Deputy Prime Minister and Minister of Finance Chrystia Freeland yesterday released Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable (Budget 2022). This bulletin outlines key climate, energy, and Indigenous highlights from Budget 2022, part of total new spending of $31.2B, which includes:
- A proposal to establish the Canada Growth Fund (initial investment of $15B over five years), directly targeted at reducing emissions and enabling the transition to a low-carbon economy.
- Confirmation of the government’s intention to establish a refundable investment tax credit for carbon capture, utilization and storage (CCUS) projects to the extent that they permanently store captured CO2 through an eligible use.
- Plans to engage with experts on establishing an investment tax credit of up to 30 per cent, focused on net-zero technologies, battery storage solutions, and clean hydrogen.
- Support for the co-development of an Indigenous Climate Leadership Agenda to support self-determined action in addressing Indigenous Peoples’ climate priorities.
Budget 2022 includes new and proposed funding supporting important climate action, as follows:
Canada Growth Fund. Budget 2022 proposes establishing the Canada Growth Fund, with an initial $15B investment over the next five years and the aim of attracting substantial private sector investment supporting the following economic policy goals:
- reduce emissions and contribute to achieving Canada’s climate goals;
- diversify the economy and bolster exports by investing in the growth of low-carbon industries and new technologies across new and traditional sectors of Canada’s industrial base; and
- support the restructuring of critical supply chains in areas important to Canada’s future prosperity—including our natural resources sector.
Clean technology. Budget 2022 proposes the following new clean technology funding and investments:
- engage with experts to establish an investment tax credit of up to 30 per cent, focused on net-zero technologies, battery storage solutions, and clean hydrogen;
- provide $2.2B over seven years, starting in 2022-23, to expand and extend the Low Carbon Economy Fund;
- expand the accelerated tax deductions for business investments in clean energy equipment to include air-source heat pumps; and
- extend the 50 per cent reduction of the general corporate and small business income tax rates for zero- emission technology manufacturers to include manufacturers of air-source heat pumps
Climate-related and ESG disclosures. The federal government is committed to moving towards mandatory reporting of climate-related financial risks across a broad spectrum of the Canadian economy, based on the international Task Force on Climate-related Financial Disclosures (TCFD) framework. Climate and environmental, social, and governance (ESG) disclosure will be supported by the following:
- the Office of the Superintendent of Financial Institutions (OSFI) will consult federally regulated financial institutions on climate disclosure guidelines in 2022 and will require financial institutions to publish climate disclosures—aligned with the TCFD framework—using a phased approach, starting in 2024;
- moving forward with requirements for disclosure of ESG considerations, including climate-related risks, for federally regulated pension plans; and
- providing $8M over three years, starting in 2022-23, to Canada Economic Development for Quebec Regions to support the start-up of the International Sustainability Standards Board’s Montreal office.
Carbon capture, utilization and storage (CCUS). Budget 2022 confirms the government’s intention to put forward a refundable investment tax credit, similar to the 45Q tax credit in the United States, for businesses that incur eligible CCUS expenses, starting in 2022. The investment tax credit would be available to CCUS projects to the extent that they permanently store captured CO2 through an eligible use. Eligible CO2 uses include dedicated geological storage and storage of CO2 in concrete, but do not include enhanced oil recovery. From 2022 through 2030, the investment tax credit rates would be set at:
- 60 per cent for investment in equipment to capture CO2 in direct air capture projects;
- 50 per cent for investment in equipment to capture CO2 in all other CCUS projects; and
- 5 per cent for investment in equipment for transportation, storage and use.
The proposed refundable tax credit is expected to cost $2.6 billion over five years starting in 2022-23, with an annual cost of about $1.5 billion in 2026-27. Going forward, it is expected that the measure will continue to cost approximately $1.5 billion annually until 2030. Other CO2 uses could be made eligible in the future, if permanence of storage can be demonstrated and no incremental CO2 emissions result from the use of the product that is produced.
Agriculture. Budget 2022 proposes the following new agriculture climate funding and investments:
- $329.4M over six years, starting in 2022-23, with $0.6 million in remaining amortization, to triple the size of the Agricultural Clean Technology Program;
- $469.5M over six years, with $0.5M in remaining amortization, starting in 2022-23, to expand the Agricultural Climate Solutions program’s On-Farm Climate Action Fund;
- $150M for a resilient agricultural landscape program to support carbon sequestration, adaptation, and address other environmental co-benefits; and
- $100M over six years, starting in 2022-23, to the federal granting councils to support post-secondary research in developing technologies and crop varieties that will allow for net-zero emission agriculture.
Natural climate solutions. Budget 2022 announces an additional $780M in funding over five years, starting in 2022-23, to expand the Nature Smart Climate Solutions Fund.
Greener construction and affordable housing. Budget 2022 proposes the following new building climate action funding, investments, and initiatives:
- $183.2M over seven years, starting in 2022-23, with $8.5M in remaining amortization, and $7.1M ongoing to the National Research Council to conduct research and development on innovative construction materials and to revitalize national housing and building standards to encourage low-carbon construction solutions;
- an additional $458.5M over the program duration, starting in 2022-23, to the Canada Mortgage and Housing Corporation to provide low-interest loans and grants to low- income housing providers as part of the low-income stream of the Canada Greener Homes Loan program;
- reform the Rental Construction Financing Initiative by strengthening its affordability and energy efficiency requirements;
- $150M over five years, starting 2022-23, to develop the Canada Green Buildings Strategy;
- $200M over five years, starting in 2022-23, to create the Deep Retrofit Accelerator Initiative; and
- $33.2M over five years, starting 2022-23, including $6M from the Green Infrastructure – Energy Efficient Buildings Program to implement a Greener Neighbourhoods Pilot Program in up to six community housing neighbourhoods to pilot “Energiesprong” model in Canada.
Budget 2022 includes new and proposed funding supporting important clean energy and climate action, as follows:
Clean electricity and nuclear energy. Budget 2022 proposes the following new clean electricity and nuclear energy funding and investments:
- $250M over four years to support pre-development activities of clean electricity projects of national significance, such as inter-provincial electricity transmission projects and Small Modular Reactors (SMRs);
- $600M over seven years for the Smart Renewables and Electrification Pathways Program to support additional renewable electricity and grid modernization projects;
- $25M to establish Regional Strategic Initiatives to work with provinces, territories, and relevant stakeholders to develop net-zero energy plans; and
- $69.9M for Natural Resources Canada to undertake research to minimize waste generated from SMRs, support the creation of a fuel supply chain, strengthen international nuclear cooperation agreements, and enhance domestic safety and security policies and practices.
Zero-emission vehicles. Budget 2022 proposes the following new zero-emission vehicle (ZEV) funding, investments, and initiatives:
- Reiterate funding commitments and initiatives previously announced in the 2030 Emissions Reduction Plan (read our earlier bulletin here) including ZEV sales mandates;
- $1.7B over five years to extend the Incentives for Zero-Emission Vehicles program until March 2025 to help more Canadians get behind the wheel of zero-emission vehicles;
- $547.5M over four years to launch a new purchase incentive program for medium- and heavy-duty ZEVs to help businesses upgrade their fleets;
- $500M investment from the Canada Infrastructure Bank in large-scale urban and commercial ZEV charging and refuelling infrastructure; and
- $400M over five years, starting in 2022-23, to fund the deployment of ZEV charging infrastructure in sub-urban and remote communities through the Zero-Emission Vehicle Infrastructure Program.
Indigenous Peoples, climate, and reconciliation. Budget 2022 proposes the following new funding and investments to support Indigenous communities, climate action, and reconciliation:
- $29.6M over three years, starting in 2022-23, to support the co-development of an Indigenous Climate Leadership Agenda to support self-determined action in addressing Indigenous Peoples’ climate priorities;
- $103.4M over five years, starting in 2022-23, to Natural Resources Canada for the development of a National Benefits-Sharing Framework for natural resources and the expansion of the Indigenous Partnership Office and the Indigenous Natural Resource Partnerships program;
- $4B over six years, starting in 2021-22, to ensure First Nations children continue to receive the support they need through Jordan’s Principle;
- $209.8M over five years, starting in 2022-23, to increase the support provided to communities to document, locate, and memorialize burial sites at former residential schools, support the operations of and a new building for the National Centre for Truth and Reconciliation, and ensure the complete disclosure of federal documents related to residential schools;
- $398M over two years, starting in 2022-23, to support community infrastructure on reserve; and
- $4B over seven years, starting in 2022-23, to accelerate work in closing Indigenous housing gaps.