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The federal government is banking on tax breaks for companies — to the tune of more than $80 billion — to usher Canada into a low-carbon economy, Tuesday’s budget announcements show.

The suite of federal investment tax credits targets clean electricity, hydrogen, carbon capture, critical mineral extraction and manufacturing of clean technology related to electric vehicles, nuclear and energy storage. Of the $80.8 billion earmarked for tax credits over the next 11 years, $56.5 billion are new commitments or increases to previous announcements, representing a 232 per cent leap from the previous year.

The clean electricity tax credit, estimated to cost $25.7 billion from 2024 to 2035, is the biggest of the bunch. It will cover 15 per cent of eligible investments in non-emitting electricity generation (like wind, solar, hydro, nuclear and more), transmission equipment and electricity storage (like batteries and hydroelectric storage). Natural gas power plants outfitted with carbon capture technology will also be eligible for this tax credit, even though, as the Institute for Energy Economics and Financial Analysis shows, CCUS technology has failed to deliver on its promised results for 50 years and by definition does not tackle the majority of emissions when the gas is ultimately burned.

Budget 2023 is an attempt to reconcile an economy struggling with inflation with significant spending on core issues like health care and addressing climate change. On the climate file, a senior official with Finance Canada estimated $100 billion annually was needed, indicating a growing awareness of the sheer scale of the crisis.

If $100 billion per year is what’s needed, Canada is still failing to mobilize capital at the scale or pace required to avert catastrophic warming, according to the best available climate science. The government’s new spending averages to a little more than $8 billion annually, though it does aim to attract private capital through that spending, too. Together, Budget 2023 is expected to represent between $15 billion and $20 billion per year being spent on climate action from public and private sources, a senior official said.

“Today, and in the years to come, Canada must either meet this historic moment — this remarkable opportunity before us — or we will be left behind as the world’s democracies build the clean economy of the 21st century,” said Deputy Prime Minister and Finance Minister Chrystia Freeland.

The federal government is “going to build a clean electrical grid that connects Canadians from coast-to-coast-to-coast” and make Canada a reliable supplier of clean energy, critical minerals and electric vehicles, she said.

Capital investment is the key to success here, a senior government official told media in the budget day lockup in Ottawa. “We cannot regulate our way to a clean economy. That just won’t work.”

The senior official called the tax breaks the “workhorse” of the government’s plan to get to a net-zero economy. That’s because they leverage private sector investment by making the public shoulder some of the cost.

#Budget2023 went big on corporate subsidies to usher in the clean economy. It included $56.5 billion in new investment tax credits for clean electricity, clean tech and more.

The tax credits were designed so “decision-making remains in the market,” saying “that’s where it should be because that’s where the expertise is,” he added.

Senior researcher with the Canadian Centre for Policy Alternatives Hadrian Mertins-Kirkwood told Canada’s National Observer the department is taking an ideological approach that creates risk for the public without the benefits.

“It is true and fair to say that capital often lies with the private sector and that we’ve been struggling to get the money, but saying the expertise lies with the private sector is different,” said Mertins-Kirkwood. “That’s saying the government is not capable of managing these clean investments and that we have to depend on private managers to do it.

“Maybe they lack expertise, maybe they don’t have the people they need. But, to me, the answer would be, ‘Let’s get that expertise,’ not ‘Let’s farm out these massive, massive spending programs,’” he added.

There’s an important difference between tax credits costing the public $80 billion and $80 billion worth of direct investments, Mertins-Kirkwood explained. By not taking an equity position in these companies they’re financing, the federal government subsidizes private sector profits by taking on some of the risk.

There’s “absolutely” a case to be made that investment tax credits can help provide certainty and encourage private sector investment, Mertins-Kirkwood said. Nonetheless, he believes the benefits of having a public stake outweigh the risks because it creates opportunities for the government to take a more active role in bringing emissions down at the pace and scale required.

Freeland said Tuesday the country was full steam ahead on major projects. “We’re going to build big things here in Canada,” she said. “From a Volkswagen battery plant in Ontario, to the Galaxy Lithium mine in Quebec, to the Trans Mountain expansion (TMX) in Alberta, to the Atlantic Loop, to the LNG terminal in Kitimat, B.C.”

Mertins-Kirkwood noted the TMX example, whose cost has skyrocketed to $30.9 billion, and called it “one of the great ironies” of Ottawa suggesting the private sector should lead the energy transition.

TMX “is an example of direct public investment in what some would argue is critical infrastructure,” he said. When Kinder Morgan threatened to abandon TMX, the federal government stepped in and bought the project, not because it was the best financial investment, but because it deemed TMX necessary, said Mertins-Kirkwood.

“We’d like to see more of that approach taken when it comes to climate,” he said. “There are a lot of great cases to be made for that sort of investment on that sort of scale that aren’t fossil fuel pipelines.”

Despite the UN’s Intergovernmental Panel on Climate Change recently issuing a “final warning” for the decade that urges countries to rapidly phase out fossil fuels, there are pledges littered throughout Budget 2023 that fly in the face of climate science. There’s $7 million earmarked for “Future Arctic Offshore Oil and
 Gas Development,” as well as carving out room in the “clean electricity” and “clean” hydrogen tax credits for electricity or hydrogen made with natural gas as long as a fraction of the emissions is captured by carbon capture technologies. The science is clear: fossil fuels must be quickly phased out, not made cleaner and produced indefinitely.

Other investment tax credits on the way

Alongside the $25.7-billion clean electricity tax credit, set to take effect next year, Finance Canada proposed several other investment tax credits.

Among them, is a tax credit for clean technology manufacturing. Finance Canada notes that Canada will be left behind unless it aligns with the United States, which is pumping a tremendous amount of money into clean technology. To help align the countries, the department is proposing approximately $11.1 billion over 11 years to help incentivize critical mineral mining and processing, zero-emission vehicle manufacturing, creation of nuclear energy equipment and battery production.

Finance Canada is further expanding its contentious carbon capture tax credit by an additional $520 million, bringing the total cost to the public to an expected $18.1 billion over the coming decade. The increase is related to expanding eligibility, perhaps most notably with British Columbia now being able to access a tax credit for geological CO2 storage.

Budget 2023 also includes a new $17.7-billion tax credit for “clean” hydrogen spread over 11 years. Because hydrogen can be produced using renewable energy, like solar and wind, as well as fossil fuels like natural gas, how “clean” the hydrogen is varies significantly depending on how it’s made. The tax credit is designed to reward cleaner hydrogen by increasing the amount of public dollars available depending on the full life cycle carbon emissions of the fuel. Hydrogen made with wind or solar could receive a 40 per cent tax credit, whereas hydrogen produced using natural gas and carbon capture is expected to receive a 15 to 25 per cent tax credit depending on how well the carbon capture works.

Finance Canada is also disclosing about $1.3 billion worth of new costs related to slashing corporate tax rates for zero-emission technology companies. The department had cut corporate income taxes by half two years ago to incentivize new investment, with an eye toward phasing it out by 2032, and is now proposing to extend that lower tax rate to 2035 to give companies a longer runway to develop technologies.

In the 2022 fall economic statement, the federal government announced a clean technology investment tax credit to help businesses adopt clean technology by refunding them up to 30 per cent of their project costs. Tuesday’s budget proposes to expand eligibility requirements to include geothermal energy while making it clear projects that also produce oil, gas or other fossil fuels would not be eligible.

John Woodside & Natasha Bulowski / Local Journalism Initiative / Canada's National Observer

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"Freeland said Tuesday the country was full steam ahead on major projects. 'We’re going to build big things here in Canada,' she said. 'From a Volkswagen battery plant in Ontario, to the Galaxy Lithium mine in Quebec, to the Trans Mountain expansion (TMX) in Alberta, to the Atlantic Loop, to the LNG terminal in Kitimat, B.C."

If Canada does not end up exporting critical minerals, we can export boatloads of irony.
If we can bottle greenwash, maybe there's a market for that too.
TMX and LNG obviously perpetuate emissions-intensive fossil fuels, boosting domestic and global emissions — and putting federal and provincial emissions targets out of reach.

Article: "Natural gas power plants outfitted with carbon capture technology will also be eligible for this tax credit, even though … CCUS technology has failed to deliver on its promised results for 50 years and by definition does not tackle the majority of emissions when the gas is ultimately burned."

Natural gas power plants outfitted with carbon capture technology would presumably capture the majority of emissions when the gas is burned — at the natural gas power plant. In this case, the power plant is the end-user. CCS would not capture fugitive emissions in the supply chain upstream.

The "majority of emissions" caveat applies to applications where CCS captures emissions from upstream production but not from downstream combustion at the consumer end. E.g., cars and furnaces.

always truly grateful to Geoffrey Pounder for his insightful comments on these vital N.O. articles

Exactly. However, regardless of who is the final user, the "carbon costs" will be passed on to consumers, and all the bad stuff (methane leaks, spills, accidents) whether in production or in transport remains.

What a sad thing ... using the TMX -- a financial and climate disaster -- as an example of addressing climate change, when in reality it is a climate threat and a massive cost to taxpayers. And almost as bad is supporting carbon capture, a technology that is pretty much proven to be cost ineffective at best and inconsequential in terms of it's miniscule potential impact on the problem. With our inept Liberal Government (owned by the fossil fuel industry) likely to lose the next election, and the even worse Conservatives poised to take over, the last hope for Canada to change tack is abandoning our FPTP electoral system in favour of proportional representation. Lobby your MP to support the pending vote on a Citizens Forum on Proportional Rep. (

The potential (and likely) downside of that (there are always downsides) is greater power to the combined forces of the Libs and the Cons. Not that Libs aren't cons when it comes to climate.

I fear for this country, because Chrystia Freeland is in my opinion the most likely person to be the next Prime Minister of Canada, and while that's better than Pierre Poilievre, Freeland seems to be one of the last of the committed, believing neoliberals. Which is to say she's against social programs and government action of nearly all non-military sorts and seems to believe firmly in the Magic of the Market. Justin could sometimes be persuaded to let his vague benevolence influence policy in a somewhat positive direction, like the dental thing, but Freeland seems doctrinaire in being dead set against any such wimpy stuff.

She's also imperialist as hell. On imperialism, Justin kind of goes along to get along, but Freeland is absolutely stoked about making sure those brown-people-countries (eg Honduras, Venezuela) don't get uppity and try to decide their own policy, and deeply, deeply committed to waging and winning the new cold war. I'm just glad Canada has no nuclear button.

What about child care? And her book "Plutocrats?" She strikes me as mainly pragmatic and the market does have its uses after all for fostering investment and jobs AND for making the conservatives look as irrelevant as they actually are. Not enough people seem to get how dangerous they actually are, so how about just being johnny on the spot instead by "helping as many people as possible in as short a time as possible" as Ezra Klein says.
Mind you, that's exactly what they did during the pandemic and got very little credit for it. In that vein, I watched Jagmeet Singh cheering with his caucus about his and the NDP's singular victory in obtaining subsidized dental care, something they've wanted as a party from the beginning, and crowing about more of the same when the NDP win power and HE is PM. Understandable, but he and they are more likely to remain the junior partner lobbying for these admittedly excellent things, and meanwhile shouldn't Trudeau be given credit where it's due for willingly entering INTO the agreement that not only facilitated this achievement, but will buy peace for another two years to achieve even MORE despite the constant, cacophonous mob across the aisle with their malevolent sights fixed mainly on him and him alone?
It's like fatigue has set in and that's the only consideration here.
So have Canadians also become infected with American election mania where government is seen as just the boring interim period between national cage matches?

Re "Plutocrats," there's a big difference between sayin' and doin'. There's no "money where the mouth was."
Helping those who need help is one thing. $10 daycare isn't a bad thing, but I struggle with the idea that a minimum wage earning lone parent with 2 kids should be paying the same amount as a couple each with 6-figure incomes. It's not even as though they can't effectively band together with a couple of others, and gain the subsidy for essentially nanny care, for $10 a day.

Trudeau deserves zero credit. He did it because he had to to remain in power. Otherwise, we'd have had dental when he headed a majority government. The piece I appreciate about it is that it's not available to those who have work-place coverage -- minimum income earners don't have that. At least it's somewhat targeted. I wonder if it applies to city or provincially funded programs: if so, it's a bit of a gift to them. If the services covered and the amount of coverage is adequate, it'll provide real help for low-income seniors, without their having to be practice fodder for dentistry schools. The skillsets of some dentists are bad enough. But it could go sideways, too, providing less coverage.

A lot of the pandemic spending went where it shouldn't have: where it wasn't needed, because the criteria were wide open. Except for seniors: they were told at the outset that the benefit was taxable (and for poorer seniors would result in less money from the GIS in the following years. Those who just grabbed the money anyway were rewarded as a result of Singh's priorities, without any "catch up application" being made available to those who didn't apply because of those rules.
Don't forget that what can be given, can also be taken away. Consider what happened to refundable tax credits.
There is a point at which "pragmatism" becomes just an excuse for unprincipled feathering of your own cap,
I don't recall other minority government participants being "on the side of" the neediest.
Maybe all credit for public healthcare should go to the liberals too, then, though it definitely would not have come into being in a majority government; that, too, was entirely because of the NDP.
It's just a crying shame that Singh didn't make requirements aligning ourselves with Paris commitments.
Trudeau wasn't a "willing" partner: in fact, he thought the September election would deliver a majority government, and he'd not have to horse-trade with anyone.
He only had to choose between the Cons and the NDP, and had the first been his choice we'd have got zip zero nada zilch in terms of climate change.
Then again, it remains to be seen what spending actually takes place.
I *am* _truly_ "fatigued" when it comes to climate leadership claims ... and what we actually get.
PS: Freeland has to hew to her leader's choices. Or is the Jody Wilson-Raybould event so easily forgotten.

"The dental thing" needs work. Not that long ago, there was an admittedly small refundable credit for out-of-pocket dental expenses. Gone with the wind. It remains to be seen what and how much will be covered.
When credits are made non-refundable, it's always at the expense of those with incomes too small to "have" to have payable tax assessments, and to the benefit of those with high incomes
There are benefits to wealthier investors, paid for by those of lesser income, e.g., the difference between the actual amount of dividends received, and the taxable amount of dividends received -- and then the investment credit isn't available to lower-income investors, either.
Charitable contributions are similarly available only to the same constituency.
Ditto political contributions, giving every dollar contributed by a middle-class or wealthy person four times the "influence" of a less wealthy person -- even before the concept of disposable income enters the scene.

I don't think Freeland is anywhere near as anti-social-program, as she is bent on making poor people poorer in order to provide more to those who aren't poor.

Despite her book outlining the problems of income disparity -- written while she was not yet in government.

The "dental thing" is significant according to the NDP, a reliable source on the topic I'd say. And I just got an e-mail from the long-standing David Suzuki Foundation who consider the budget a "win" for clean energy.
And on the book written before Freeland was in really think she lacks integrity because she's not acting unilaterally now that she's in power? Same with Guilbeault from Greenpeace, THE bona fide, who was, please recall, also SELECTED by Trudeau?
Could it be that everyone is compromised to some degree by the complicated reality of actual governance, which is a veritable hot seat in the House of Commons shared with a horde of science-denying conservatives amid terrifying climate change who also refuse to even take a pandemic seriously?! But who have ALSO been duly democratically elected AND who thrive on pure obstructionism for its own sake? Why is there no quarter given for the ongoing, intractable difficulty of this nightmare situation, or sufficient recognition of how it would also tie ANY progressive hands somewhat? May, Singh and Blanchett have the luxury of criticism which is valid and useful, but isn't it supposed to be a conservative strategy/style to indiscriminately trash those in power and eat their own, destroying the whole group with internecine battles? Jagmeet certainly should be more supportive and give more credit to the Liberals he's collaborating with, but won't because HE wants the power of the top job, imagining that he'd do it better. Sure. He's a likable guy but really should know better.
Although I'm very hopeful about that con phenomenon unfolding with the "UCP" here in Alberta at the moment, aren't we progressives supposed to be above such uncharitable, petty snark? All kind of illiberal isn't it?

"Natural gas power plants outfitted with carbon capture technology will also be eligible for this tax credit, even though, as the Institute for Energy Economics and Financial Analysis shows, CCUS technology has failed to deliver on its promised results for 50 years and by definition does not tackle the majority of emissions when the gas is ultimately burned."

Much though I hate carbon capture, I think it should be noted that this might be a bit of a copy-paste leading to an error in this case. Normally, when it's associated with extraction processes, CCS by definition does not deal with emissions when what's extracted is ultimately burned. But in a power plant, the natural gas is in fact being burned right then, so if it worked it would deal with that. Unfortunately it mostly doesn't work. And, it doesn't deal with emissions from methane leakage during extraction and transmission. And it's ridiculously expensive. So it still sucks. But that one objection does not apply to this use case.

I'd have no problem with applying CCUS to existing plants, but it in fact subsidizes (and encourages) those that aren't built yet -- increasing the demand for gas, and new pipelines.

Thank you to the author of this piece for spelling out the stupidity of public investment in CCS.
There needs to be disambiguation of all false claims by industry and by government, right where and when the claims are published. Apparently our free speech rights allow our media and our government representatives to criticize government policy, so there's no good reason not to do that.
Indeed, any venue claiming to inform the public necessarily falls short if it doesn't do so.

It would also be good if the extraordinarily high costs of nuclear power were spelled out, in terms of dollars for building and maintaining, along with making it clear that it is not a clean technology: the waste is not only toxic, but toxic for millennia, with no known way of making it a safe substance. Not to mention that the public pays for the plants, and they are then handed over to an "operator." They're subsidized just like the oil patch is.

It's become somewhat fashionable, it seems, to refer to lesser forms of carbon pollution as "clean," regardless of how toxic they are. Someone needs to start mentioning that, as well.

I wonder, push come to shove, once all the uranium mining, concentration and transport and storage are considered, once the carbon production embodied in concrete-constructed plants and energy-intensive steel is calculated, how much the inadequate storage we have now costs consumers and taxpayers, in dollars and in carbon "costs," how much carbon goes into producing the power ... especially as compared to wind and/or solar.

It seems to me that the reasonable way to make hydrogen would be by harnessing tidal or wind power, and using it to obtain hydrogen from water: that would be the only truly "green" hydrogen. Seems to me that would release more oxygen into the atmosphere, which might provide a small counter-balance to the ever-increasing CO2 emissions.

All of the above would go a long way to highlighting the general, long-standing, ongoing and increasing toxicity of the O&G industries *and* their products.

There is no good reason, either, for providing refundable credits without demonstrated proof of reduced emissions, and the degree/quantum of support being tied exactly to actual overall reductions. As applied to O&G subsidies, at least it would require them to cease expansion, in order to rake in our hard-earned-bux.

Ultimately, these are just outright grants to privately owned industry (and we don't need to be "supporting" billionnaires). And for publicly-owned industry, it's a gift to shareholders. Those who want to invest in proven green-green industry will do so anyway. Those who don't care about the environment, the earth and people's health and lives will invest in the high-return industries anyway: they don't need "incentives," which are further misplaced when they fly in the face of science, statistics and 2 degrees (forget about 1.5, they way our governments are going).