Canadian government is set to introduce legislation this month that outlines a comprehensive plan to provide subsidies for carbon capture and net-zero energy projects. Informed sources suggest that the ambitious initiative is valued at approximately $20 billion over the next five years.
The decision comes after industry stakeholders expressed concerns about the prolonged absence of state support for carbon capture utilization and storage (CCUS) projects, as well as for equipment dedicated to producing low-carbon energy. Back in September, industry lobbies warned that investments totaling around C$50 billion ($36 billion) were at risk without prompt government intervention.
Finance Minister Chrystia Freeland is expected to unveil the investment tax credit (ITC) funding during the presentation of the Fall Economic Statement (FES) to parliament on Tuesday afternoon, according to insider information. This funding, part of the larger plan, will be incorporated into legislation to be submitted to parliament later this month. Previous budget estimates indicate that the five ITC programs collectively could channel approximately C$27 billion ($19.7 billion) during their initial five years of operation.
The proposed legislation will also introduce labor provisions tied to most ITCs. Investors seeking to benefit from the maximum subsidy will be required to adhere to these provisions, including paying workers the prevailing union wage and offering apprenticeship opportunities.
Canada, while lagging behind the U.S. in incentives for low-carbon technologies, is now taking strides to catch up. The U.S. has been actively promoting clean tech companies through the Inflation Reduction Act (IRA) for over a year, with President Joe Biden lauding the $430 billion IRA as an economic powerhouse.
Carbon capture utilization and storage (CCUS) is considered crucial for reducing emissions from Alberta's oil sands without compromising production, as Canada aims to become a global leader in low-carbon practices. Prime Minister Justin Trudeau's commitment to achieving net-zero emissions by 2050 underscores the importance of investment in clean technologies.
The impending legislation is viewed as a critical step in the global competition for capital and investments in environmentally friendly projects. By providing certainty to investors, the government seeks to position Canada as a leader in the transition to a low-carbon economy.
The Finance Ministry, in adherence to its policy, refrained from commenting on fiscal documents before their official publication. The comprehensive plan, initially announced in spring 2021, is set to address the pressing need for financial support in the clean tech sector and aligns with Canada's long-term environmental goals.