Deputy Prime Minister and Minister of Finance Chrystia Freeland delivers the 2021 federal budget.
Deputy Prime Minister and Minister of Finance Chrystia Freeland delivers the 2021 federal budget. Source: Chrystia Freeland twitter (@cafreeland)

New tax breaks for zero-emission vehicle makers, higher greenhouse gas reduction targets and billions of dollars for “industrial transformation” among the highlights for the Electric Autonomy Canada audience in the federal budget

In its blockbuster 2021 federal budget, the Canadian government announced that $17.6 billion of the overall $101.4 billion in new spending will go towards a “green recovery” for the country. Here are the top seven line items to look for:

Aggressive emission reduction targets

In an important piece of news on climate action, the 2021 budget estimates the investments and measures taken “including strengthened alignment with the United States to further cut pollution from transportation” put Canada on track to cut greenhouse gas emissions by 36 per cent below 2005 levels by 2030 — a six per cent increase over the pledge for a 30 per cent reduction first announced by the Harper government in 2015. The budget reaffirm’s Canada’s goal to be net-zero by 2050.

“We are at a pivotal moment. Just as the invention of the steam engine and of the personal computer triggered transformative economic shifts, today, the global economy is turning swiftly, decisively and irreversibly green”

2021 Canadian Federal Budget

Lowering emissions from transportation and landfills

The transportation and waste sectors account for 30 per cent of greenhouse gas emissions in Canada, with the majority coming from light- and heavy-duty vehicles, with emissions from gas-powered household equipment on the rise. Additionally, landfills across the country are responsible for contributing significant methane emissions.

The 2021 budget hones in on reducing these GHG emissions to create a “healthier environment” overall with an investment of $104.6 over five years to Environment and Climate Change Canada. The money will be used to “strengthen greenhouse gas emissions regulations for light- and heavy-duty vehicles and off-road residential equipment, establish national methane regulations for large landfills, and undertake additional actions to reduce and better use waste at these sites.”

Additional $5 billion for Net Zero Accelerator

2021 Canadian Federal Budget
Click the image to download the 2021 Canadian Federal Budget

The Strategic Innovation Fund’s Net Zero Accelerator, introduced last year, gets a further investment of $5 billion over seven years in the 2021 budget on top of the initial $3 billion in funding allocated at launch, for a total of $8 billion.

The funds are to be used to “rapidly expedite decarbonization projects with large emitters, scale-up clean technology and accelerate Canada’s industrial transformation across all sectors” according to government documents. This includes investments in clean technology developments in Canada’s automobile sector, the development of a battery sector that will contribute to an end-to-end battery supply chain.

$56.1 million for fuelling standards

The issue of volumetric charging for zero-emission vehicles (ZEVs) seems to be front and centre on the government’s agenda with $56.1 million earmarked for “Measurement Canada to develop and implement, in coordination with international partners such as the United States, a set of codes and standards for retail ZEV charging and fueling stations.”

Proponents for volumetric charging practices advocate that, rather than electric vehicle drivers being charged for the amount of time they are plugged in, they may be billed based on the amount of electricity drawn. Currently those vehicles that plug into slower chargers are paying more than their super fast charging counterparts. The budget says, “This measure would provide regulatory certainty to providers of charging services and facilitate the development of the charging network.”

Tax breaks for ZEV manufacturers

Companies in the business of building EVs and EV batteries will be getting some temporary income tax relief in this budget. Makers of “plug-in hybrid vehicles with a battery capacity of at least seven kilowatt-hours, electric vehicles and hydrogen-powered vehicles”, those companies that convert combustion vehicles to electric and manufacturers of electric charging systems are eligible for the break.

The document reads, “Budget 2021 proposes to reduce—by 50 per cent—the general corporate and small business income tax rates for businesses that manufacture zero-emission technologies. The reductions would go into effect on January 1, 2022, and would be gradually phased out starting January 1, 2029 and eliminated by January 1, 2032.”

Big investments in hydrogen fuel cells

Hydrogen fuel-cell technology is heavily favoured in the 2021 budget with funding for “green hydrogen,” tax breaks and funding to “support the production and distribution of low-carbon and zero emission fuels, including hydrogen.” The funding, which isn’t specified, in particular aims to position Canada as a “global leader” in hydrogen and make good on the Hydrogen Strategy for Canada, according to the budget.

Companies that manufacture hydrogen-powered vehicles, manufacturers of hydrogen fuelling stations and manufacturers of hydrogen-producing equipment “by electrolysis of water” will also benefit from a temporary reduction in corporate income tax.

Luxury vehicle tax

Prospective EV buyers already face price disparity compared to the purchase of a combustion model, but those drivers looking at “luxury vehicles” — ranging from combustion to electric — will be facing an additional tax. The calculation will be either 20 per cent of the amount above $100,000 or 10 per cent of the overall cost of the vehicle, whichever is less.

Many of the EV models available in Canada today come in over $100,000, and this new tax may impact sales of those vehicles in the Canadian market. The measure will come into effect in January 2022 and the government estimates it will increase revenues $604 million coming from all vehicles, including combustion, over the next five years.