The 2023 budget proposed by the Liberals includes a 15 percent refundable tax credit for companies that invest in “clean electricity.” This tax credit is estimated to reduce federal revenues by $6 billion over a four-year period, according to the Parliamentary Budget Officer (PBO).
A recently published report on June 29 states that the Investment Tax Credit for Clean Electricity will be available for both taxable and non-taxable entities, including public utilities. This tax credit will be applicable to any projects that have not yet begun construction prior to the 2023 budget but will be available starting in the 2024 budget.
However, the tax credit will no longer be available after 2034, as stated in the Legislative Costing Note. The credit will apply to eligible investments in various clean electricity generation systems, electricity storage systems, and equipment for electricity transmission between provinces and territories.
According to the PBO, the cost of the tax credit will start at $722 million in the 2024-2025 fiscal year and gradually increase to $1.887 billion in the 2027-2028 fiscal year. The total estimated cost of the program is approximately $6.025 billion.
The government promises that this tax credit will create jobs and support the transition to a cleaner energy sector. Minister of Environment and Climate Change, Steven Guilbeault, stated that the tax credit will help produce, manufacture, or transition to clean energy in Canada, while supporting middle-class jobs and vibrant communities across the country.
In addition to the Clean Electricity tax credit, the federal government plans to introduce four other tax credits totaling over $60 billion in the next decade. These include a Clean Technology Manufacturing Tax Credit, Clean Hydrogen Investment Tax Credit, Carbon Capture, Utilization, and Storage Investment Tax Credit, and an expansion of the Clean Technology Investment Tax Credit to include geothermal energy systems.
Guilbeault emphasized that this budget is historic in terms of fighting climate change and creating a clean and electrified economy in Canada. He stated that the budget outlines over $80 billion in new measures to address climate change, bringing the total investment in climate change initiatives to $200 billion.