Canada’s Budget 2024 was released on April 16, 2024. This Budget includes several new tax changes and incentives which will impact Canada’s energy sector and energy affordability for customers. The Atlantica Centre for Energy reviews the Budget to find out which programs and policies included will impact Atlantic Canada’s energy sector, and how these changes may impact local residents and businesses.

Select highlights of Canada’s Budget 2024 from an energy-sector lens include:

Government Spending and Deficit:

  • The budgetary deficit is forecasted to be 39.8 billion in 2024-25 and 38.9 billion in 2025-26. -39.8 -38.9
  • The 2023-24 Budget deficit is expected to be $40 billion.
  • Total government spending is expected to be $535 billion for the 2024-25 financial year.

 Investment Tax Credits:

  • Details for the Clean Electricity investment tax credit was released and it is available as of April 16, 2024 for projects that did not begin construction before March 28, 2023. This is a 15% refundable tax credit rate for investments in new equipment or refurbishments related to low-emitting electricity generation (including nuclear and biomass), electricity storage, and transmission between provinces. This tax credit is available to Crown utilities, municipalities and indigenous stakeholders, among others. The Clean Electricity investment tax credit (ITC) is expected to cost $7.2 billion over five years starting in 2024-25, and an additional $25 billion from 2029-30 to 2034-35. More information is available here: Supplemental tax information.
  • Eligibility for both the Clean Technology and Clean Electricity investment tax credits is expanded to support using waste biomass to generate heat and electricity. This change under the Clean Technology ITC is backdated to November 21, 2023.
  • A new 10% Electric Vehicle Supply Chain investment tax credit on the cost of buildings used in key segments of the electric vehicle supply chain, for businesses investing in electric vehicle assembly, ­electric vehicle battery production, and­ cathode active material production.
  • The Clean Technology Manufacturing investment tax credit is amended to provide new clarity and improve access for critical minerals projects. Draft legislation will be released for consultation in summer 2024.

Other notable investment incentive programs:

  • Reiterated $3 billion to recapitalize the Smart Renewables and Electrification Pathways Program (announced in 2023), to build more clean, affordable, and reliable power, and to support innovation in electricity grids and spur more investments in Canadian offshore wind.
  • Budget 2024 announces the Canada Growth Fund will explore ways to broaden its approach, for example, by developing an expanded range of Carbon Contracts for Difference (CCFDs) offerings tailored to different markets and their unique risks and opportunities. The Canada Growth Fund has around $6 billion remaining to continue issuing.
  • Advance Indigenous participation in major projects through the Indigenous Loan Guarantee Program, to provide more opportunities for Indigenous communities to benefit from the significant number of natural resource and energy projects.

Timeline of federal investment tax credits

  • An intention to disburse up to $500 million per year from Clean Fuel Regulations compliance payment revenues to support biofuels production in Canada. More details will be announced in the 2024 Fall Economic Statement.
  • The Clean Fuels Fund is extended for an additional 4 years (a total of $776.3 million will be available to support clean fuel projects).
  • Providing $3.1 billion over 11 years, starting in 2025-26, to Atomic Energy of Canada Limited to support Canadian Nuclear Laboratories’ ongoing nuclear science research, environmental protection, and site remediation work.
  • Budget 2024 announced new guidance to these institutions to mobilize more financing and take on greater risk (including the Business Development Bank of Canada and Export Development Canada).
  • Businesses will be able to immediately write off the full cost of new investments in patents, data network infrastructure equipment, computers, and other data processing equipment (for use before January 1, 2027).
  • Budget 2024 proposes $600 million over 4 years, beginning next year, for future enhancements to the Scientific Research and Experimental Development (SR&ED) program.
  • $607.9 million over 2 years, beginning this year, to top-up the Incentives for Zero Emission Vehicles program.

 Carbon Pricing:

  • The federal government will return fuel charge proceeds from 2019- 20 through 2023-24 ($2.5 billion) to an estimated 600,000 small- and medium-sized businesses (SMEs) through a new refundable tax credit. Supplemental tax information.
  • The carbon rebate for residents will see the rural top-up increase from 10% to 20% starting this year. The government also plans to better define eligible rural areas.

 Building Retrofits:

  • $800 million over 5 years, starting next year, to launch a new Canada Greener Homes Affordability Program that will support the direct installation of energy efficiency retrofits for Canadian households with low- to median-incomes. This program will be co-delivered with provincial and territorial partners, and complemented by CMHC’s Greener Homes Loan program, which provides interest-free loans of up to $40,000 for energy efficiency home retrofits.
  • $1.5 billion under the Green and Inclusive Community Buildings program to support green and physically accessible retrofits, repairs, and upgrades of existing public community facilities.
  • The federal government will begin modernizing existing energy efficiency programs that offer tools to building owners. The federal government will encourage provinces and territories to adopt these building codes. A national approach to home energy labelling is also being developed.

 Regulatory Burden:

  • Budget 2024 announces measures to help clarify and reduce timelines for major projects, so they can get built faster:
    • Launch work to establish a new Federal Permitting Coordinator within the Privy Council Office’s Clean Growth Office.
      • Set a target of 5 years or less to complete federal impact assessment and permitting processes for federally designated projects, and a target of 2 years or less for permitting of non-federally designated projects.
    • Set a three-year target for nuclear project reviews, by working with the Canadian Nuclear Safety Commission and Impact Assessment Agency of Canada.
    • Issue a Cabinet Directive to drive culture change, achieve new targets, and set out clear federal roles and responsibilities within and across departments with the objective of getting clean growth projects built in a timely and predictable manner.
    • Build a Federal Permitting Dashboard that reports on the status of large projects which require permits, to improve predictability for project proponents, and increase the federal government’s transparency and accountability to Canadians.
    • To advance the principle of “one project, one review”, Budget 2024 proposes to amend the Impact Assessment Act to respond to the October 2023 Supreme Court of Canada decision that ruled that elements of the Act are unconstitutional.
    • Work to establish a Crown Consultation Coordinator to ensure efficient and meaningful Crown consultation with Indigenous peoples on the issuance of federal regulatory permits to projects that do not undergo federal impact assessments.

 Individual/Corporate Taxation:

  • The federal government will increase the inclusion rate on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and trusts from one-half to two-thirds, effective June 25, 2024.
  • The lifetime capital gains exemption will increase to $1.25 million, effective June 25, 2024.
  • The government is proposing the Canadian Entrepreneurs’ Incentive, which will reduce the inclusion rate to one-third on a lifetime maximum of $2 million in eligible capital gains (for select types of businesses). Supplemental tax information.

 Business Certainty and Investment:

  • By 2050, clean energy GDP could grow fivefold—up to $500 billion, while keeping Canada on track to reach net-zero by 2050 (based on research from Clean Energy Canada).
  • Improve Indigenous capacity for consultation by advancing the co-development and implementation of consultation protocol agreements and resource centres, led by Crown-Indigenous Relations and Northern Affairs Canada.
  • Canada-U.S. Energy Transformation Task Force will continue to work to reduce our shared exposure to production and supply chains controlled by non-likeminded countries, including by attracting investment in EV supply chains, solar, and more.
  • Later this year, the Government of Canada will release a taxonomy promoting credible climate investment and combating greenwashing.

 Workforce:

  • Starting to implement legislative amendments to the Canada Labour Code that would require employers in federally regulated sectors to establish a right to disconnect policy limiting work-related communication outside of scheduled working hours.

More information:

Select stakeholder comments:

“Overall, however, Budget 2024 signals a more-of-the-same approach to fostering productivity at a time when bold action is needed. It lacks a clear change strategy to catalyze a new era of productivity growth. And it includes new measures—like the capital gains tax increase—that will signal to some that supporting investment isn’t a priority.”

“Budget 2024, like budget 2023 before it, promises a great deal. The electricity sector is eager to get building to fulfil those promises. We applaud the federal government’s implementation of the Indigenous Loan Guarantee Program, which is an important element in the road forward. However, the Excessive Interest and Financing Expenses Limitation (EIFEL) poses a serious risk as tens of millions of dollars in added costs will be passed on to electricity ratepayers across the country. If the housing sector can get an exemption, the same should apply to the electricity sector.”

“Our country needs to actively look at ways to reduce the cost of living and the cost of doing business. The Atlantic Chamber continues to call on Government to reduce deficit spending, launch a comprehensive review of our taxation system, and actively explore reducing regulatory burden for business.”

“While we still have work ahead of us to level the playing field with clean fuel production tax credits provided by the IRA in the U.S., today’s budget will help stimulate more investments in Canadian biofuel production, and that is good news.”

“If the government wants to ensure the long-term viability of its new spending plans, it must view the private sector as a partner in building a strong and growing economy. Instead, the government is punishing the investors it relies on to generate growth. That means fewer good-paying jobs for Canadians.”

“The inclusion of the oil and natural gas industry in the National Indigenous Loan Guarantee Program is a significant advancement. Given that Indigenous equity deals in Canada predominantly involve oil and gas projects, this program opens avenues for Indigenous communities to access capital, fostering economic reconciliation and self-determination.”

“Indeed, clean energy is the only lasting way to cut energy bills for Canadians. To that end, the federal government’s popular EV rebate program received a $607.9 million top-up to ensure it does not run out.”