Guide to Tax Incentives for Clean Energy Technologies described in Class 43.1 and 43.2

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Laws and Policies

CCLW

CCLW national policies

Income Tax Regulations

Explanation on capital cost allowance for zero-emission vehicles 

Last amended

Under Classes 43.1 and 43.2 in Schedule II of the Income Tax Regulations, certain capital costs of systems that produce energy by using renewable energy sources or fuels from waste, that conserve energy by using fuel more efficiently, or that produce low-carbon fuels from waste are eligible for an accelerated capital cost allowance. Under Class 43.1, eligible equipment may be written off at 30 percent per year on a declining balance basis. In general, equipment that is eligible for Class 43.1 but is acquired after February 22, 2005, and before 2025 may be written off at 50 percent per year on a declining balance basis under Class 43.2. Without these accelerated write-offs, many of these assets would be depreciated for income tax purposes at lower annual rates.
In addition to Class 43.1 or 43.2 accelerated capital cost allowance, the Income Tax Regulations allow certain expenses incurred during the development and start-up of renewable energy and energy conservation projects [Canadian renewable and conservation expenses (CRCE)] to be fully deducted in the year they are incurred, carried forward indefinitely and deducted in future years, or transferred to investors under a flow-through share agreement.
There are also capital cost allowances for zero emission vehicles acquired after 18 March 2019, which are available for use before 2028 (with a phase out on deductions happening from 2024). Eligible vehicles are those that are plug-in hybrid with battery capacity of at least 7 kWh or is fully electric or fully powered on hydrogen.
An enhanced first-year capital cost allowance with the following phase-out period is available:
<ul>
<li>100% after March 18, 2019, and before 2024</li>
<li>75% after 2023 and before 2026</li>
<li>55% after 2025 and before 2028</li>
</ul>

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

Any compulsory, unrequited payment to the government levied on corporations or individuals. This can be for environmental reasons, such as introducing a Carbon tax to set a price that emitters must pay for the greenhouse gases they emit.

Either money or something of monetary value is transferred between two or more organisations, people or countries.

Electrical energy generated from mechanical devices driven by flowing fresh water.

Electricity generation from devices driven by the movement of salt water, differences in saltwater temperatures, or salinity gradients.

Heat extracted from the ground, usually in the form of hot water or steam and typically referred to as hydrothermal fluid.

Production of electricity and heat from solar irradiation.

A ban is a legal action that prevents the sale or supply of a product or service, or that recalls a product from the market. Examples are bans on SF6, greenwashing, fossil fuel advertisement or single-use plastics.

A tax advantage is an economic benefit applied to certain accounts or investments that are, by law, tax-reduced, tax-deferred, or tax-free. This can apply to investments in areas such as green energy projects or the agricultural sector, where tax advantages can help manage financial risks.

Guide to Tax Incentives for Clean Energy Technologies described in Class 43.1 and 43.2

Policy instrument

Renewable energy

Economic sector

Finance