An array of funding and investment tax credits in Budget 2024 aims to spur sustainable energy and clean transportation development

The Liberal government’s budget 2024 is throwing billions of dollars at the transition to zero-emission transportation and power generation.

Spending commitments in the $480.5-billion document include $607 million for zero-emission vehicle purchase rebates, a 10-per-cent tax credit to support electric vehicle supply chain investment and a 15-per-cent tax credit to boost investment in low-emitting electricity generation systems.

More broadly, the government is using tax credits to spearhead its support for a broad range of clean-economy initiatives.

“[B]usinesses in industries critical for the net-zero transition are already making significant investments in Canada,” reads Budget 2024.

“[T]he major economic investment tax credits will attract private investment, grow Canada’s economy, and create high- paying jobs. In anticipation, new major projects have already launched across the country.”

Six “major” investment tax credits

In Budget 2024 the government identifies six key areas of focus for sustainability and decarbonization. These areas will receive “major economic investment tax credits, which represent $93 billion in federal incentives.” These are:

• Carbon capture, utilization and storage;
• Clean technology adoption;
• Clean hydrogen;
• Clean technology manufacturing;
• Clean electricity; and
• EV supply chains.

Some tax credits are expansions of existing initiatives (clean technology manufacturing). But there are also entirely new streams like a 10 per cent EV Supply Chain Investment Tax Credit.

The EV supply chain tax credit applies to buildings where EV assembly; battery production; and cathode active material production occurs.

(On social media and elsewhere, observers immediately speculated about its appearance in the budget and recent reports that Honda is eyeing Canada for a potential $18.4-billion EV and battery plant investment.)

To be eligible for the credit, a property must be acquired or put into use after January 1, 2024. The credit will reduce to five per cent in 2033 and discontinue after 2034. The government says it expects the credit to cost $1.1 billion between 2024 and 2035.

“We believe all of the above will make Canada’s economy more sustainable, competitive, and productive,” reads a statement from Mark Zacharais, executive director at Clean Energy Canada, in response to Budget 2024.

“Time is critical, however: the business community is still awaiting the finalization of key investment tax credits, which are needed quickly to keep up with the U.S.’s Inflation Reduction Act.”

As well as investing in businesses, Budget 2024 takes into account the person power needed to fill clean sector jobs. A new pilot run by Talent for Innovation Canada “will focus on attracting, training, and deploying top talent” in bio-manufacturing; clean technology; electric vehicle manufacturing; and microelectronics, including semiconductors.”

Boosting EV adoption in Budget 2024

There was some substance in Budget 2024 as to how the government will support the EV Availability Standard. The Standard mandates that ZEVs make up 20 per cent of all light-duty vehicles sold in 2026, 60 per cent in 2030 and 100 per cent in 2035.

Specifically, the government says it will make a $607.9-million top-up to the federal iZEV purchase rebate program. The iZEV program would otherwise expire in early 2025. That money will be provided over a two-year period.

There was no new money in the budget for EV charging infrastructure. Instead, the government reiterated it is investing $1 billion in charging stations through Natural Resource Canada’s Zero Emission Vehicle Infrastructure program (ZEVIP) as well as projects funded by the Canada Infrastructure Bank (CIB). 

(By the government’s count there are 11,223 networked public charging and hydrogen fuelling stations in Canada. A total of 27,612 electric charging ports are present at those stations.)

“We welcome additional funding to top up the federal EV purchase incentive program,” said Brian Kingston, president and CEO of the Canadian Vehicle Manufacturers’ Association in a press statement.

“Meeting the government’s mandated EV sales targets requires long term funding for EV purchase incentives and a detailed plan to build charging infrastructure.”

But, says Kingston, the CVMA remains concerned the government “lacks a clear plan” to achieve its sales mandate targets.

Energy and electricity investment details

Budget 2024 adds some definition to where its big picture investments will end up with respect to the energy sector.

Some highlights include:

• $138.2 million for energy storage in Nova Scotia; and up to $80 million for the Atlin Hydroelectric Expansion in Yukon.
• A 15 per cent refundable Clean Electricity Investment Tax Credit expected to cost $32.2 billion from 2024 to 2035. Eligible investments include new equipment or refurbishments related to low-emitting electricity generation systems using energy from wind, solar, water, geothermal, waste biomass, nuclear, or natural gas with carbon capture and storage; stationary battery and pumped hydro electric storage systems; and transmission of electricity between provinces and territories. Paying prevailing union wages and creating apprenticeships are required to receive the full 15 per cent tax credit.
• Up to $535 million in CIB financing and $50 million from the Smart Renewables and Electrification Pathways Program for the 250-MW Oneida Energy storage project in Ontario.
• $173 million in CIB financing and $50 million from the Smart Renewables and Electrification Pathways Program for Indigenous-led, Bekevar Wind Power project, in Saskatchewan.
• $14.4 million to explore the feasibility of the Kivalliq Hydro Fibre Link to connect northern Manitoba and southeastern Nunavut. The plan would provide electricity and internet access to five communities and one existing mine.
• $9 million from the Smart Renewables and Electrification Pathways Program for the Métis Nation of Alberta-owned Salay Prayzaan Solar project.

“Investing in clean electricity today will reduce Canadians’ monthly energy costs by 12 per cent and create approximately 250,000 good jobs by 2050,” reads the budget.