Canada will offer a substantial incentive to companies that invest in carbon-capture technologies and will set aside as much as C$3.8 billion ($3 billion) over eight years to accelerate critical mineral exploration, extraction and processing as it seeks to cut carbon emissions.
In this year’s budget presented on Thursday, Canada is introducing a 60% tax credit for equipment used to capture carbon from the air, and 50% for all other equipment, plus a 37.5% credit for transportation and storage equipment.
That is below the 75% Canadian Association of Petroleum Producers (CAPP) requested last year.
Carbon capture facilities are expected to be a key part of global efforts to contain emissions from fossil fuels. Canada is the world’s fourth-largest oil producer and has a set a goal of generating net-zero emissions by 2050.
“The investment tax credit… will be one of the largest single industrial tax incentives in Canada’s tax code,” a senior government official said.
The tax credit is projected to cost the government C$2.6 billion ($2.1 billion) over five years, but the budget has numerous other measures aimed at pivoting the economy toward a low-carbon future.
The government will extend a C$5,000 incentive for buying electric vehicles – begun in 2019 – to March 2025.
It will also set up a Growth Fund to attract private investment needed to reach zero carbon emissions by 2050, which will initially be capitalized at C$15 billion over five years, confirming a Reuters report on Wednesday.
Canada needs to spend between C$125 billion and C$140 billion every year to reach net-zero goals by 2050, compared with the current annual investment of between C$15 billion and C$25 billion, according to the budget document.
“No one government can close that gap,” the budget document says.
Canada is seeking to attract electric vehicle and battery makers in order to underpin the future of its manufacturing industry, which is still dependent on the production of internal-combustion cars.
As part of that, the country is proposing to invest C$3.8 billion over eight years in a strategy to ramp up extraction and processing of critical minerals like nickel, lithium, and cobalt that are used to make batteries, confirming another Reuters story from this week.
The value of Canada’s critical mineral deposits at current prices is approximately C$340 billion, the senior official said.
“So we’re investing in the budget and accelerating the development of those deposits and in processing them here at home,” the official said.