Canada: clean hydrogen investment tax credit of 15–40% and clean technology credit (Budget 2023)

Canada's 2023 Budget specified two investment tax credits for the clean economy: the Clean Hydrogen Investment Tax Credit with rates from 15 to 40% depending on the carbon intensity of the hydrogen, and the Clean Technology Investment Tax Credit of up to 30% of the capital cost of qualifying assets. The hydrogen credit is refundable, that is, it can be paid out even where the business has no tax liability to reduce.

Clean hydrogen credit

According to McMillan, the rate depends on the lifecycle carbon intensity (CI) of the hydrogen: 40% at a CI below 0.75 kg CO₂e per kg H₂, 25% at a CI of 0.75 to 2 kg and 15% at a CI of 2 to 4 kg. The credit applies to qualifying equipment acquired and made available for use in Canada from the date of the budget (28 March 2023), is halved for equipment made available for use in 2034 and expires after 2034. The equipment must be used almost exclusively to produce hydrogen by electrolysis or from natural gas with CO₂ capture and storage. The maximum rates apply only where the wage and apprenticeship requirements are met (IEA). Biogas and biomass are not listed among the qualifying pathways in McMillan's description.

Clean technology credit

According to the Canada Revenue Agency summary, the Clean Technology ITC offers a rate of up to 30% for corporations and corporate partnerships, with labour requirements; the scope includes, among others, active solar heating, off-road zero-emission vehicles, concentrated solar power and small modular reactors. The detailed list must be checked in the CRA provisions.

Why this matters for biomethane and biogas

The credits are not aimed directly at biogas, but they affect the investment environment: electrolysers powered by renewable energy can compete or cooperate with hydrogen from biomass, and credits for clean energy technologies can lower the cost of auxiliary installations. Together with the Clean Fuel Regulations and provincial credit systems they form a coherent package of incentives.

International context

The Canadian credits appeared against the background of the American Inflation Reduction Act, which launched large-scale subsidies for clean energy and hydrogen. The instruments have similar foundations – the level of support depends on emission intensity, and the full rates are tied to wage and apprenticeship requirements – although the Canadian credit is investment-based and refundable, while the American 45V is production-based, which makes simple comparisons difficult.

What this means for Poland and Europe

For the EU, tax credits are a tool complementing grants and auctions. The example of Canada shows a trend in which countries outside the Union compete for investment in clean technologies with fiscal instruments. European technology producers (electrolysers, biogas upgrading) should bear in mind that Canadian and American projects may benefit from generous support.