What projects qualify

A CCUS project is a project intended to support a CCUS process through any of the following:

• Capturing CO₂ that would otherwise be released into the atmosphere
• Capturing CO₂ directly from the ambient air
• Transporting captured carbon
• Storing or using captured carbon

On this page

• Qualified CCUS project
• What expenditures qualify

Qualified CCUS project

To be considered a qualified CCUS project, the project must meet the following conditions:

• Based on the project’s most recent project plan, it is expected to support the capture of CO₂ in Canada for a period that is at least equal to the total CCUS project review period for the project (approximately 20 calendar years)
  • For example, a pilot or demonstration project that would operate temporarily would not be considered a qualified CCUS project
• Based on the project’s most recent project plan, its projected eligible use percentage equals or exceeds 10% in each of the following periods:
  • If the first project period begins after September of a calendar year, the period beginning on the first day of commercial operations and ending on December 31 of the following calendar year
  • Each calendar year of the project’s total CCUS project review period, other than a period that includes a year referred to in the previous bullet
• An initial project evaluation must have been issued by Natural Resources Canada (NRCan), which includes a verified CCUS property list 

To be considered a qualified CCUS project, the project cannot be:

• Operated to service a unit for which the commissioning date was on or before April 7, 2022, and undertaken for the purpose of complying with emission standards that apply, or will apply, under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations (Open in a new tab)

What expenditures qualify

There are 4 categories of qualified CCUS expenditures:

1. Qualified carbon capture expenditures

   Qualified carbon capture expenditures are eligible in proportion to the quantity of captured CO₂ the project is expected to support for storage or use in eligible uses.

   Example calculating a qualified carbon capture expenditure

   A taxpayer has $15 million of carbon capture expenditures before the first day of commercial operations of a qualified CCUS project. A qualified carbon capture expenditure is the portion of the expenditure incurred in the year by the taxpayer to acquire property in respect of a qualified CCUS project, determined by the formula

   A x (B + C + D + E) x F

   In its project plan, the taxpayer projected eligible use at 100% in each project period. Consequently, assuming the taxpayer's expenditures are described in variable A of the definition qualified carbon capture expenditure, variables B through E of that definition are each 100%. The bracketed portion of the formula yields 400%, while variable F is 0.25, so the taxpayer's qualified carbon capture expenditure is $15 million x 400% x 0.25 = $15 million. Assuming that the applicable specified percentage is 50%, this results in refundable CCUS development tax credits of $7.5 million.

2. Qualified carbon transportation expenditures

   Qualified carbon transportation expenditures are eligible in proportion to the quantity of captured CO₂ the project is expected to support for storage or use in eligible uses.

3. Qualified carbon use expenditures

   Qualified carbon use expenditures are eligible only if they are expenditures to acquire property that is expected to be used to support the use of captured carbon solely to produce concrete in Canada or the United States using a qualified concrete storage process.

4. Qualified carbon storage expenditures

   Qualified carbon storage expenditures are eligible only if they are expenditures to acquire property that is expected to support storage of captured carbon solely in dedicated geological storage.

Qualified CCUS expenditures

To be eligible for the CCUS ITC, qualified CCUS expenditures must be:

• For a qualified CCUS project

• Incurred to acquire property described in capital cost allowance Class 57 or Class 58, or as described in the definition of dual-use equipment

For the purposes of determining whether a process is a CCUS process, whether a property is described in Class 57 or 58, or whether a property is dual-use equipment, the technical guide published by NRCan shall apply conclusively with respect to engineering and scientific matters. 

NRCan's CCUS ITC Technical Guidance Document

For descriptions and rates for CCA classes including 57, 58, 59 and 60 refer to: Capital cost allowance (CCA) classes (Open in a new tab)

Determination of capital cost

Qualified CCUS expenditures are based on the capital cost of properties. The capital cost of property generally means your cost of acquiring the property and includes:

• Legal, accounting, engineering, or other fees incurred to acquire the property
• Site preparation, delivery, installation, testing, or other costs incurred to put the property into service
• In the case of a property that you manufacture for your own use, material, labour, and overhead costs reasonably attributable to the property, but not any profit which might have been earned had the asset been sold

The capital cost of the property must be reduced by:

• An amount of any non-government assistance you received in or before the tax year in which the property was acquired

• An amount you are entitled to or can reasonably be expected to receive and that would be non-government assistance if you received it in the year

Amounts of non-government assistance that were applied to reduce the capital cost of a property in a preceding tax year that are repaid in a tax year or are no longer expected to be received in the year are added to the capital cost of property for determining the relevant qualified CCUS expenditure for the year.

If any part of the qualified expenditure of the CCUS project is unpaid 180 days after the end of the tax year in which the expenditure is otherwise incurred, the expenditure is deemed to be incurred at the time it is paid.