🇨🇦 💪 Canada’s answer to 45Q: the CCUS Investment Tax Credit (#ITC) 💪 🇨🇦

💵 Aiming to compete with its Southern neighbour, Canada has allocated $3.1 billion over the first five years (with a projected extension to around $7.6 billion up to 2030) to scale carbon dioxide removal (#CDR) as part of its Carbon Management Strategy.

👏 Unlike 45Q, the CCUS ITC supports companies with CAPEX, more precisely equipment purchases (estimated 30% of CAPEX). This is a huge advantage, as it provides companies with incentives prior to conducting the carbon removal activity itself.

The tax credit rates are as follows (2022-2030 and 2031-2040 respectively):

💨 Direct Air Capture Storage (DACS) equipment investment: 60% and 30%

🏗️ Other CCUS Projects: 50% and 25%

🚛Transportation, Storage, and Utilization: 37.5% and 18.75%

🔙 The ITC will be available retroactively for eligible expenses incurred from 2022 onwards for CCUS capital expenses with the aim of permanent CO2 storage through two primary methods: dedicated geological storage or storage in concrete.

Eligibility criteria include:

📦 Geological Storage: Available in jurisdictions with adequate regulatory frameworks (initially only Alberta, Saskatchewan, and British Columbia).

🧱 Concrete Storage: Requires a process where at least 60% of CO2 is mineralized and stored permanently in concrete, verified by third-party ISO standards.

⚡ Dual-Use Equipment: Eligibility extended to include equipment used for heat, power, or water, integral to the CCUS process, with tax support prorated accordingly.

➡ The CCUS ITC is yet another example of smart policy incentives to scale CDR. The focus on CAPEX in particular is crucial given the stage the industry is at. Such a shame that it only applies to a subset of CDR technologies, just like 45Q in the U.S. More tech-neutral approaches will be needed in future, but this is a great start and has some real teeth!

For those interested into digging deeper, I recommend following Carbon Removal Canada and their Executive Director Na'im Merchant, who are leading the way on Canadian CDR policy. Also a shout-out to Phil De Luna, who first made me aware of this tax credit on the Carbonsations podcast.

❓ What are your thoughts? Will this drive CDR investments to Canada? 

#carbonremoval #Canada #climatepolicy

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