Latest legislation accelerates Canada’s net-zero emissions goals

Before Canada’s parliament adjourned for the summer, the governing body secured the signing of several pieces of legislation related to zero emissions and clean energy, including the implementation of clean economy tax credits and workforce development initiatives aimed at net zero emissions.

The passage of this legislation comes shortly after Canada was ranked first in the world in the BloombergNEF Global Lithium-Ion Battery Supply Chain Ranking for attractiveness to build electric vehicle (EV) battery supply chains. Building on this position and its outstanding net-zero emissions initiatives, this latest legislation further aligns Canada with U.S. motivations to increase domestic manufacturing, create jobs, increase private sector investment and strengthen supply chains.

Commitment to green jobs

Canada has ambitious plans to achieve a net-zero emissions economy by 2050, as set out in the Canada’s Net Zero Emissions Accountability ActPursuant to this commitment, on June 20, 2024, Bill C-50: Canada’s Sustainable Workplaces Act became law. C-50 establishes a framework for accountability, transparency and engagement to promote economic growth, create sustainable jobs and support workers and communities as Canada transitions to a net zero economy. Key provisions include the creation of the Sustainable Workplaces Partnership Council, the development of a Sustainable Workplaces Action Plan and the establishment of a Sustainable Workplaces Secretariat to support the implementation of the Act.

Tax incentives under the Green Tax program

On the same day, two additional bills were passed:Bill C-59: An Act to Implement the 2023 Fall Economic Report AND Bill C-69: Budget Implementation Act for 2024, No. 1—both implement budget measures from 2023 and 2024, respectively.

C-59 legally implements the Carbon Capture, Utilization, and Storage (CCUS) Investment Tax Credit (ITC), the Clean Technology ITC, and work requirements for work performed under the tax credits in order to receive the full amount of the credit (creating a precedent similar to the U.S. wage and apprenticeship requirements). The CCUS ITC is tied to the acquisition of real estate used for CO2 capture.₂ emissions and their storage or industrial use. The Clean Technology ITC will provide a refundable tax credit for investments in qualifying clean technology properties acquired.

C-59 also extends Budget 2021, which lowers corporate income tax rates for certain qualifying manufacturers of zero-emission technologies. From now until 2031, these manufacturers can benefit from a reduced corporate income tax rate of between 15% and 7.5% and a small business income tax rate of between 9% and 4.5% for their manufacturing activities, such as the production of zero-emission vehicles (ZEVs), ZEV and fuel cell batteries, and electric vehicle charging and hydrogen refueling stations, among other qualifying activities.

C-69 introduces additional clean economy tax credits—Clean Hydrogen ITC and Clean Technology Manufacturing ITC. The Clean Hydrogen ITC is a refundable tax credit based on the carbon intensity of the hydrogen produced, qualifying expenses incurred at the hydrogen production property, and meeting workforce requirements. The Clean Technology Manufacturing ITC is a refundable tax credit that covers costs related to new machinery and equipment used to manufacture or process clean technologies and to mine, process, or recycle critical minerals.

Legislation is expected to be introduced in Parliament this fall regarding the recently announced Electric Vehicle Supply Chain Investment Tax Credit. The Electric Vehicle Supply Chain Tax Credit will apply to the costs of buildings used in segments of the electric vehicle supply chain, specifically for companies investing in Canada in three supply chain segments: electric vehicle assembly, electric vehicle battery manufacturing and cathode material manufacturing. Further positioning Canada as an attractive location for electric vehicle battery supply chains.

While eligible taxpayers can already benefit from these tax credits, codifying them in law will provide clear guidance and consistency, and set a precedent for Canada’s commitments to incentivize zero-emission activities under these credits.

Provincial leadership

While much is happening at the federal level, Canada’s provinces are simultaneously moving the needle toward Canada’s net-zero emissions goals. Billions have been invested in EV supply chains across Canada’s ten provinces to date. Notably, Ontario was recently recognized for its expansion of its EV supply chains. Honda announced the construction of four EV and battery manufacturing plants in the province as part of a $15 billion investment agreement — the largest EV supply chain announcement in Canada to date. Additionally, eyes are on British Columbia and Quebec for their embrace of EVs and investments in clean industries like EV batteries. In short, each province has emerged as a leader in its own industries, from hydrogen production and battery manufacturing to mining and processing key minerals. This ability to diversify investments and industries into a clean economy further solidifies Canada’s ability to achieve its net-zero emissions goals by 2050.

TRC: How We Can Help

At TRC, our team of policy and financing specialists are dedicated to monitoring legislative and regulatory activity related to net-zero actions and their impact on advanced clean energy and transportation. This allows us to share unique and early insights into bills, regulatory actions, and policies and programs that could impact businesses. Across all levels of government in Canada, TRC tracks legislation and regulations on upcoming and ongoing policies related to ZEVs, medium and heavy-duty ZEVs, incentives including rebates, tax credits and exemptions, and policies leading to grant and voucher programs, among others. Our financing experts use these policy insights to help you apply for incentives such as available tax credits. Contact us if your fleet, company, agency or organization could benefit from support in navigating this new legislation and developing a strategy around clean transportation projects.