Canada to introduce 40% hydrogen tax credit along the lines of US IRA

Canada is to introduce a new tax credit of up to 40% for hydrogen production, as part of an effort to bring the country’s incentive regime in line with the generous H2 subsidies available over the border in the United States. The autumn economic statement, announced by Canada’s department of finance yesterday (Thursday), pledges to introduce the regime in spring 2023, and run it until at least 2030. The announcement comes few months after the US signed its game-changing Inflation Reduction Act into law, which provided a tax credit of up to $3/kg for green hydrogen production, effectively making renewable hydrogen the cheapest form of hydrogen globally.

The Canadian model plans to mirror the US regime by making the tax credits scalable dependent on a range of factors, including carbon intensity and labour conditions. An upcoming public consultation will determine a carbon-intensity system that is appropriate for Canada, as well as the level of support for each hydrogen production pathway, including green hydrogen produced from renewable energy and blue H2 made with fossil gas and carbon capture and storage.

Reference