On January 6, 2023, the federal government concluded formal consultations relating to two new Investment Tax Credits (ITC), which will launch the same day as Budget 2023. The new Investment Tax Credit for Clean Technologies and the Investment Tax Credit for Clean Hydrogen were detailed in the 2022 Fall Economic Statement on November 3, 2022. They are, in large part, designed as a response to measures in the U.S. Inflation Reduction Act.  

Investment Tax Credit for Clean Technologies details:  

  • a refundable tax credit equal to 30% of the capital cost of investments in: 
    • Electricity Generation Systems
    • Stationary Electricity Storage Systems that do not use fossil fuels in their operation
    • Low-Carbon Heat Equipment 
    • Industrial zero-emission vehicles and related charging or refueling equipment  
  • if a company does not meet certain labour conditions, the maximum tax credit rate will be reduced by 10 percentage points 
  • this credit will no longer be in effect at the start of 2035, subject to a phaseout starting in 2032 

Investment Tax Credit for Clean Hydrogen details:  

  • investigating possible lifecycle carbon intensity tiers to guide the level of support 
  • the lowest carbon intensity tier that meets all eligibility requirements is proposed to receive an investment tax credit of at least 40% 
  • if a company does not meet certain labour conditions, the maximum tax credit rate will be reduced by 10 percentage points 
  • the credit will be phased out after 2030 

Flexibility needed 

The Atlantica Centre for Energy submitted feedback gathered from several stakeholders and external experts for both the Consultation on the Clean Hydrogen Investment Tax Credit and the Consultation on Labour Conditions for Clean Tech and Clean Hydrogen Investment Tax Credits. In the two submissions, it is clear both proposed Investment Tax Credits need additional flexibility.  

Select recommendations for the proposed Investment Tax Credits include (in no order): 

  • expand the list of eligible technologies and project components (e.g. include geothermal generation) 
  • ensure lifecycle carbon intensity tiers for hydrogen can evolve as technologies do to help develop domestic demand 
  • increase the flexibility of finance incentives being offer (e.g. introduce an optional Production Tax Credit) 
  • extend availability timelines to accommodate emerging technologies (e.g. develop a new ITC stream for advanced Small Modular Reactors) 
  • permit non-taxable organizations to equally participate in project development (e.g. Indigenous communities, municipalities) 

Several other groups and businesses across Atlantic Canada raised similar and additional concerns with the proposed Investment Tax Credits.  

Canadians, including prospective investors in clean hydrogen production, are welcome to continue to share their ideas and comments with the Department of Finance, by emailing: Hydrogen-Hydrogene@fin.gc.ca.