441-00450 (Natural resources and energy)

Importance of the energy sector/clean tech to Canada:

• Canada’s energy sector is a key contributor to employment, economic growth and social development in Alberta and across Canada. As we move forward to transform our economy towards a net-zero future, workers and innovators are going to be an essential part of this transition building on the innovation and expertise across the energy sector. 
• Building on the Pan-Canadian Framework on Clean Growth and Climate Change, our new strengthened climate plan, A Healthy Environment and a Healthy Economy, announced in December 2020, continues to advance the next generation of clean technology and grow the role of renewable energy. It includes $15 billion in investments for 64 strengthened and new federal policies, programs and investments to cut pollution and build a stronger, cleaner, more resilient and inclusive economy.
• We are committed to promoting clean economic growth by helping Canadian businesses take advantage of the massive transition that Canada and the global economy must make to reach the target of net-zero emissions.
• We are committed to continuing to work with the sector to grow the economy, and to better align climate change objectives, including achieving emissions reductions through innovation across the energy sector.  

Federal support for energy sector

Government of Canada investments:

• $3 billion since 2016 to help Canadian companies innovate, develop new and improved technologies, reduce carbon pollution, strengthen competitiveness and create jobs. This includes investments in things like clean energy, clean hydrogen, carbon capture, use and storage, wind, solar, energy storage and smart grids.
• Infrastructure improvements to help the transition away from coal, which will make it easier for affordable clean energy.
• $750 million over five years for Sustainable Development Technology Canada to support startups and scale up companies to enable pre-commercial clean technologies to successfully demonstrate feasibility, as well as support early commercialization efforts.
• $50 million to invest in technologies and $100 million to leverage private sector co-investments through the Clean Resource Innovation Network – a pan-Canadian network focused on ensuring Canada’s energy resources can be sustainably developed and integrated into the global energy supply.
• Up to $1.72 billion, including funding to the governments of Alberta, Saskatchewan, and British Columbia, and the Alberta Orphan Well Association, to clean up orphan and/or inactive oil and gas wells – creating thousands of jobs and having lasting environmental benefits.
• Launching a Net-Zero Challenge for large emitters to support Canadian industries in developing and implementing plans to transition their facilities to net-zero emissions by 2050.
• $3 billion in the Strategic Innovation Fund’s Net-Zero Accelerator Fund to rapidly expedite decarbonization projects with large emitters, scale-up clean technology and accelerate Canada’s industrial transformation across all sectors.
• $1.5 billion in a Low-carbon and Zero-emissions Fuels Fund to increase the production and use of low-carbon fuels (e.g., hydrogen, biocrude, renewable natural gas and diesel, cellulosic ethanol).
• $750-million Emission Reduction Funds provides loans for projects that reduce or eliminate greenhouse gas emissions with a focus on methane and supports reducing the greenhouse gas intensity of fuel production.  Projects that entirely eliminate methane have a non-repayable portion.

The Government of Canada understands the importance of the region’s natural resources to Canadians, providing jobs and opportunities that contribute to the national economy. Canada will continue to play a key role in supplying the world’s future energy needs, as Canadians work towards achieving net-zero emissions by 2050. The Government of Canada recognizes that the energy sector in Alberta’s Industrial Heartland has a significant role to play. A strong energy sector will help to ensure that the environment is protected as it drives economic growth.

Ongoing and proposed federal support to Alberta’s Industrial Heartland energy sector includes:

• Investing $1.5 billion in the Clean Fuels Fund, to support the build out of new domestic production capacity for clean fuels (e.g. renewable natural gas, hydrogen, advanced ethanol, renewable diesel, and sustainable aviation fuels), the establishment of sustainable biomass supply chains, and the development of essential binational codes and standards.
• Developing a carbon capture, utilization and storage strategy to cut industrial emissions, including the introduction of a refundable investment tax credit for businesses that incur eligible CCUS expenses (starting in 2022), and investing $319M over seven years to support research, development, and demonstration (RD&D) to advance the commercial viability of carbon capture, utilization, and storage (CCUS) technologies.
• Unveiling the Hydrogen Strategy for Canada that lays out an ambitious framework to help cement hydrogen’s role in reducing emissions and leading to economic benefits across Canada while also positioning Canada as a leader in hydrogen. Vast natural gas and petroleum resources endow Canada with a competitive advantage in the production of clean hydrogen. Funding of $1.35 million through Prairies Economic Development Canada (PrairiesCan) to modernize an Edmonton facility for Alberta firms to test their products and processes and ultimately to demonstrate the value of Canadian-made technologies for the global hydrogen industry.
• Broadening the Canada Infrastructure Bank’s (CIB) role to invest in private sector-led infrastructure projects that will accelerate Canada’s transition to a low-carbon economy. This will allow the CIB to invest in small modular reactors; clean fuel production; hydrogen production, transportation and distribution; and carbon capture, utilization and storage.
• Advancing plans to eliminate plastic waste in the environment through the circular economy. The knowledge and experience of the petrochemical industry in Alberta’s Industrial Heartland will be instrumental in the development of valuable solutions using plastic waste. Developing the circular economy presents an opportunity for the energy sector to re-imagine its refining capacity.

Alberta’s Industrial Heartland plays an important role in Canada’s sustainable development. There are many positive examples of interrelated industries already working together in the region, benefitting from the Heartland’s unique characteristics, economic opportunities, and the high-quality renewable carbon feedstock produced by the energy sector. The Government of Canada will continue to work with the Government of Alberta and Heartland stakeholders to grow energy-related manufacturing in a way that adds value to the province’s hydrocarbon sector, and will support the region as it embraces an increasingly low-carbon future.

The Government of Canada recognizes the importance of Canada’s energy sector, which directly and indirectly supports hundreds of thousands of middle class families and their communities. As the Government of Canada works to build a more sustainable and resilient economy, an industrial advantage will depend on the speed and success of decarbonization efforts, ability to meet the demands of domestic and global consumers for low-carbon goods and services, and efforts to rapidly scale up low-carbon technologies. Canadian workers and businesses are well-positioned to lead the growth of a strong Canadian economy that thrives in a low-carbon world and provides sustainable jobs.

Support for Energy-Related Manufacturing

Canada’s industrial sectors – such as manufacturing, chemicals, cement and oil and gas – play a key role in the economy, and will be vital in the transition towards a net-zero future. Canada’s strengthened climate plan, “A Healthy Environment and a Healthy Economy”, was announced in December 2020 and contains 64 strengthened and new federal policies, programs and investments to reduce emissions and build a stronger, cleaner, more resilient and inclusive economy. The Plan includes $3 billion for the Strategic Innovation Fund – Net Zero Accelerator to support the adoption and deployment of decarbonization solutions in Canadian industry and $1.5 billion to increase the production and use of low- carbon fuels. A focus of the government as it transitions to a net-zero economy will be on supporting the rapid scale up of existing and new, strategic clean technologies and supporting the market for clean fuels in Canada, including through Canada’s Hydrogen Strategy. The government is committed to working with Canadian businesses and workers in advancing a net-zero economy. 

Carbon Capture, Utilization, and Storage (CCUS) technologies are an important tool for reducing emissions in high-emitting sectors, including Alberta’s energy sector, where other pathways to reduce emissions may be limited or unavailable. For that reason, CCUS technologies will play a role in helping Canada reach its emissions reduction target and net-zero emissions by 2050. Investments made in CCUS will help to ensure the sustainability of economic activity in Alberta’s energy sector and Industrial Heartland.

The government proposed in Budget 2022 the final design of the investment tax credit for CCUS that was first announced in Budget 2021. The investment tax credit would be refundable, and provide significant support for business that incur eligible CCUS expenses starting in 2022, with the goal of reducing emissions from CCUS by at least 15 megatonnes of CO2 annually.

The credit would provide support to reduce the large, upfront capital costs associated with the construction of CCUS, with a rate as high as 50 percent for equipment to capture CO2, and 60 percent for this equipment in the case of direct air capture projects. Tax support will be available for a broad range of CCUS applications across different industrial subsectors, including blue hydrogen projects, and could be used to help reduce emissions in oil and gas, chemical production, electricity generation, or other sectors. The investment tax credit would be available for CCUS projects to the extent that captured CO2 goes to an eligible use, which includes dedicated geological storage, or storage in concrete, but does not include enhanced oil recovery.

In Budget 2021, the government also invested $319 million over seven years, starting in 2021-22, with $1.5 million in remaining amortization to support research, development, and demonstration activities for carbon capture, utilization, and storage technologies through Natural Resources Canada.

Support for Alberta and the Energy Sector

Canada’s strengthened climate plan builds off previous measures targeted at the energy sector as part of the government’s COVID-19 economic response. Due to the unprecedented challenges for workers and companies in the energy sector as a result of the pandemic, the government allocated $2.8 billion to support energy sector workers and help the industry reduce its emissions. This includes $750 million for the Emissions Reduction Fund to help oil and gas companies reduce methane emissions, $1.7 billion to the Western provinces and Alberta Orphan Wells Association to support work to clean up orphan and inactive oil and gas wells, and $320 million for Newfoundland and Labrador to support workers in the offshore sector. This funding will sustain jobs in the energy sector, while also supporting the broader energy-related supply chain.

Support through Accelerated Capital Cost Allowances

In the 2018 Fall Economic Statement, the Government of Canada introduced the Accelerated Investment Incentive, which provides an enhanced first-year capital cost allowance of up to three times the first-year allowance otherwise available for all businesses, including in the energy sector. For businesses in the manufacturing and processing sector, including energy transformation, the 2018 Fall Economic Statement also announced an enhanced first-year capital cost allowance of 100 percent for investments in machinery and equipment. These measures will be available for investments that become available for use before 2028, subject to a phase-out starting in 2024.