Despite a robust recovery from the COVID-19 pandemic, the combination of higher interest rates and subdued global activity has led to a deceleration in Canada’s economic growth, dropping from 3.8% in 2022 to 2.6% in the first quarter of 2023. The Federal Government’s 2023 Fall Economic Statement, released on November 21, 2023, outlines strategic measures to fortify the economy, particularly focusing on the Clean Economy. Here, we delve into two pivotal funding components of this statement.
Clean Economy Tax Credits
A cornerstone of the Clean Economy initiative, the federal government is prioritizing the implementation of clean economy investment tax credits, having announced details on the timelines for legislation. These credits encompass carbon capture, utilization, and storage (CCUS), clean technology adoption, clean hydrogen, clean technology manufacturing, and clean electricity. Legislation for CCUS and clean technology tax credits is slated for introduction in Parliament this fall, with availability from January 1, 2022, and March 28, 2023, respectively. The remaining tax credits will follow suit, with availability beginning on or after March 28, 2023.
In a notable expansion, the government has broadened eligibility for the clean technology and clean electricity tax credits to encompass the use of waste biomass for electricity and heat generation.
The Clean Economy Tax Credits were originally announced in Budget 2021 with the following details:
| Tax Credit | Legislation Introduced | Effective Date | Tax Credit Rate | Eligibility Criteria |
| CCUS | Fall 2023 | January 1, 2022 | 37.5-60% | Costs for capture, transportation, storage and usage |
| Clean Technology | Fall 2023 | March 28, 2023 | 15% | Specific types of property |
| Clean Hydrogen | Early 2024 | March 28, 2023 | 15-40% | Costs to produce clean hydrogen |
| Clean Technology Manufacturing | Early 2024 | January 1, 2023 | 30% | New machinery and equipment for clean technologies |
| Clean Electricity | Fall 2024 | Budget Day 2024 | 15% | Technologies for generation and storage of clean electricity |
| Clean Technology (Biomass expansion) | Fall 2024 | November 21, 2023 | 15% | Technologies using biomass for electricity/heat |
Canada Growth Fund
In a strategic move to attract investments for Canadian businesses, the federal government has launched the $15 billion Canada Growth Fund (CGF), a public investment vehicle designed to augment private investment in the clean economy. Operational since the summer of 2023, CGF made its inaugural investment of $90 million in October 2023 in Calgary’s Eavor Technologies Inc., a pioneering geothermal energy company. Over 150 market participants have engaged with the fund to develop a pipeline of projects across clean economy sectors.
Additionally, CGF is poised to issue carbon contracts for difference, with up to $7 billion allocated for this purpose, aiming to support emission-reducing projects.
The Canada Growth Fund‘s investments are focused on three key areas:
- Projects using less mature technologies and processes to reduce emissions
- Technology companies scaling less mature technologies in demonstration or commercialization stages
- Companies and projects across low-carbon or climate tech value chains
CGF distinguishes itself from other funding sources by targeting projects in the scale-up phase, deviating from R&D projects funded via grants, start-ups of interest to venture capitalists, and mature technology projects suitable for private sector investment. Unlike grant or contribution programs, CGF generally invests in projects with a reasonable expectation of a return of capital.
Investments in EV Battery Supply Chain
Since 2020, the federal government has invested over $34 billion in every stage of the electric vehicle (EV) production process through the Strategic Innovation Fund (SIF). Budget 2023 announced an additional $500 million over ten years to support clean technologies, with a specific focus on projects developing a Canadian battery ecosystem and expanding capacity for critical minerals. Currently, nine projects are in development, indicating a continued emphasis on fostering the EV ecosystem.
The Strategic Innovation Fund supports large-scale R&D, commercialization, expansion, growth, and investment attraction projects with significant benefits to Canada’s economy. With a project scope of at least $20 million in total costs, SIF is currently targeting initiatives aimed at reducing greenhouse gas emissions, developing Canada’s critical minerals ecosystem, growing the life sciences sector, addressing critical gaps in biomanufacturing and supply chains, and aerospace, semiconductor, agri-food, automotive, and natural resources sectors.
Housing Affordability
Addressing housing affordability emerges as a key focus in the economic statement, with proposed measures including accelerated construction and lowered prices for both buyers and renters. The significance of this issue may lead to the introduction of new programs at the federal and provincial levels. An illustrative example is the recently announced Digital Technology Supercluster Call for Proposals to Grow Housing Production Capacity in British Columbia.
The Digital Technology Supercluster will support projects leveraging innovative digital technologies to enhance housing production in British Columbia. Eligible projects must involve multiple organizations collaboratively addressing a housing challenge using digital technologies that support due diligence, design, construction, and post-construction phases.
In summary, Canada’s economic landscape is evolving with targeted investments and initiatives to foster sustainable growth, innovation, and affordability. We expect to see new evolutions in the government funding landscape to address the key challenges within the statement.
Follow NorthBridge Consultants for news on government funding programs as they evolve. Or, contact us today for an assessment on eligibility.