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Recent news focused on Canada's economy has largely centred on inflation and rising interest rates, which is unsettling to say the least. While much of the Government of Canada's attention is directed at resolving (what will hopefully only be short-term) economic uncertainty, government officials also remain committed to investing in the future, including cleantech.

In this regard, the 2022 Canadian Federal Budget allocated $28.2B to a variety of cleantech endeavours. The figure represents a sizeable increase over the 2021 Federal Budget, and is a promising step towards meeting Canada's 2050 net-zero targets. The Budget provides funding for several key cleantech areas, such as modular nuclear reactors, which can provide clean energy to Canada's remote communities; extraction of minerals critical to the development of electric vehicles and other clean technologies; and several initiatives focused on hydrogen-based technologies.

Other key cleantech funding initiatives outlined by the Budget are as follows:

Even with significant government investment, it remains incumbent on Canadian private enterprise to develop and commercialize cleantech. Doing this requires Canadian businesses to implement an intellectual property (IP) strategy that will enable them to successfully compete on national and international stages. We discussed high-level strategic IP concerns and various funding sources available for scaling Canadian businesses in an earlier article, which can be found here. In particular, Canadian businesses should consider the following when developing an IP strategy:

Apart from the 2022 Federal Budget, government funding for scaling Canadian cleantech businesses, such as through NRC IRAP, may be available for IP strategy development. Please contact a Gowling WLG professional for more information.

Establishing a greener neighborhood pilot program

Greener construction in housing and buildings

Launching a world-leading Canada Growth Fund

"Budget 2022 proposes to establish the Canada Growth Fund to attract substantial private sector investment to help meet important national economic policy goals:

New measures to help reduce greenhouse gases:

Helping business switch to medium and heavy duty zero emission vehicles

Expanding Low Carbon Economy Fund

Support for business investment in air-source heat pumps

Building capacity to support green procurement

Investment Tax Credit for Carbon Capture, Utilization, and Storage ("CCUS")

these rates will be reduced by 50 per cent for the period from 2031 through 2040.

Taking more action to eliminate plastic waste

Building Canada's net-zero economy

Increasing the Impact of the Canada Infrastructure Bank ("CIB")

Capitalized at $15 billion over the next five years

"Budget 2022 proposes to establish the Canada Growth Fund to attract substantial private sector investment to help meet important national economic policy goals:

1. To reduce emissions and contribute to achieving Canada's climate goals;

2. To diversify our economy and bolster our exports by investing in the growth of low-carbon industries and new technologies across new and traditional sectors of Canada's industrial base; and

3. To support the restructuring of critical supply chains in areas important to Canada's future prosperity-including our natural resources sector."

Scientific Research and Experimental Development program (SR&ED)

"The government intends to undertake a review of the program, first to ensure that it is effective in encouraging R&D that benefits Canada, and second to explore opportunities to modernize and simplify it. Specifically, the review will examine whether changes to eligibility criteria would be warranted to ensure adequacy of support and improve overall program efficiency."

Small Business income tax rate

"Budget 2022 proposes to phase out access to the small business tax rate more gradually, with access to be fully phased out when taxable capital reaches $50 million, rather than at $15 million."

Critical Mineral Exploration Tax Credit

Up to 30% of exploration expenses

"Critical Mineral Exploration Tax Credit for specified mineral exploration expenses incurred in Canada and renounced to flow-through share investors.

The tax credit would apply to certain exploration expenditures targeted at nickel, lithium, cobalt, graphite, copper, rare earths elements, vanadium, tellurium, gallium, scandium, titanium, magnesium, zinc, platinum group metals, or uranium, and renounced as part of a flow-through share agreement entered into after Budget Day and on or before March 31, 2027."

Innovation, Science and Economic Development Canada

"Budget 2022 proposes to provide up to $1 billion over six years on a cash basis, starting in 2024-25, to Innovation, Science and Economic Development Canada for the Strategic Innovation Fund. Combined with $500 million drawn from existing program funding, this will provide $1.5 billion in targeted support towards critical minerals projects, with prioritization given to manufacturing, processing, and recycling applications. Support for innovative projects through the Strategic Innovation Fund will complement other proposed investments in the sector, including a proposed $1.5 billion investment in infrastructure."

Centre of Excellence on Critical Minerals

$10.6 million over three years starting in 2024-2025

"Budget 2022 proposes to provide $10.6 million over three years, starting in 2024-25, to Natural Resources Canada to renew the Centre of Excellence on Critical Minerals, which works with provincial, territorial, and other partners, and that will provide direct assistance to help developers of critical minerals navigate regulatory processes and existing support measures."

Innovation, Science and Economic Development Canada

"to Innovation, Science and Economic Development Canada to engage with stakeholders, conduct market analysis, and support projects that will strengthen Canada's semiconductor industry."

Canada's Global Innovation Clusters

"to provide $750 million over six years, starting in 2022-23, to support the further growth and development of Canada's Global Innovation Clusters. Building on their success to date, these clusters will expand their national presence and will collaborate to deepen their impact, including through joint missions aligned with key government priorities, such as fighting climate change and addressing supply chain disruptions. To maximize the impact of this funding and to ensure it corresponds with industry and government needs, it will be allocated between the five clusters on a competitive basis."

Innovation, Science and Economic Development Canada

$47.8 Million over five years starting in 2023-24, and $20.1 million afterwards.

"to launch a new national lab-to-market platform to help graduate students and researchers take their work to market"

"to help Canadian businesses secure their intellectual property in foreign markets".

$2.4 Million over five years, and $0.6 million afterwards

"to expand use of ExploreIP, Canada's intellectual property marketplace, so that more public sector intellectual property is put to use helping Canadian businesses"

"to support long-term investments and assist in stabilizing the Prince Edward Island potato sector and supply chain."

"to help the Indigenous tourism industry recover from the pandemic and position itself for long-term, sustainable growth."

Indigenous Tourism Association of Canada

"to the Indigenous Tourism Association of Canada to support its operations, which continue to help the Indigenous tourism industry rebuild and recover from the pandemic."

"to Transport Canada to launch a new purchase incentive program for medium- and heavy-duty ZEVs"

"to Natural Resources Canada to expand the Green Freight Assessment Program, which will be renamed the Green Freight Program. This will support assessments and retrofits of more vehicles and a greater diversity of fleet and vehicle types."

"to triple the size of the Agricultural Clean Technology Program."

"to Agriculture and Agri-Food Canada to expand the Agricultural Climate Solutions program's On-Farm Climate Action Fund."

Net Zero Tax Credit (no official name yet)

"Budget 2022 announces that the Department of Finance Canada will 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. The design details of the investment tax credit will be provided in the 2022 fall economic and fiscal update."

"to Environment and Climate Change Canada to administer direct payments to support emission-intensive, trade-exposed small and medium-sized enterprises..."

Alberta, Saskatchewan, Manitoba, and Ontario

"Budget 2022 proposes to expand the accelerated tax deductions for business investments in clean energy equipment to include air-source heat pumps."

To support job creation and growth in clean technology manufacturing in Canada, the government proposes to 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."

Industrial Energy management System program

"to Natural Resources Canada to expand the Industrial Energy Management System program. This will to support ISO 50001 certification, energy managers, cohort-based training, audits, and energy efficiency focused retrofits for key small-to-moderate projects that fill a gap in the federal suite of industrial programming."

Investment Tax Credit for Carbon Capture, Utilization, and storage.

"Budget 2022 proposes a refundable investment tax credit 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 does 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

37.5 per cent for investment in equipment for transportation, storage and use."

The above rates will be reduced by 50 percent for the period 2031 trough 2040

Lands and Economic Development Services program and Community Opportunity Readiness program

"to advance shovel-ready economic opportunities in Indigenous communities."

Canadian Northern Economic Development Agency

"to support Indigenous economic development in the North."

"To further support Indigenous small and medium-size enterprises, Budget 2022 proposes to forgive up to 50 per cent of the COVID-Indigenous Business Initiative loans that supported businesses in need during the pandemic. This action will help ensure that Indigenous owned businesses are positioned for long-term success."

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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