Country:Canada
Year:1994
Policy status:Superseded
Jurisdiction:National
Date Effective:1994
Policy Type:Economic Instruments>Fiscal/financial incentives>Tax relief
Energy Efficiency Policy Targets:Industry
Renewable Energy Policy Targets:Solar, Hydropower, Bioenergy, Co-firing with fossil fuels
Climate Change Policy Targets:Industry, Energy Sector, CHP, Energy Sector, Electricity Generation, Energy Sector, Electricity Generation, Fossil fuels (Coal, gas, oil), Energy Sector, Electricity Generation, Renewable
Agency:Finance Canada/Natural Resources Canada
URL:http://oee.nrcan.gc.ca/industrial/financial-assistance/tax-incentives.cfm?attr=24
Energy Efficiency Description:

The accelerated Capital Cost Allowance (CCA), under Class 43.1 and 43.2 of Schedule II to the Income Tax Regulations, allows investors an accelerated write-off of certain equipment used to produce energy in a more efficient way or to produce energy from alternative renewable sources.

A 50% accelerated CCA is provided under Class 43.2 for eligible equipment that generated either (1) heat for use in an industrial process or (2) electricity by using a renewable energy source (e.g. wind, solar, small hydro), waste fuel (e.g. landfill gas, manure, wood waste) or making efficient use of fossil fuels (e.g. high efficiency cogeneration systems). Class 43.2 was introduced in 2005 and is currently available for assets acquired on or after February 23, 2005 and before 2020. For assets acquired before February 23, 2005, accelerated CCA is provided under Class 43.1, at 30%. The eligibility criteria for these classes are generally the same except that cogeneration systems that use fossil fuels must meet a higher efficiency standard for Class 43.2 than that for Class 43.1. Systems that only meet the lower efficiency standard continue to be eligible for Class 43.1.

Budget 2012 expanded Class 43.2 with respect to waste-fuelled thermal energy equipment, and equipment of a district energy system that uses thermal energy provided primarily by eligible waste-fuelled thermal energy equipment. Class 43.2 was also expanded to include equipment that uses the residue of plants – generally produced by the agricultural sector – to generate electricity and heat.

Renewable Energy Description:

The Income Tax Act contains the only non-R&D programme initiated in the 1980s that is still in existence today. It is an accelerated capital cost allowance for certain renewable energy assets.

The federal Income Tax Act provides an accelerated capital cost allowance (30% capital cost allowance rate computed on a declining balance basis) for certain types of renewable energy equipment used to generate electricity or to produce thermal energy for direct use in an industrial process. A range of renewable energy conversion and energy efficiency equipment are eligible for inclusion, such as certain co-generation systems, small-scale hydropower installations, wind energy conversion equipment, certain photovoltaic and active solar heating equipment, and equipment used in certain landfill gas applications.

The Income Tax Act also allows the first, exploratory wind turbine of a wind farm to be fully deducted in the year of its installation, in a manner similar to the one in which the first, exploratory well of a new oil field can be written off.

The eligibility has been broadened to include certain fixed-location fuel cells and ancillary fuel reformation and electrolysis equipment acquired after 18 February 2003.

The Canadian Renewable and Conservation Expense (CRCE) category of expenditure is intended to promote the development of conservation and renewable energy projects in the same way that is currently done for investments in other types of resource activities. Under CRCE, eligible expenditures are 100% deductible in the year they are incurred or can be carried forward indefinitely for deduction in later years.

NOTE: This policy is still in force. A new database entry accounts for changes to the measure (see superseding entry: Accelareated Capital Cost Allowance and related entry: Canadian Renewable and Conservation Expenses).

Climate Change Description:

The accelerated Capital Cost Allowance (CCA), under Class 43.1 and 43.2 of Schedule II to the Income Tax Regulations, allows investors an accelerated write-off of certain equipment used to produce energy in a more efficient way or to produce energy from alternative renewable sources.

A 50% accelerated CCA is provided under Class 43.2 for eligible equipment that generated either (1) heat for use in an industrial process or (2) electricity by using a renewable energy source (e.g. wind, solar, small hydro), waste fuel (e.g. landfill gas, manure, wood waste) or making efficient use of fossil fuels (e.g. high efficiency cogeneration systems). Class 43.2 was introduced in 2005 and is currently available for assets acquired on or after February 23, 2005 and before 2020. For assets acquired before February 23, 2005, accelerated CCA is provided under Class 43.1, at 30%. The eligibility criteria for these classes are generally the same except that cogeneration systems that use fossil fuels must meet a higher efficiency standard for Class 43.2 than that for Class 43.1. Systems that only meet the lower efficiency standard continue to be eligible for Class 43.1.

Budget 2012 expanded Class 43.2 with respect to waste-fuelled thermal energy equipment, and equipment of a district energy system that uses thermal energy provided primarily by eligible waste-fuelled thermal energy equipment. Class 43.2 was also expanded to include equipment that uses the residue of plants – generally produced by the agricultural sector – to generate electricity and heat.

This record is superseded by:Accelerated Capital Cost Allowance

Last modified: Thu, 14 Mar 2013 16:34:22 CET