OTTAWA – November 21, 2023
In a significant step towards promoting environmental sustainability, the Canadian government plans to unveil legislation later this month aimed at launching financial support for projects related to carbon capture and net-zero energy, as revealed by an insider familiar with the situation. Valued at around $20 billion over five years, this initiative aims to accelerate the development of low-carbon technologies and reduce emissions across the country.
The decision to implement these subsidies comes after a prolonged delay in state support for carbon capture utilization and storage (CCUS) projects, as well as for equipment used in the production of low-carbon energy. Industry lobbies warned in September that approximately C$50 billion ($36 billion) in investments were at risk without prompt government action.
Finance Minister Chrystia Freeland is expected to announce the investment tax credit (ITC) funding during the presentation of the Fall Economic Statement (FES) to parliament on Tuesday afternoon. The ITC programs, estimated to funnel C$27 billion ($19.7 billion) over their first five years, will be a key component of the legislation set to be presented later this month.
The government plans to introduce labor provisions tied to most of the ITCs, requiring investors to pay workers the prevailing union wage and provide apprenticeship opportunities to qualify for the maximum subsidy.
Canada’s decision aligns with the United States’ approach, as the U.S. has been providing significant incentives to cleantech firms for more than a year through the “U.S. Inflation Reduction Act (IRA).” President Joe Biden praised the $430 billion IRA, passed in August 2022, as an economic powerhouse, estimating that it has already spurred $132 billion in investment across more than 270 new clean energy projects.
Carbon capture and utilization technologies play a vital role in decreasing emissions from Alberta’s oil sands while maintaining production levels, positioning them as a central focus for Canada, which ranks as the fourth-largest oil producer globally.
The determination of Prime Minister Justin Trudeau to establish a low-carbon economy is highlighted through the crucial role of ITCs, which plays a pivotal part in supporting the government’s aim to accomplish net-zero emissions by 2050. The source emphasized that there is a “global race for capital and investments in these sorts of projects,” and the government aims to provide certainty to investors.
While the finance ministry refrained from commenting on fiscal documents before their publication, the source confirmed that consultations for two of the three remaining ITC programs will commence this year, with legislation for all programs expected by the end of the next year.
In addition to the carbon capture initiatives, the FES is reported to include C$15 billion in 10-year loans for new rental housing construction, a C$1-billion fund dedicated to affordable housing, and new mortgage rules for lenders dealing with homeowners at risk. The fiscal statement is also expected to address affordability issues through additional reforms to the Competition Act, including measures to counteract predatory pricing.