These measures aim to help Canada meets its greenhouse gas emission reduction targets and is a response to the clean technology incentives in the United States’ Inflation Reduction Act (IRA).
Clean Tech Tax Credit
With this proposal, geothermal projects can benefit from the tax incentives provided by Clean Tech Tax Credit. This pertains to tax incentives equal to 30% of the capital cost of investments un Class 43.1. This includes piping, heat pumps, heat exchanges, steam separators, and electrical generating equipment. However, equipment used for geothermal projects that will co-produce oil, gas or other fossil fuels are not eligible.
Budget 2023 also proposes to extend the phase-out schedule for the Clean Tech Tax Credit, so that projects that will become available for use by 2033 will still get the 30% tax credit, while those that become operational by 2034 will have a reduced tax credit of 15%. The Clean Tech Tax Credit can also be reduced to 20% if labor requirements are not met. This ensures fair pay for labor in accordance to prevailing wage figures as determined by corresponding project labor and collective bargaining agreements.
Clean Tech Manufacturing Tax Credit
A new tax incentive in Budget 2023 is the Clean Tech Manufacturing Tax Credit. This corresponds to 30% of the capital cost of certain depreciable property that is used for clean technology manufacturing and processing, and critical mineral extraction and processing.
This applies to the manufacturing renewable energy equipment for geothermal, as well as for the extraction and certain processing activities of six critical minerals essential for clean technology supply chains, including lithium, cobalt, nickel, graphite, copper, and rare earth elements.
