INVESTMENT TAX CREDITS: Canada’s Bold Move to Drive the Clean Economy

As nations worldwide race to harness the economic opportunities of a net-zero future, the Government of Canada is taking decisive action to ensure Canadian workers and industries are at the forefront. The Clean Economy Investment Tax Credits (ITCs), representing $93 billion in federal incentives by 2034–35, are poised to attract investment, support innovation, create jobs, and steer Canada’s economy towards net zero by 2050.

The Honourable Jonathan Wilkinson, Minister of Energy and Natural Resources, and the Honourable Marie-Claude Bibeau, Minister of National Revenue, announced the enactment of the first four Clean Economy Investment Tax Credits: 

1. The Clean Technology ITC

The Clean Technology ITC supports taxpayers investing in specified clean technologies in Canada. The Canada Revenue Agency (CRA) administers the Clean Technology ITC, assessing claims and issuing payments, while Natural Resources Canada (NRCan) offers guidance on what qualifies as clean technology property. Eligible technologies include clean electricity generation equipment like wind turbines and solar panels, stationary electrical energy storage, low-carbon heating systems such as ground and air source heat pumps, and non-road zero-emission vehicles.

2. The Carbon Capture, Utilization and Storage (CCUS) ITC

The CCUS ITC, jointly administered by NRCan and the CRA, supports taxable Canadian corporations that incur eligible expenditures for qualified CCUS projects. This ITC is available to a broad range of CCUS applications across various industrial sectors. Detailed information on eligible projects, NRCan’s technical guide, how to submit a CCUS project plan, and how to claim the ITCs with the CRA is available on the Clean Economy Investment Tax Credits webpages.

3.  The Clean Technology Manufacturing ITC, 

The Clean Technology Manufacturing ITC supports Canadian companies manufacturing or processing clean technologies and their precursors. It provides support for 30 percent of the cost of new machinery and equipment investments used to manufacture or process key clean technologies, as well as extract, process, or recycle critical minerals.

4. The Clean Hydrogen ITC.

The Clean Hydrogen ITC offers a 15 to 40 percent refundable tax credit for investments in projects producing hydrogen, with the cleanest hydrogen projects receiving the highest levels of support. Equipment needed to convert hydrogen into ammonia for transportation may also be eligible.

Clean Economy Investment Tax Credits

NRCan and the CRA have collaborated to create a seamless service experience for businesses seeking to claim these ITCs, centralized on the Clean Economy Investment Tax Credits webpages. As more information becomes available, including details on the Clean Technology Manufacturing ITC and Clean Hydrogen ITC, this webpage will be updated. The federal government is committed to delivering these ITCs, which are already spurring investments and helping Canadian businesses compete and succeed while reducing emissions. The full suite of ITCs will soon be available to Canadians.

“Clean technology innovation and projects will be a key driver of how we decarbonize, create jobs and bring investment to Canada as we build a prosperous net-zero economy in 2050. Canada’s Investment Tax Credits will reduce emissions and create hundreds of sustainable jobs for Canadians, exemplifying how climate action and economic growth go hand in hand. We are bringing benefits for Canadians today and into the future, and ensuring Canada is a global economic leader of the future,” said Minister Wilkinson.

“Our government is committed to empowering Canadian businesses to excel as global leaders in the pivotal industries that will grow our clean economy. Providing business tax incentives that contribute to Canada’s economic well-being is at the core of the Canada Revenue Agency’s mandate. We will continue to champion Canada’s clean economy, and the visionary businesses investing in it, through our ongoing engagement with industries, stakeholders, and the tax professional community,” added Minister Bibeau.

The federal government is prioritizing a suite of major economic investment tax credits to create jobs and keep Canada on track to reduce pollution and reach net zero by 2050. These ITCs include:

• Carbon Capture, Utilization, and Storage investment tax credit
• Clean Technology investment tax credit
• Clean Technology Manufacturing investment tax credit
• Clean Hydrogen investment tax credit
• Clean Electricity investment tax credit
• Electric Vehicle Supply Chain investment tax credit

The Clean Technology ITC and CCUS ITC are now available for qualifying businesses, with more information on the Clean Technology Manufacturing ITC and Clean Hydrogen ITC to follow. 

To learn more, including how to claim these credits, visit the Clean Economy Investment Tax Credits webpage.

The CRA has established a dedicated team to assess and review Clean Economy ITC claims and set up a dedicated telephone line for related questions. NRCan will evaluate CCUS project plan submissions to verify qualifying properties and provide project evaluations to support CCUS ITC claims filed with the CRA.

Recipients of the CCUS ITC expecting to incur eligible expenditures of $250 million or more must produce construction and completion knowledge-sharing reports and annual operations knowledge-sharing reports, which will be made publicly available to Canadians.

Taxpayers can request a technical opinion from NRCan on whether the equipment in a planned or completed project meets the engineering and scientific requirements of Clean Technology property. This voluntary step provides a technical opinion from NRCan to the taxpayer, which is not binding on the CRA.

The full value of federal ITCs is accessible to those meeting certain labor requirements, including paying prevailing wages and creating apprenticeship opportunities, thus spurring the creation of good-paying, sustainable jobs across various regions and sectors.

With these comprehensive measures, the Government of Canada is ensuring that Canadian industries and workers are not only prepared for a net-zero future but are also leaders in creating a sustainable and prosperous economy.

Sources:

• 2030 Emissions Reduction Plan: Clean Air, Strong Economy
• Canada’s Sustainable Jobs Plan
• Canada’s Carbon Management Strategy
• Clean Economy Investment Tax Credits
• Government of Canada released the 2023 Fall Economic Statement
• CCUS ITC
• Clean Tech ITC
• The Hydrogen Strategy for Canada