|
FROM: JAN-FEB 2009 ISSUE | BY MARIA MAVROYANNIS
In uncertain times, the economic advantages of going green can be as important as the environmental ones. Regardless of the motivation, companies can benefit from Canada’s wide array of federal, provincial, and regional tax credits, grants, and interest-free loan programs. While there is no formal roadmap for going green, there are several opportunities that encourage investment in green technologies. Taking a structured approach to evaluating these opportunities can help to identify the most cost effective ones for your business.
Canadian governments at all levels support the use of green technologies and Greenhouse Gas (GHG) emissions reductions through regulations and tax incentives which can substantially reduce the cost of implementing eco-friendly initiatives. One of the best of its kind, Canada’s Scientific Research and Experimental Development (SR&ED) program offers tax credits to companies in any sector for technological research or development that results in new capabilities or learning. The value of SR&ED activity ranges from 20 per cent for large corporations, where it takes the form of tax credits against payable taxes, to as much as 35 per cent in refundable credits for smaller, private corporations.
Many clean energy-generating technologies depreciate more rapidly than traditional capital equipment. To address this reality, the Income Tax Act provides an accelerated capital cost allowance (CCA) of 50 per cent per year on a declining balance basis for specified clean energy equipment acquired before 2020. This category includes equipment that generates heat or electricity by using renewable energy sources (e.g., wind, solar, tidal, geothermal, biomass), uses waste to create bio-fuels, and uses fossil fuels in high-efficiency co-generation situations. Similar equipment meeting a lower efficiency standard is eligible for the lower – but still generous – 30 per cent per year capital cost allowance rate.
The majority of tangible items are eligible for these enriched CCA rates, and certain intangible start-up costs (e.g., engineering, design work, feasibility studies) are also treated as Canadian Renewable and Conservation Expenses. These expenses may be fully deducted in the year incurred, carried forward indefinitely for use in future years, or transferred to investors. There are several provincial measures designed to encourage the growth of green technology and use of renewable energy sources.
- British Columbia: The province implemented a revenue-neutral carbon tax July 1, 2008. This tax, levied at the retail level, will be offset by income tax reductions to businesses and individuals. A cap-and-trade system will address the larger final emitters.
- Alberta: An emissions trading system was introduced to provide for the purchase of credits and offsets. Where emissions levels are exceeded, it provides for payments into a management fund.
- Manitoba: The province implemented a credit that allows both purchasers and manufacturers of reen-energy equipment to claim 10% of the cost.
- Ontario: The province has introduced a 10-year income tax break for corporations commercializing their intellectual property, as well as the Next Generation of Jobs Fund. This five-year $1.15 billion reserve is aimed at creating new and sustainable employment.
- Quebec: In 2007, Quebec introduced a carbon levy with revenues funneled towards the six-year $1.2 billion Green Fund, created to support projects aimed at lowering the province’s GHG emissions and meeting its Kyoto target.
- Nova Scotia: In 2006, the province implemented a tax credit permitting corporations to claim 25 per cent of their capital investments in energy efficient or renewable energy.
Numerous other provincial and federal funding programs may directly subsidize your company’s activities in the areas of green technology, energy conservation, waste management, and other environmental protection initiatives. Environment Canada provides a referential list of federal, provincial, territorial, and municipal incentives and rebates on its website.
In addition to taking advantage of the various tax incentives and job creation schemes, companies can apply to the federal government for funding and business support. Sustainable Development Technology Canada (SDTC) operates two funds: the $550 million SD Tech Fund for projects that address climate change, air quality, clean water, and clean soil, and the $500 million NextGen Biofuels Fund that supports the establishment of first-of-its-kind large demonstration-scale facilities for the production of next-generation renewable fuels.
Earlier this year, an Ontario Securities Commission Notice encouraged companies listed on the Toronto Stock Exchange to increase their disclosure and quantification relating to known and contingent environmental liabilities rather than relying on boilerplate language. The Canada Pension Plan Investment Board also promotes environmental disclosure, stating that such environmental factors affect risk and return of investments.
Making sense of the various fiscal incentives, disincentives, taxes, and regulatory changes at the federal and provincial levels is challenging, but worth the effort. By quantifying the environmental and economical impact, companies can focus on the measures most important to their bottom line.
[ TOP ] |