Announced last November (2022), the investment tax credit is set to be available for clean hydrogen production based on the lifecycle carbon intensity of hydrogen to ensure Canadian companies can remain globally competitive.

Read more: Canada looks to introduce tax credits to support clean hydrogen investments

Supporting between 15-40% of eligible projects, the credit offers a tiered structure based on hydrogen carbon intensity, with projects producing less than 0.75kg CO2/kg H2 receiving a 40% credit, 0.75-2kg CO2/kg H2 receiving 25% and 2-<4kg CO2/kg H2 getting just 15%.

Additionally, the tax credit will also extend a 15% tax credit to equipment needed to convert hydrogen into ammonia for transportation, however, the Government has said, “The tax credit will only be available to the extent the ammonia production is associated with the production of clean hydrogen.”

Furthermore, as per the original plans, labour requirements will need to be met to receive the maximum tac credit rates. Set to come into effect on October 1, 2023, if the requirements are not met, credit rates will be reduced by 10%.

Expected to cost CAD$5.6bn over five years, beginning in 2023-24, the Government has said between 2028-29 and 2024-25, the Clean Hydrogen Investment Tax Credit is expected to cost an additional CAD$12.1bn ($8.9bn).

The move comes little over six months after the US passed the Inflation Reduction Act, which offered up to $3/kg of clean hydrogen production, based on lifecycle carbon intensity.

Read more: Win for hydrogen in the US – Inflation Reduction Act to become law

Soon after, other regions across the globe began following the US. Just this year, the European Commission has outlined plans to offer a fixed premium per kg of hydrogen produced for a maximum of 10 years, via auction-style bidding, backed by €800m ($866m) from the Innovation Fund.

Read more: European Commission plans to subsidise green hydrogen production

Australia is also set to review its own hydrogen strategy to respond to global green hydrogen support, such as the Inflation Reduction Act, to ensure it does not miss opportunities presented by the clean energy carrier.

Read more: Australia to review National Hydrogen Strategy in response to global policy support


Players in industry are reacting to the news. H2 View will be updating this story as we receive more comment. 

John Risely, Director at Newfoundland and Labrador-based World Energy GH2, said the Budget sets the right conditions for a multi-billion-dollar clean hydrogen sector in Atlantic Canada.

“Canada has committed to helping our allies in Europe transition to cleaner energy, supplied by stable countries,” said Risely. “This commitment was reflected in German Chancellor Olaf Scholz’ and European Commission President Ursula von der Leyen’s visits to Canada. Now, it is time to make good on that promise and deliver our first shipments of clean hydrogen in 2025.”

Read more: Canada-Germany Hydrogen Alliance targets first exports by 2025