Liberals offer timeline for new green investment tax credits

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OTTAWA – Promised green tax credits designed to make Canada competitive with the U.S. will wait until at least next year to become a reality according to the fall economic update, but industry groups say they’re pleased to at least have specific timelines in place.

The government unveiled a suite of tax credits mostly in the spring budget, giving companies investing in zero-emission electricity, clean technology and hydrogen projects a major tax incentive. While the government gave the outlines of the credit in the spring, the details of what exactly would be eligible has yet to be detailed in any legislation, preventing companies from receiving any funds.

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The goal of the program was to compete with U.S. President Joe Biden’s inflation reduction act, which has made billions available for green technologies in a bid to completely shift the U.S. economy.

The government’s fiscal update on Tuesday revealed that the detailed rules around credits for carbon capture and storage and clean technology purchases will be introduced before the House rises in December.

The Pathways Alliance, a group of oilsands companies, is proposing a $16.5 billion project in northern Alberta that would link oilsands facilities with a new 400-kilometre pipeline for sequestering carbon dioxide. The Alliance has said details of the tax credit are important for moving ahead with the project.

The fiscal update also revealed that credits around hydrogen production and green electricity generation won’t see new legislation until 2024.

Fernando Melo, director of federal policy for the Canadian Renewable Energy Association, said it is good to have a deadline, but he hopes the government can turn the legislation into law quickly.

“I’m hopeful that they are better at moving this bill through Parliament than this government has shown in the past. But I do think it’s positive that we actually do have at least a sort of timeline for implementation,” he said.

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The government has promised the tax credits will be retroactive. Melo said for some people in the industry that is enough assurance to move forward, but others want more certainty and want the credits firmly in place before making big investment decisions.

Finance Minister Chrystia Freeland said the U.S. Inflation Reduction Act is rewiring the American economy, that it is akin to the Industrial Revolution in terms of the scale of the change.

She said Canadians should know the tax credits are making the country competitive.

“America has put a huge amount of money on the table to fund that industrial transition. I want Canadians to know that there is no country in the world that is as competitive with the U.S. in attracting money than Canada,” she said. “We are committed to owning the podium.”

The proposed credits will require companies to commit to certain key labour rules, requiring that companies pay prevailing union wages on major projects and offer up apprenticeship and training opportunities to receive the credits.

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Freeland said that is going to ensure that these credits also create good jobs.

“This is about good jobs for Canadians and if you have a good job you have a good life,” she said.

Sean Strickland, executive director of Canada’s Building Trades Union was relieved to see the labour rules spelled out in the bill as well as a clear sign the government is moving them forward.

He said there are billions of dollars in new projects awaiting the government’s rules.

“They clearly signal to industry and to workers that the investment tax credits, even if implementation has been delayed, that it’s still on track and legislation is forthcoming,” he said. “There are lots of projects that are going through economic analysis and moving towards final investment decisions that are based on the availability of this tax credit.”

Strickland said these credits are in many cases going to companies that are profitable with healthy balance sheets so making them conditional on good working conditions only makes sense.

“If we’re going to give them that gift from the taxpayer. We better make sure it’s tied to good middle-class-paying jobs,” he said.

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The U.S. legislation is firmly in place and already offering companies major incentives. Strickland said having the Liberals offer up timelines is a good first step, but they need to get the credits enshrined. “This is happening. They are re-industrializing their economy in the U.S., and the longer we drag our feet on actually implementing this we increase the risk of flight of capital.”

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