Breaking News
Investing Pro 0
🚨 NDVA surged 43%. This AI Chipmaker Could Be Next See Analysis

Canada offers C$35 billion green tax credits but still trails generous US incentives

Published Mar 29, 2023 12:10 Updated Mar 29, 2023 12:19
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
3/3 © Reuters. FILE PHOTO: Canada's Prime Minister Justin Trudeau speaks in parliament during Question Period in Ottawa, Ontario, Canada, March 28, 2023. REUTERS/Patrick Doyle 2/3
 
ENB
-0.44%
Add to/Remove from a Portfolio
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Steve Scherer and Nia Williams

OTTAWA (Reuters) - Canada's 2023 budget took a big step toward luring more investment in clean technology to build a low-carbon economy, analysts said on Wednesday, but gaps must still be filled to make the country more competitive with the United States.

Liberal Prime Minister Justin Trudeau's government unveiled on Tuesday a series of new green investment tax credits worth some C$35 billion ($26 billion) on Tuesday, including almost C$26 billion for producing and transmitting electricity.

"Given the role that electricity is going to play in the decarbonisation of the Canadian economy, this is probably the most important federal budget ever for addressing climate change," said Francis Bradley, the chief executive of trade association Electricity Canada.

Before the budget, Canada was "in neutral", Bradley said. "This puts us right up into second gear."

Trudeau's government has been under pressure to level the playing field with its largest trading partner since Washington passed massive uncapped incentives for clean energy investments in the Inflation Reduction Act (IRA) last year.

While the budget makes headway on the green transition, it does not put the kind of money on the table the United States has, said Michael Bernstein, executive director of climate think-tank Clean Prosperity. The IRA could offer more than $1 trillion to clean tech investors there.

Canada's investment tax credits help companies make one-time capital expenditures, but the U.S. is offering ongoing production tax credits that cover operational costs.

"It is going to continue to be difficult to compete with the U.S. without production tax credits," Bernstein said. For hydrogen, investment tax credits will not be enough "to keep us competitive with the U.S."

Mark Zacharias, executive director for Clean Energy Canada, agreed.

"Our suggestion for future budgets is we'd like to see production tax credits for electricity, batteries and clean hydrogen," said Zacharias.

The new tax credits will have broad appeal to investors in new and growing industries, ranging from clean hydrogen, to zero-emissions vehicle manufacturing, to heat pumps.

"The government is mobilizing private investment into new sources of economic growth," said Dale Beugin, executive vice president of the Canadian Climate Institute.

Industry groups and analysts said Canada still needs to do more to develop contracts for differences, which are meant to encourage major projects in carbon capture or hydrogen production. Contracts for differences guarantee investors in such projects a fixed carbon or hydrogen price over a contract duration, guarding against risks from political and market uncertainty.

The budget detailed how Canada will set up a growth fund, or a public investment vehicle, that a government source said would provide the contracts for projects it finances. Ottawa is still consulting on how to set up a program that would offer the contracts more broadly.

Canada also widened eligibility for previously-announced carbon capture utilization and storage (CCUS) investment tax credits to include cement plants.

That will benefit a proposed C$1.4 billion net-zero cement plant in Edmonton Alberta, being developed by privately-owned Lehigh Cement. Pipeline company Enbridge Inc (TSX:ENB) is working with Lehigh to develop the CCUS component.

"From my industry's perspective, we are very pleased," said Sarah Petrevan, sustainability director for the Cement Association of Canada. "This budget far exceeded my expectations in how targeted the government was going to be."

($1 = 1.3584 Canadian dollars)

Canada offers C$35 billion green tax credits but still trails generous US incentives
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email