Ottawa Embarks on 'Race to Build Clean Economy' | Federal Budget 2023
Interprovincial power transmission projects will be eligible for the Clean Electricity Investment Tax Credit.
Ottawa is starting to feel the hot blast from Washington in terms of of energy transition. Faced with the colossal investments announced by the United States government, the Minister of Finance has decided to loosen the purse strings to ensure that Canada gets its share of the pie in the vast clean energy project, despite a budget drawn up under the sign of prudence.
Chrystia Freeland thus plans total investments of 80 billion dollars over 10 years in a declared desire to counterbalance the Inflation Reduction Act. This law, passed in 2021 by the administration of Democrat Joe Biden, establishes subsidies for the production of clean energy of at least 369 billion US dollars by 2032.
If Canada doesn't keep pace, it will be left behind, the budget tabled Tuesday argues. Chrystia Freeland talks about the most significant economic transformation since the industrial revolution and a watershed moment. Americans are investing and Canada must be there too, argued the minister.
To avoid missing the energy transition train, the federal budget provides:
- a $20 billion envelope from the Canada Infrastructure Bank for strategic financing;
- the granting of 26 billion for the creation of a refundable tax credit of 15% for investments in clean electricity;
- the granting of 11 billion for the creation of a 30% refundable tax credit for investments in clean technologies.
These three measures are in addition to the $23 billion, already announced in the last fall's economic update, in view of the creation of a refundable tax credit for investments in clean hydrogen.
It is therefore these four measures that make up the envelope of 80 billion presented in the budget. And to those who call these investments too late – there are many of them – Minister Freeland kindly voiced her opposition at a press briefing on Tuesday.
With great respect, I have to say that I disagree. It was Canada that took [the first] very strong actions to build the green economy; it was Canada that introduced the price on pollution, […] one of the most important decisions of our government.
When the budget was tabled, the tax credit for investments in clean electricity was presented by a senior government official as being the backbone of the energy transition plan.
We are going to do something new with this credit by opening it up to Crown corporations, also commented on this senior official. Indeed, the tax credit targets producers of electricity without emissions, whether the sources are hydroelectric, wind, solar or nuclear. This means that it directly targets provincial Crown corporations such as Hydro-Québec, Hydro One or even BC Hydro, which are the main electricity producers in the country.
In order for these state corporations to remain competitive in the face of the massive subsidies from which private American producers will benefit, they will therefore be able to submit their production, storage and interprovincial transportation activities to the tax credit. Even new project construction and repairs to existing facilities will qualify for this funding.
This tax credit would be allocated beginning the day the next federal budget is tabled, in 2024, and will be intended for projects whose construction had not begun before the tabling of the current budget. It will be offered until 2034.
In addition to competitiveness with the American machine, this tax credit also aims to significantly increase Canada's production capacity. The Climate Institute of Canada predicts that electricity demand will double in Canada by 2050.
Currently, 83% of the energy produced in Canada comes from clean sources. Canada aims to have a carbon-neutral electricity sector by 2035.
The tax credit for investments in clean technologies is primarily aimed at mining and the equipment used to extract critical minerals used in the manufacture of electric vehicles.
The The main objective here is to take advantage of the opportunities created by the Inflation Reduction Act, which offers tax credits to American consumers for the purchase of electric vehicles produced in North America.
In her budget, Minister Freeland was thus clear not only on the need to help Canada's allies limit their economic dependence on dictatorships, but above all on the boon represented by such a realignment of the world economy for Canada.
As for the Canada Infrastructure Bank, it will invest at least $10 billion in clean energy and at least $10 billion in green infrastructure, which will allow it to support the construction of vast energy transmission and storage projects.
In concrete terms, the federal government would like these envelopes to be able to finance the loop de l'Atlantique, a series of interprovincial transmission lines that will transport clean electricity between Quebec, New Brunswick and Nova Scotia.
Ottawa, who says to negotiate with the provinces and the public services s for the advancement of this project, hopes that it will materialize by 2030.