Wednesday, November 29, 2023

A year after Ottawa announced low-carbon tax credits, investors are still waiting for details

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OTTAWA – Liberal tax credits aimed at preventing the flow of jobs in the renewable and low-carbon energy sectors to the United States are still not in effect nearly a year after their initial announcement, a delay that has Canadian business groups fearing they will companies choose to take them. their investments south of the border anyway.

The federal Liberals have introduced a series of investment tax credits (ITCs) that they say will attract more investment in low-carbon technologies. These include incentives for hydrogen production, carbon capture and storage, clean electricity and clean manufacturing, with the government offering credits of up to 30% of the cost of new investments.

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The credits are designed to encourage a variety of low-carbon businesses, ranging from power plants, nuclear reactors and critical mineral mines to battery factories and solar equipment factories. They have positioned themselves to counter the American Inflation Reduction Act, which provides massive government subsidies to companies that invest in this kind of thing in the United States.

The government announced all of the tax credits in Budget 2023 or the 2022 Autumn Economic Update, but none of them are in place yet because the bill creating them has not yet been introduced in the House of Commons.

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The Liberals have released draft bills for two of the credits, the carbon capture and clean technology credits, but have not yet released details on the credits for electricity, manufacturing or hydrogen production.

The government has committed to meeting labor requirements to qualify for the credits, such as paying prevailing wages or working with a unionized workforce. He also suggested that the credits would be valid for 10 years, until 2034.

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Evan Wilson, vice-president of the Canadian Renewable Energy Association, said his members were happy to see the government match what was proposed in the United States, but now they need details.

“There are still many details missing to know how to move forward with our projects. But overall, we are very excited about the signal that has been sent,” he stated.

Wilson said many renewable energy products are led by multinational companies that have teams in the United States and Canada launching projects, and that right now Americans have an advantage.

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The Business Council of Canada has urged the government to accelerate work on ICT so that businesses can start applying for and receiving credit. The government consulted on the loans this summer and the underlying message from the council was to hurry.

“The federal government committed to developing CCIs for cleantech in its last three budgets. “None are currently in effect, minimizing their ability to support final investment decisions in the near term,” the board wrote.

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He highlighted that the American program is already profitable for companies.

“Delays in finalizing the terms and conditions of each ITC through legislation effectively freeze capital and diminish Canada’s ability to meet its emissions reduction targets and important commitments,” the council wrote. “Finance Canada must send a clear and bankable market signal articulating the details of its ITCs. The sooner this is done, the sooner companies will be able to invest in emerging technologies and equipment.

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A government source who spoke behind the scenes because he was not authorized to speak publicly insisted that completing the credits is a high priority and that they hope to complete it soon.

The source emphasized that Ottawa had never created such credits before and wanted to make sure it got it right.

Katherine Cuplinskas, press secretary for Finance Minister Chrystia Freeland, said the credits were intentionally made retroactive so businesses know they are coming even if they are not yet firmly established.

He said the government was aware of the importance of matching American credits.

“We know that an important part of this is the growth of Canada’s clean economy. “Our government is making more than $120 billion in historic investments to make this happen, including creating tax credits for clean technology investments that are already helping businesses and workers plan for the future,” he wrote in a statement. of press.

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