CANADA Law and Practice Contributed by: Thomas McInerney, Selina Lee-Andersen, Sonia J. Struthers and Elyse Bouey, McCarthy Tétrault LLP
When taken collectively, these findings drive deal mechanics related to the representations, warranties and indemnities addressing environmental compli - ance and, increasingly, specific climate-related or carbon-related covenants (for example, on compli - ance-unit transfers, carbon-cost allocation or emis - sions performance) negotiated to allocate these risks between buyer and seller. 6. Climate-Friendly Investment Support 6.1 Renewable Energy Canada provides extensive policy, regulatory and fis - cal support for the uptake of renewable and clean- energy technologies, combining federal tax measures, federal and provincial funding programs, and regula - tory drivers. Support operates across the investment chain: rebates and grants for specific technologies, program funding for renewable energy projects, refundable tax credits for investments in certain clean- energy property, and de-risking instruments for large decarbonisation projects. The principal support, now central to clean energy investment decisions in Canada, is a suite of federal clean economy investment tax credits (ITCs). The amount of the ITCs is calculated based on a specified percentage of the capital cost to acquire eligible capi - tal property. The ITCs are refundable and generally deliver support earlier in a project’s life than Canada’s capital cost allowance system. There are currently five ITCs enacted in Canada: • the clean technology investment tax credit sup - porting investment in clean technology property including renewable and low-emitting generation equipment, small nuclear energy property and energy storage equipment; • the clean electricity investment tax credit support - ing investment in clean electricity property includ - ing low-emitting generation equipment, energy storage equipment, large nuclear energy property and inter-provincial transmission; • the clean hydrogen investment tax credit support - ing investment in clean hydrogen production; • the clean technology manufacturing investment tax credit supporting investment in the manufacture of
clean technology property as well as critical min - eral extraction and processing, and • the carbon capture, utilisation and storage (CCUS) investment tax credit. The electric vehicle supply chain investment tax credit was announced by the federal government in 2024 but has not yet been enacted. The federal govern - ment recently reaffirmed its commitment to advancing Canada’s electricity grid, delivering clean power and reducing emissions, including by extending the clean electricity investment tax credit to eligible intra-provin - cial transmission equipment. Provincial measures may complement the federal framework, with some prov - inces offering their own renewable-energy and CCUS incentives that may, in certain circumstances, be lay - ered on the federal incentives for a single project. 6.2 Other Support Federal and provincial support extends well beyond renewable generation to other forms of climate-friend - ly investment, including CCUS, industrial decarboni - sation and clean infrastructure. This support combines tax incentives (notably the refundable CCUS invest - ment tax credit), financing and de-risking instruments, regulatory and procurement measures, and an emerg - ing sustainable-finance architecture. The Canada Growth Fund, an arm’s-length federal investment fund, plays a distinct, financing-side role. Among its instruments, it uses carbon contracts for difference to guarantee a future carbon price and pay the proponent the difference if the market carbon price falls below the contracted level, thereby de-risking the carbon-price exposure of large decarbonisation pro - jects, including CCUS, and improving their bankability. Canada is also developing a voluntary national sus - tainable-finance taxonomy intended to identify and mobilise climate-aligned investments. The framework is being developed by an independent council (co- hosted by Business Future Pathways and the Cana- dian Climate Institute) and aims to define activities that support Canada’s net-zero by 2050 targets, pre - vent greenwashing, and ensure alignment with inter - national commitments.
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