Federal budget sets aside $83B for clean technology tax credits

Serious money is heading for Canadian industries looking to reduce emissions after the federal government unveiled its answer to the U.S. Inflation Reduction Act.

Serious money is heading for Canadian industries looking to reduce emissions after the federal government unveiled its answer to the U.S. Inflation Reduction Act.

The spending commitments announced in Tuesday’s federal budget include tax credits for investments in clean electricity, clean-tech manufacturing, and hydrogen that together are expected to cost some $55 billion through to the 2034-35 fiscal year.

Total tax incentives amount to almost $83 billion over that timeframe when the carbon capture and storage and clean-tech investments credits announced last year are factored in, both of which saw minor boosts this round.

The government says the funding is necessary to boost clean economy spending from some $15 billion a year to the $100 billion a year needed. The spending is also needed to not fall behind as other countries roll out subsidies, most notably with the US$369 billion contained in the landmark U.S. legislation passed last year.

“In what is the most significant economic transformation since the Industrial Revolution, our friends and partners around the world, chief among them the United States, are investing heavily to build clean economies,” said Deputy Prime Minister Chrystia Freeland as she introduced the budget.

Tax credits are the backbone of the effort because they are stable and efficient way to roll out government support, while leaving decision-making with the expertise of the private sector, said a senior government official in the budget lockup.

Clean electricity is the biggest focus of the credits, costing $6.3 billion over the first four years starting in 2024, and $25.7 billion through to the 2034-35 year. Notably, provincial utilities and Indigenous-owned corporations will be eligible for the credits.

The spending is meant to help spur both more generation, as well as a better-connected east-west grid to meet the expected doubling of electricity demand by 2050.