In response to Washington and its massive subsidies to clean tech, Ottawa wants to pull the blanket on its side by pledging around $18 billion over five years to boost this promising area.
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“Today and in the years to come, Canada must seize this historic moment of this remarkable opportunity or we will be left behind as democracies around the world build the clean economy of the 21st century,” Minister Chrystia Freeland said.
She offered an answer to the Cut Inflation Act passed by Joe Biden’s government last year, which represents a gigantic aid of 400 billion US dollars to accelerate the energy transition by any means possible.
The “key objective” of Canada’s Budget 2023 response, according to a senior Treasury Department official, is “very simple”: to bring most private capital north of the border by luring it with tax credits.
“A lot of capital” is needed to achieve the federal government’s transitional goals, which – think about it – are aiming for climate neutrality by 2045 and a ban on the sale of new petrol cars in 2035.
“It’s important to accelerate the progress that we’re making in Canada because the pace [actuel] is not sufficient to achieve the necessary goals and to steer this transition [énergétique]said this senior federal official.
Tax credits as a spearhead
Most of the $18 billion over the next five years will be distributed primarily through the government’s weapon of choice: the tax credit.
Ottawa initially aims to foster the green transition and “build a clean grid of electricity accessible to Canadians from coast to coast,” as Ms Freeland puts it. As such, it will absorb 15% of clean power investments, for an estimated total of $7.3 billion over five years.
However, the lion’s share of investment will go into support for the development of new technologies, which would total $11 billion.
The clean hydrogen sector alone, which shows great promise but is still struggling to take off, will benefit from a $5.5 billion boost in grants ranging from 15% to 40% per investment.
There will also be $4.5 billion allocated for 30% tax credits in manufacturing, processing and extraction related to the clean energy sector, including the manufacture of nuclear power plants.
Applauding this strategy, Desjardins chief economist Jimmy Jean asks if the initiative will bear fruit, as previous attempts to boost investment have largely failed.
“It’s a series disappointment. These ideas have been around for a long time, but it’s always difficult to implement them,” he says.
-With Anne Caroline Desplanques
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