NorthAmOil: Canada unveils details of carbon capture tax credit
The Canadian government has unveiled details of its long-awaited tax incentives to help fund carbon capture projects in the country.
The incentives form part of Canadian Prime Minister Justin Trudeau’s new fiscal plan, and are aimed at spurring investment in carbon capture and storage (CCS) technologies. Canada is trying to balance a goal of net-zero emissions by 2050 with the continued production of oil and gas – at least in the shorter term – and CCS is thought to be crucial to striking this balance. However, oil and gas players making forays into CCS have called on government support to help with the economics of such projects.
In Canada’s budget for this year, unveiled on April 7, Trudeau has proposed a refundable investment tax credit for carbon capture. Between 2022 and 2030, the investment tax credit rates would be set at 60% for investment in equipment for direct air capture (DAC) projects, 50% for equipment in all other carbon capture projects and 37.5% for transportation, storage and usage. In a bid to encourage companies to invest in carbon capture more quickly, the rates will be halved over 2031-40, potentially accelerating planned projects so they can benefit from higher rates in the nearer term.
The tax credit is expected to cost CAD2.6bn ($2.1bn) during the first five years and around CAD1.5bn ($1.2bn) per year until 2030.