Exclusive-Canada budget to have tax credit for equipment used to produce EVs -sources

FILE PHOTO: Canada’s Deputy Prime Minister and Minister of Finance Chrystia Freeland delivers the fall economic statement in the House of Commons on Parliament Hill in Ottawa

By Steve Scherer

OTTAWA (Reuters) – Canada will introduce in its budget next week a 30% investment tax credit to boost clean-tech manufacturing, especially in the electric vehicle (EV) supply chain, two government sources familiar with the document said on Thursday.

The tax credit for capital investments in manufacturing equipment will be a “significant piece” of a bundle of measures aimed at putting Canada’s green-transition effort on the same level as the United States, said one source.

The credit will be available for future investments in equipment used to extract and process critical minerals used in EVs, a second source said, and to purchase equipment used in manufacturing along the entire EV supply chain, including for batteries.

In addition, the tax credit will be able to be used to buy equipment to produce nuclear energy fuels and heavy water, for making electrical energy storage, and for producing solar panels or wind turbines, the second source said.

Neither source put a price tag on the measure, but they did say it would not apply to projects where investments have already been agreed, such as the two Canadian battery plants planned by carmakers Volkswagen and Stellantis NV.

Finance Minister Chrystia Freeland will present the 2023-2024 fiscal year budget to parliament on Tuesday. Neither source was authorized to speak on the record. A Finance Ministry spokesperson declined to comment.

Freeland has promised to bolster Canada’s green energy stimulus after the United States last year passed the Inflation Reduction Act (IRA), which provides massive incentives for those who invest in clean technology there.

(Reporting by Steve Scherer; Editing by Denny Thomas and Bill Berkrot)