Canada’s federal 2022 Fall Economic Statement (FES) was tabled on November 3, 2022, at 4pm EST by The Honourable Chrystia Freeland, P.C., M.P. Deputy Prime Minister and Minister of Finance. The key focuses of the 2022 FES rest on affordability for Canadians and their families, as well as attempting to stimulate the economy with funding for jobs, growth, and key economic sectors within Canada.
The FES comes at a time when Canada, and the broader world, are facing significant economic challenges that include supply interruptions for key resources due to significant geopolitical conflicts, severe risk of a recession, and skyrocketing inflation. However, with these looming threats to Canada’s stability comes the confidence from federal leaders that the nation will not only survive the coming years, but actually identify new opportunities for growth.
“The next few years are an historic opportunity for Canada—a time when we can continue building an economy that works for everyone, and create the good middle class jobs that Canadians will count on for generations to come. But if we are to capitalize on the opportunities before us in the years to come, we need to step up and make more smart investments today.”The Honourable Chrystia Freeland, P.C., M.P. Deputy Prime Minister and Minister of Finance
These challenges arise on the heels of difficult times that were brought forth by the global COVID-19 pandemic, which caused significant public health impacts that were met by government funding response.
“We will be able to invest in the Canadian economy and be there for the Canadians who need it most—because we were prudent in April, and because we are being prudent today.”The Honourable Chrystia Freeland, P.C., M.P. Deputy Prime Minister and Minister of Finance
To help readers distil the key support that businesses can expect from programs outlined in the FES, this article will provide a summary of the most significant initiatives, as well as offer resources and tools for ensuring that companies are well-positioned to leverage the benefits for when these programs open.
“The 2022 Fall Economic Statement builds on investments made in and since Budget 2022 to grow Canada’s economy, create opportunities for workers, and continue to address Canada’s challenge with investment and productivity that stretches back decades. Significant further measures will be introduced in Budget 2023.”The Honourable Chrystia Freeland, P.C., M.P. Deputy Prime Minister and Minister of Finance
Canada Growth Fund
Perhaps the most significant government funding initiative discussed in Canada’s 2022 Fall Economic Statement is the Canada Growth Fund (CGF). The CGF was first presented by the federal government in the 2022 Canadian Federal Budget which, at the time, shared minimal information about what the program was, when it would open, and which businesses would be eligible.
Although the FES still remains vague on crucial applicant eligibility criteria, funding amounts, and specific program timelines, it does offer some more insight as to what Canadian businesses can expect from the CGF.
Investing in Canadian businesses and projects in a net-zero economy is the mandate of the Canada Growth Fund (CGF), which hopes to attract substantial private capital investments from a sector that it believes offers trillions of dollars in private capital to be invested.
Following are the important national economic policy goals that will be met by the CGF:
- The reduction of emissions and the achievement of Canada’s climate targets;
- Implement key technologies like carbon capture, utilization, and storage (CCUS) and low-carbon hydrogen in an accelerated fashion;
- Promote the creation of jobs, productivity, and clean growth in Canadian companies, and encourage the retention of intellectual property domestically; and
- Increase Canada’s economic and environmental prosperity by making the most of its abundant natural resources and strengthening critical supply chains.
The FES mentions that the program will likely operate on a concessionary basis, such as loans and contracts, for its funding.
Canada Development Investment Corporation (CDEV) will launch the Growth Fund by the end of 2022, allowing it to begin to invest immediately to meet Canada’s climate and economic goals. During the first half of 2023, the government will put in place a permanent, independent Growth Fund structure.
New Canadian Tax Credits for a Cleaner Future
The following programs are new updates for tax incentives brought forth by the Federal Fall Economic Statement. For a comprehensive review of all significant tax updates that occurred due to the FES, please refer to Ryan LLC’s Fall Economic Statement 2022 Tax Alert.
Investment Tax Credit for Clean Technologies
Introducing a refundable tax credit of 30% of the capital cost of investments in:
- Systems to generate electricity, such as solar photovoltaic, small modular nuclear reactors, concentrated solar, wind, and water (micro-hydro, run-of-river, wave, and tidal);
- Battery-based stationary energy storage, flywheel-based stationary energy storage, supercapacitor-based stationary energy storage, compressed air-based stationary energy storage, gravity energy storage, and thermal energy storage systems that don’t use fossil fuels;
- Heat equipment with low-carbon emissions, such as active solar heating, ground-source heat pumps, and air-source heat pumps; and
- Hydrogen or electric heavy-duty equipment used in construction and mining that is zero-emission or can be charged or refueled remotely.
The full 30% credit will be available to companies that meet certain labour conditions; those that fail to do so will only receive 20%.
A number of labour conditions will be in place, such as paying prevailing wages based on local labour market conditions, as well as creating apprenticeship training opportunities.
Budget 2023 will provide details on the two labour conditions and any additional eligible technologies. As of the day of Budget 2023, the credit would be available and would cease to exist in 2035 after a phase-out period starting in 2032. The tax credit is expected to cost $6.7 billion over five years, starting in 2023-24.
Investment Tax Credit for Clean Hydrogen
Canada will be a reliable, premium supplier of energy in a net-zero world, and clean hydrogen is an essential part of this. An investment tax credit will be implemented to support investments in clean hydrogen production.
In the coming weeks, the Department of Finance will launch a consultation on how best to implement an investment tax credit for clean hydrogen based on the lifecycle carbon intensity of hydrogen.
Support for emissions from the production of clean hydrogen are 4.0kg of CO2e or less per kg of hydrogen. The highest support would be for emissions 0.45kg of CO2e or less per kg of hydrogen.
The tax credit will promote jobs and skills for a net-zero economy according to whether certain labour protection requirements are met. The requirements are currently unclear though they will aim to ensure that wages paid are at the prevailing level in the local labour market, and that apprenticeship training opportunities are being created.
The proposed tax credit will be available for eligible investments made as of the Canada Federal Budget 2023 release date and will be phased out after 2030. The lowest carbon intensity tier that meets all eligibility requirements may receive a tax credit of at least 40%. Not meeting certain labour conditions will reduce the maximum rate by 10%.
Investing in Research, Infrastructure, and Labour Workforce
The FES has also mentioned a new investment that will benefit the labour workforce in Canada. The goal is to address significant labour shortages and ensure that workers are trained to adapt to the new technologies and systems needed to solve global climate issues and market demands:
- As part of the Union Training and Innovation Program, employers can obtain union-based apprenticeship training in the skilled trades. The funding provided through this stream will help unions develop green skills training for workers in the trades. As a result of this investment, 20,000 apprentices and journeypersons will be able to gain valuable experience;
- A proposed $962.2 million investment over eight years in the National Research Council to modernize infrastructure and spur more research and innovation projects;
- $301.4 million proposed over three years for the Youth Employment and Skills Strategy Program to help young people find jobs placements with additional wraparound support services;
- $400.5 million over two years towards the Canada Summer Jobs program to fund approximately 70,000 summer placements;
- $100.2 million over three years to support work placements for First Nations youth via the Income Assistance-First Nations Youth Employment Strategy Pilot; and
- $33.5 billion via the Canada Infrastructure Program to fund public infrastructure projects ($23 billion of which has currently been invested in over 5,200 projects).
Is Your Business Prepared for These Programs?
These government funding programs will represent significant opportunities for Canadian businesses that are eligible and prepared with a government funding plan. If your business does not currently have one, we highly recommend using this free Build a Government Funding Plan tool to develop yours before it’s too late.
Moreover, make sure you sign up for our free government funding newsletter to receive weekly updates on programs your business may be eligible for, as well as more free resources and market trends.
Mentor Works streamlines the government funding process through optimized practices and resources. Businesses are paired with an experienced team of professional grant writers who complete each stage of the funding process.