Navigating Canada’s Clean Energy Tax Incentives: Your Guide to Bill C-59

As part of the Fall Economic Statement Implementation Act, 2023 (Bill C-59), the Canadian federal government provided further details on a number of tax measures intended to promote clean energy. The Implementation Act provided information on the status of the Carbon Capture, Utilization, and Storage; Clean Technology; Clean Hydrogen; Clean Electricity; and Clean Technology Manufacturing investment tax credits (ITCs). Since the clean energy ITCs were announced, consultations have been underway to specify eligibility, labour requirements, and stacking restrictions. This blog will discuss the five tax credits and new information relevant to potential claimants.

Carbon Capture, Utilization, and Storage Investment Tax Credit

Initially proposed in Budget 2021 to support carbon sequestration efforts, the Carbon Capture, Utilization, and Storage (CCUS) ITC has been legislated under the Implementation Act. The tax credit was designed to support investments in carbon capture technology, including transportation, storage, and use equipment, as well as equipment conversion, building costs, and monitoring expanses. The credit is available for projects with expenses over $250M, with rates of up to 60% available.

The credit may be stacked with other forms of government support, including loans, grants, subsidies, or other support provided by a government, municipality, or public authority.

Clean Technology Investment Tax Credit

The Clean Technology ITC was first announced in the 2022 Fall Economic Statement, with a proposal to cover up to 30% of capital costs of investments in clean technologies, including renewable energy equipment, electricity storage equipment, zero-emission vehicles, nuclear fusion equipment, and more. Eligibility has been expanded to include projects which involve electricity and heat generation from waste biomass.

In addition to taxable Canadian corporations, real estate investment trusts can also claim the credit. Unlike the CCUS ITC, this credit cannot be stacked with other forms of government assistance, which includes non-forgivable loans. he credit can be claimed by filing a form with the claimant’s income tax for the year in which the eligible expenses were incurred.

Clean Electricity Investment Tax Credit

The Clean Electricity ITC, designed to support electricity generation systems, electricity storage systems, and electricity transmission between provinces, will be undergoing further review this year, which will be carried out in two separate consultation processes for both publicly-owned and non-publicly-owned utilities. With a credit of up to 15% available, the credit can also be applied to heat and electricity generation from waste biomass.

Clean Hydrogen Investment Tax Credit

The Clean Hydrogen ITC was proposed as a support for clean hydrogen production, with a credit of up to 40% available. As the Clean Hydrogen ITC rate is based on the carbon intensity (CI) of a project, the Implementation Act provided details on how to calculate the CI of projects, particularly in cases where clean electricity is purchased from the grid. Additionally, if the CI exceeds expectations, there may be potential to receive further credits.

Clean Technology Manufacturing Investment Tax Credit

The Clean Technology Manufacturing ITC is available to projects which involve the manufacturing of renewable energy equipment, heat pump systems, zero-emission vehicles, and more. With further consultations underway, the credit will be available at a rate of 30%.

Labour Requirements

In order to be eligible for the maximum rates for the clean energy ITCs, projects must operate under labour requirements which relate to apprenticeship hour specifications. Penalties for missed hours for apprenticeships have been reduced from $100 per hour to $50 per hour.

Learn More

Although the clean energy tax incentives can seem complex, they also have the potential to provide needed relief for companies investing in clean energy solutions. If your business is completing activities in carbon capture utilization and storage; clean hydrogen; or other clean energy technologies such as solar energy or zero-emission vehicles, you may be eligible to receive credits. Discussing your options with our experts at NorthBridge can provide necessary information on how to qualify, and how to leverage the credit alongside other loans, grants, and tax credits.

Refer to the table below for more information on these tax credits: