Consultation on the Clean Hydrogen Investment Tax Credit
Current status: Closed
In the 2022 Fall Economic Statement, the government indicated that it is proceeding with a tax credit for investments in clean hydrogen production.
The government intends for the new investment tax credit to be available across a range of clean hydrogen pathways. The proposed tax credit will be refundable, and available for eligible investments made as of the day of Budget 2023. The credit will be phased out after 2030. The lowest carbon intensity tier that meets all eligibility requirements is proposed to receive an investment tax credit of at least 40 per cent. If a company does not meet certain labour conditions, the maximum tax credit rate will be reduced by 10 percentage points.
This engagement process gave stakeholders and interested members of the public the opportunity to provide input on this topic. The consultation ran from December 1, 2022 to January 6, 2023. Thank you to everyone who participated.
Key questions for consideration
This consultation sought input on the design of the investment tax credit for clean hydrogen, and in particular:
- An appropriate carbon intensity-based system for the Canadian context; and,
- The level of support needed for different production pathways in Canada.
The discussion questions that served as the basis for this consultation are outlined below.
- What clean hydrogen production pathways can be expected going forward? What are expectations for future hydrogen demand (e.g., by 2030)? What are potential hydrogen opportunities in Canada?
- What would constitute appropriate carbon intensity tiers in the Canadian context? What makes such tiers appropriate?
- Under what carbon intensity tiers are the different clean hydrogen production pathways in Canada expected to be found?
- What levels of support would be appropriate for each carbon intensity tier, including the proposed top rate of at least 40 percent?
- What equipment is required at clean hydrogen production facilities? Is there equipment that is external to the facility that may be needed to support clean hydrogen production and how should the government consider eligibility for that equipment under the clean hydrogen investment tax credit or other investment tax credits?
- What are the most common methods used to prepare clean hydrogen for transportation, including the various forms that hydrogen could take (e.g., compressed gas, liquid, or intermediate "hydrogen carrying" products like ammonia or methanol)? What stationary infrastructure is required to prepare hydrogen for transportation, either domestically or internationally?
- Life cycle carbon intensity calculation:
- Are there any concerns with using the Government of Canada's Fuel Life Cycle Assessment Model for calculating the life cycle carbon intensity of clean hydrogen production?
- What additional guidance or support could be provided to help with the calculation of life cycle carbon intensity of clean hydrogen production with this model?
- What should be included in the scope of the life cycle carbon intensity calculation? How could this extend to clean hydrogen that is produced alongside co-products, or as a by-product of an industrial process?
- Once hydrogen is being produced, by how much would the carbon intensity differ from the carbon intensity that was expected based on the design of the plant? Does this differ by production pathway? Is it possible to ensure that the carbon intensity of the clean hydrogen produced will be within a certain band and would this change over time? For the different clean hydrogen production pathways, what ongoing monitoring and calculations are done to measure carbon intensity once a clean hydrogen facility begins production?
- How could life cycle carbon intensity calculations at the stage of plant design, and once a plant has actually started operations, be verified?
- What is the typical service life of a clean hydrogen production facility and what are the risks that a project may not operate through to the end of its useful life?
Input received through this consultation, and the consultation on labour conditions for clean technology and clean hydrogen investment tax credits, will be considered alongside the analysis departmental officials are conducting to help inform decisions on the design of the investment tax credit for clean hydrogen. Details of the design of the investment tax credit will be announced in due course.
While this formal consultation has now concluded, Canadians, including prospective investors in clean hydrogen production, are welcome to continue to share their ideas and comments with the Department of Finance, by emailing Hydrogen-Hydrogene@fin.gc.ca.
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