Despite hydrogen investment, federal budget update disappoints automakers

OTTAWA — Finance Minister Chrystia Freeland’s fall economic update creates two new federal tax credits for clean technology and low-emitting hydrogen production, with the caveat that companies that pay fair wages and train apprentices will get a bigger credit than those that do not.

The statement tabled in the House of Commons on Thursday is Freeland’s first big push to keep Canada in the clean-tech economy race in the shadow of the massive Inflation Reduction Act south of the border and move Canada’s transition to a green economy further along.

“The green transition is the most significant economic transformation since the Industrial Revolution,” Freeland said.

The Inflation Reduction Act signed into law in August by U.S. President Joe Biden invests nearly US$400 billion in everything from critical minerals to battery manufacturing, electric vehicles, and clean electricity, including hydrogen.

Experts and industry associations have been warning ever since that Canada would be shoved aside in the global competition for investment, skilled workers and materials if it did not step up and do more to match the U.S. investments.

The Canadian Vehicle Manufacturers’ Association says the federal government isn’t doing enough for the country’s evolving auto industry.


“Today’s Fall Economic Statement recognizes the significance of the U.S. Inflation Reduction Act for investment in the rapidly transforming auto sector and electric (EV) supply chain but falls short on details,” CVMA CEO Brian Kingston said in a statement. “Canada needs to keep up with the U.S. in the the transition to electrification with support for charging infrastructure, clean energy and grid readiness, consumer purchase incentives, EV manufacturing, and the EV supply chain, including sustainable processing of critical minerals.

“The federal government should move quickly to implement the most effective policy tools at its disposal to keep pace with the U.S.

“CVMA will continue to highlight these needs to the government and encourage more specific actions before and in the next federal budget.”

Most of the heavy lifting to respond to the U.S. legislation will need to wait until the Liberals introduce the next federal budget, expected in spring 2023.

But Freeland outlined in Thursday’s mini-budget the broad strokes of some of it, including launching consultations to design an investment program for electric vehicle and battery manufacturing and plans to create a new tax credit for companies that start producing low-carbon hydrogen.

That credit is being carved away from the clean-tech investment tax credit for green electricity production, energy storage and heat pumps that she said last spring would be ready by this fall. The April federal budget planned to include hydrogen as part of that, but that is no longer the case.

The fall update does include more details of the clean-tech credit but it will not launch until the day the next budget is tabled. It will cost nearly $6.7 billion over the next five years. It will also be the first Canadian tax credit that is more lucrative for companies that pay a fair market wage and have training programs for young workers.

Freeland said the labour conditions being placed on the tax credit will also be imposed on the clean hydrogen credit when it launches and are among the most significant new measures proposed in the fall update.

She said the idea is that if government is going to support companies, then that money from taxpayers should be guaranteed to create good-paying jobs and help train the workforce of the future.

The notion of linking tax credits to labour conditions was borrowed from the U.S., which included similar but not identical labour provisions in some of its new investment plans.


Freeland also used the update to release more details of the new Clean Growth Fund she promised in last spring’s budget, and says it will launch before the end of the year with $15 billion in startup capital.

The Liberals are hoping the fund will ease the risks of investing in emerging clean technologies and attract “substantial private sector investment” for clean technologies.

The update also includes some movement on the government’s promise to help retrain workers to succeed in clean technology companies, with $250 million over the next five years to create two new sustainable job training programs.

One would build a new training centre that could retrain 15,000 workers in low-carbon economy jobs, and the other would fund apprenticeship training through an existing union training program.

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