Before the Parliament of Canada adjourned for the summer, the governing body ensured that several zero-emission and clean energy-related legislative measures were signed into law. Among these include implementing clean economy tax credits and net-zero-focused workforce development initiatives.
The enactment of this legislation comes not too long after Canada ranked first in the world in BloombergNEF’s Global Lithium-Ion Battery Supply Chain Ranking of attractiveness to build electric vehicle (EV) battery supply chains. Building on this position and prominent net-zero initiatives, this recent legislation further aligns Canada with U.S. motivations to boost domestic manufacturing, create jobs, increase private sector investment, and strengthen supply chains.
Commitment to Green Jobs
Canada has ambitious plans to reach a net-zero economy by 2050, as codified in the Canadian Net-Zero Emissions Accountability Act. In line with this commitment, on June 20, 2024, Bill C-50: Canadian Sustainable Jobs Act became law. C-50 establishes a framework for accountability, transparency, and engagement to promote economic growth, sustainable job creation, and support for workers and communities in Canada’s transition to a net-zero economy. Key provisions include the creation of a Sustainable Jobs Partnership Council, the development of a Sustainable Jobs Action Plan, and the establishment of a Sustainable Jobs Secretariat to support the implementation of the Act.
Green-Tax Incentives
Two additional bills were passed into law on the same day—Bill C-59: Fall Economic Statement Implementation Act, 2023 and Bill C-69: Budget Implementation Act, 2024, No. 1—both implement budget measures from 2023 and 2024, respectively.
C-59 legally implements the Carbon Capture, Utilization, and Storage (CCUS) Investment Tax Credit (ITC), the Clean Technology ITC, and labor requirements for work completed under the tax credits to receive the fully available credit amounts (setting a precedent similar to U.S. prevailing wage and apprenticeship requirements). The CCUS ITC is related to acquiring property used to capture CO2 emissions and its storage or use in industry. The Clean Technology ITC will provide a refundable investment tax credit on eligible clean technology property acquired.
C-59 also extends a 2021 budget measure that reduces corporate income tax rates for certain qualifying zero-emission technology manufacturers. From now until 2031, those manufacturers can benefit from a reduced tax rate of 15% to 7.5% for corporate income tax and 9% to 4.5% for small-business corporate income tax for their manufacturing activities, like manufacturing zero-emission vehicles (ZEVs), ZEV batteries and fuel cells, and EV charging and hydrogen refueling stations, among other eligible activities.
C-69 implements additional clean economy tax credits—the Clean Hydrogen ITC and Clean Technology Manufacturing ITC. The Clean Hydrogen ITC is a refundable tax credit dependent on the carbon intensity of the hydrogen produced, eligible expenses incurred for property that produces hydrogen, and whether labor requirements are met. The Clean Technology Manufacturing ITC is a refundable tax credit that covers costs concerning new machinery and equipment used to manufacture or process clean technologies and extract, process, or recycle critical minerals.
This fall, Parliament is anticipated to introduce legislation for its newly announced EV Supply Chain Investment Tax Credit. The EV Supply Chain ITC will be for the cost of buildings used in segments of the EV supply chain, specifically for businesses that invest in Canada across three supply chain segments: EV assembly, EV battery production, and cathode active material production. Further positioning Canada as an attractive location for EV battery supply chains.
While eligible taxpayers could already receive these tax benefits, codifying them into law provides clear guidelines and consistency and sets a precedent for Canada’s commitments to incentivizing zero-emission activities under these credits.
Provincial Leadership
While a great deal is happening at the federal level, Canada’s provinces are simultaneously moving the needle on Canada’s net-zero goals. To date, billions have been invested in EV supply chains across Canada’s ten provinces. Notably, Ontario has been highlighted recently for its expansion of EV supply chains. Honda announced building four EV and battery manufacturing factories in the province as part of a $15 billion investment deal—Canada’s largest EV supply chain announcement yet. Additionally, eyes are on British Columbia and Québec for their EV adoption and investments in clean industries like EV batteries. In all, each province has become a leader in their respective industries, ranging from hydrogen production and battery manufacturing to critical mineral mining and processing. This capacity for diverse clean economy investments and industries further solidifies Canada’s ability to meet its net-zero goals by 2050.
TRC: How We Can Help
At TRC, our team of policy and funding professionals dedicate themselves to monitoring legislative and regulatory activities related to net-zero activities and their influence on advanced clean energy and transportation. This enables us to share unique and early insight into the bills, regulatory actions, and policies and programs that may impact businesses. At all levels of government across Canada, TRC is tracking legislation and regulations regarding upcoming and ongoing policies related to, for example, ZEVs, medium- and heavy-duty ZEVs, incentives including rebates, tax credits, and exemptions, and policies leading to grant and voucher programs, among others. Our funding experts leverage these policy insights to assist with applying for incentives, like the available tax credits. Reach out if your fleet, firm, agency, or organization could use support in navigating this new legislation and strategizing around clean transportation projects.
