Canada’s clean energy plan detailed in federal budget

OTTAWA – Rick Smith, President of the Canadian Climate Institute, made the following statement in response to the release of the Federal Budget 2023:

“This is the most consequential budget in recent history for accelerating clean growth in Canada. Climate action and economic policy are one and the same—the world’s major economies know that investing in clean energy is the catalyst for future competitiveness, and Budget 2023 takes decisive steps to ensure Canada won’t fall behind in the global race to net zero.

“This is a shrewd response to the U.S. Inflation Reduction Act. The 2023 federal budget builds on Canada’s existing policy strengths. It provides targeted support to attract the private capital required to drive new sources of clean economic growth, explicitly building on the solid foundation of existing policies such as carbon pricing and clean fuel regulations. In particular, new funding through Investment Tax Credits (estimated to cost $17 billion over the next five years) as well as new focus for the Canada Growth Fund and the Canada Infrastructure Bank, will help mobilize additional investment in clean growth projects across the country, such as clean electricity, hydrogen, clean technology manufacturing, electric vehicles, and batteries.

“We strongly support the federal government’s commitment to provide carbon contracts for difference to drive more private investment at lower cost. It makes sense to provide both tailored contracts for differences through the Canada Growth Fund as well broader contracts to buttress the certainty of carbon pricing. As we have recommended, contracts for difference leverage Canada’s biggest advantage—carbon pricing—to crowd-in private investment and secure the longer-term economic viability of clean growth projects.

“Clean electricity is Canada’s greatest competitive advantage in attracting investment — and we need more of it. This budget takes significant strides toward building bigger, cleaner and smarter electricity systems across the country, with new investment tax credits for the electricity sector worth $6.3 billion over the next five years and $25.7 billion over the next ten. By making these tax credits conditional on provincial commitments to affordable net zero electricity, the budget will also create incentives for essential provincial and territorial action on clean electricity. These shifts will underpin Canada’s net zero transition and make energy more affordable and reliable for Canadians in the long run.

“Overall, Budget 2023 invests in the right priorities to tackle climate change and build a stronger, cleaner, and more competitive economy.”

The 2023 Federal Budget’s most significant elements for supporting clean growth and progress on climate change:

• The Budget prioritizes clean electricity, with both new (investment tax credits, including credits available to crown corporations and public utilities) and existing resources (Canada Growth Fund, Canada Infrastructure Bank).
• The Budget clarifies the role of the Canada Infrastructure Bank to make it “the government’s primary financing tool for supporting clean electricity generation, transmission, and storage projects, including for major projects such as the Atlantic Loop.” Drawing on existing resources, it commits at least $10 billion of support for clean power and an additional $10 billion for clean growth infrastructure.
• The Budget opens the door to multiple types of contracts for difference. By directing the Canada Growth Fund to provide tailored contracts for differences for large projects — whether tied to prices of carbon or commodities such as hydrogen — it can get some projects moving quickly in the short-term. And by consulting on broader carbon contracts for difference it can reinforce certainty around future carbon prices, making the carbon pricing work better.
• By tasking the Public Sector Pension Investment Board (PSP Investments) to manage the Canada Growth Fund’s assets, the budget ensures that the Growth Fund can move quickly in mobilizing private capital. Critically, the budget notes the importance of transparency and accountability in ensuring these investments are consistent with the Growth Fund’s mandate.
• The budget announces that the Canada Infrastructure Bank will provide loans to Indigenous communities to support them in purchasing equity stakes of projects in which the Infrastructure Bank in investing.
• Investment Tax Credits will mobilize significant private capital in key areas that could provide new sources of economic growth and competitiveness. For example, 30 per cent refundable credit will support investment in new machinery or equipment used to manufacture or process clean technologies and extract, process, or recycle key critical minerals. Similarly, tax credits of 15-40 per cent will support production of clean hydrogen and conversion to ammonia for transport.

The Budget provides some support for building resilience to disasters and climate impacts. It dedicates:

• $15 million to Public Safety Canada to create a public portal providing Canadians information about their vulnerability to flood;
• $48 million to Public Safety to identify high risk flood areas and implement a modernized Disaster Financial Assistance Arrangements Program
• $31.7 million to stand up a flood insurance program for Canadians without access to insurance.