Morneau Extends Tax Credits to Wind, Solar and Efficiency, Keeps Fossil Subsidies Alive and Well
Canadian Finance Minister Bill Morneau included tax incentives for wind, solar, and energy efficiency equipment and a favourable tax regime for fossil producers in his fall fiscal update released earlier this week.
The new support will flow toward oil and gas operators even though “Canada has promised for years to phase out inefficient fossil fuel subsidies, and continues to do so,” National Observer reports.
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The technical changes for renewables and efficiency—and they’re nothing if not technical—would offer project developers a faster schedule for writing off the cost of “specified clean energy equipment” for tax purposes. For example, if a company invests $100 million in wind turbines, solar panels, or energy efficiency gear, it will be allowed to write off the entire capital cost in its next tax return, compared to the $40 million share it would have been able to claim until now. The difference would add up to about $16 million in accelerated tax savings.
“This will help achieve climate goals, and boost Canada’s global competitiveness,” Morneau told the House of Commons, spurring new investment and jobs. His written update said the measure would help cleantech companies to “better compete with fossil-fueled sources of energy”.
But those same fossil-fueled sources will get their own new subsidy, Observer reports, allowing accelerated tax write-offs for “eligible Canadian development expenses and Canadian oil and gas property expenses”.
While the fiscal update refers to Canada’s medium-term commitment to phase out fossil subsidies, “advocacy groups say Canada gives hundreds of millions of taxpayers’ dollars [it’s actuallybillions—Ed.] to the oil and gas industry through tax breaks and other fiscal support to encourage its growth, which is Canada’s fastest-growing source of carbon pollution,” Observer notes. “During the meeting of G7 environment ministers in Halifax this fall, Environment and Climate Change Minister Catherine McKenna could not say whether the group had made any progress discussing the group’s commitment to phasing out fossil fuels.”
The combination of energy-related tax measures will cost the federal government just over C$14 billion by 2023/24, the update states.