour conditions will be prerequisites to qualification for the credit, including the creation of apprenticeship opportunities and paying local market wages. The entire 30% credit will be available to those who adhere to certain labour conditions to incentivize clean energy job creation. A reduced 20% credit will be available to those who do not adhere to such conditions.
A further credit, one supporting the clean hydrogen industry, has also been announced. The Investment Tax Credit for Clean Hydrogen is a proposed refundable investment tax credit scaled by carbon intensity. Similarly, to the Investment Tax Credit for Clean Technologies, eligibility requirements will be linked to labour conditions.
Investments, which otherwise meet all eligibility requirements, made in the lowest carbon intensity tier would receive an investment tax credit of at least 40%. The maximum tax credit would be reduced by 10 percentage points for companies which do not meet the labour condition criteria.3
The Department of Finance will launch a consultation process to seek input on a carbon intensity scale appropriate for the Canadian market and the level of financial support needed.
While more details on these tax credits are expected to be forthcoming prior to the Budget 2023, these announcements are a promising step on the path to net-zero.
Footnotes
1. https://novascotia.ca/news/release/?id=20220920003
2. https://www.budget.gc.ca/fes-eea/2022/report-rapport/FES-EEA-2022-en.pdf
3. https://www.budget.gc.ca/fes-eea/2022/report-rapport/FES-EEA-2022-en.pdf
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