The Canadian government’s 2023 budget plan includes new investments to support clean hydrogen production.
The plan provides information on investments to build a clean economy, fight climate change, and create jobs for Canadians and supports hydrogen production through the Clean Hydrogen Investment Tax Credit.
The Clean Hydrogen Investment Tax Credit was first announced in the 2022 Fall Economic Statement. Since then, the Canadian government has consulted with unions and other stakeholders on how to implement the tax credit. Budget 2023 announces the following features for the Clean Hydrogen Investment Tax Credit, beginning in 2023-2024:
- The levels of support vary between 15 and 40 per cent of eligible costs for projects that produce the cleanest hydrogen receiving the highest levels of support (Table 3.1).
- The Clean Hydrogen Investment Tax Credit will also extend a 15 per cent tax credit for equipment needed to convert hydrogen into ammonia, a process used to facilitate the transport of hydrogen. The tax credit is only available if ammonia production is associated with the production of clean hydrogen.
- Labour requirements must be met to receive the maximum tax credit rates. Credit rates will be reduced by 10 percentage points if labour requirements are not met. Labour requirements come into effect on October 1, 2023.
The proposed credit is expected to cost $5.6 billion over five years, with an additional $12.1 billion in the following five years. More information about the Clean Hydrogen Investment Tax Credit can be found in the Budget Supplementary Information under “Investment Tax Credit for Clean Hydrogen” and “Labour Requirements Related to Certain Investment Tax Credits“
The budget also outlines the role of the Canada Growth Fund, a $15 billion investment designed to attract private capital to build Canada’s clean economy. An investment tool provided by the Canada Growth Fund is called the contracts for difference, which offers price assurance for products with potentially unpredictable market trends, like hydrogen, minimizing risks for projects that help cut Canada’s emissions.
- Budget 2023 – Backgrounder
- Budget 2023 – Homepage
- Budget Supplementary Information
- An Investment Tax Credit for Clean Hydrogen
- Labour requirements Clean Hydrogen Investment Tax Credit
- Canada Growth Fund
IMAGE (above): Canada’s Deputy Prime Minister and Minister of Finance Chrystia Freeland stands beside Canadian Prime Minister Justin Trudeau, during the Budget 2023 address on March 28, 2023. Credit: Finance Canada Youtube Page)