New heavy-duty ZEV tax credit comes to Canada’s industrial sector
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EV Incentives & Funding
Nov 24, 2022
Mehanaz Yakub

The new 30 per cent tax credit looks to promote the use of zero-emission vehicles in mining and construction as well as other clean technologies

The mining and construction industries in Canada are now getting a boost in support to transition to zero-emissions heavy-duty vehicles, after the federal government announced, earlier this month, the adoption of new tax credit for clean technologies.

The new 30 per cent tax credit looks to promote the use of zero-emission vehicles in mining and construction as well as other clean technologies

The mining and construction industries in Canada are getting a boost in support to transition to zero-emissions heavy-duty vehicles. The federal government is offering a new tax credit for clean technologies.

The industrial heavy-duty vehicle segment must accelerate its electrification timeline if Canada is going to meet its net-zero targets. The new tax credit makes it more financially feasible for mining and construction companies to make the switch.

“Electric versions of traditional underground mining equipment can be significantly more expensive than their diesel counterparts. The upfront capital investment for ditching diesel can make adopting the greener ZEVs out of reach for some companies,” explains Stephen Gravel, manager of the Centre for Smart Mining at Cambrian College in Sudbury, Ont., in an email statement to Electric Autonomy Canada.

“I think this tax credit will work to enable more mining companies to adopt electric equipment. It may also accelerate the rollout of electric vehicles at mine sites that have already started to make this transition.”

Financing the tax credits

The 30 per cent refundable tax credit first appeared in the 2022 Fall Economic Statement. It will apply to zero-emission (hydrogen and electric) heavy-duty equipment used in mining and construction industries, as well as charging and refuelling infrastructure.

Credits will also be available for renewable energy generation and storage, as well as low-carbon heating systems. The federal government is beginning consultations in the coming weeks about developing tax credits for the production of clean hydrogen.

“With major investment tax credits for clean technology and clean hydrogen, we will make it more attractive for businesses to invest in Canada to produce the energy that will power a net-zero global economy,” said Chrystia Freeland, deputy prime minister and minister of finance during her speech introducing the 2022 Fall Economic Statement.

The tax credits will be begin in the spring of 2023. They are expected to cost $6.7 billion over five years. By 2032, they will phase down and will no longer be available by 2035.

Reaction to the tax credit

So far, the new tax credit is being met with support from many in the mining industry.

Stuart Lister, vice-president of marketing and communications at Collingwood-based electric mining equipment manufacturer MacLean Engineering, says that the tax credit “sounds substantive” in an email to Electric Autonomy.

Gravel adds another important aspect of the tax credit is the inclusion of related charging and refueling infrastructure.

“Mines are currently grappling with the non-trivial expenses of acquiring and installing charging infrastructure in underground settings. This tax credit starts to address some of the financial risks in adopting new EV technology for Canadian mines.”

MEDATech Engineering Services, a firm in Collingwood that builds electric powertrains for mining vehicles, tells Electric Autonomy the tax credit is “great” and will “only help” EV adoption in the sector. But, cautions MEDATech, mining companies will still need to be strategic with adopting EVs in their fleets.

“This [tax] will get a lot more companies interested in going electric with their vehicles. But they still need to plan it out,” says Carl Michener, media contact at MEDATech. “They still need to do a feasibility study. They still need to understand what the energy requirements are and what the work cycle of the vehicle is because if they don’t, then they’re paying $500,000 too much for a giant battery that they don’t necessarily need.”

The tax credits will also have significant implications for the construction sector, where the uptake of electric vehicles is growing.

According to a report published by Research and Markets, the Canadian construction equipment market currently sits at around US$3.8 billion. It is anticipated to reach US$4.85 billion, with a sales volume of 39,484 units, in the next five years.

Keeping pace with the U.S.

Canada’s clean technology tax credit is a response to the Biden Administration’s Inflation Reduction Act (IRA), signed into law in August. The IRA provides tax credits for the manufacturing of electric vehicles and sourcing of critical minerals in North America.

It includes a $1-billion Clean Heavy Duty Vehicles rebate program. There is also funding for disadvantaged communities that may be put toward electrifying local depots.

The Canadian government notes in the 2022 Fall Economic Statement that the IRA is “good news for Canadian workers and Canadian companies” as it “undoubtedly accelerates the ongoing transition to a net-zero North American economy.”

But the financial incentives to locate manufacturing in the U.S. means that, “Without new measures to keep pace with the IRA, Canada risks being left behind. The need for a competitive clean technology tax credit in Canada is more important than ever.”

The Canadian model for the new tax credit will be scalable and based on a variety of factors including carbon intensity and labour conditions.

For example, companies that pay prevailing wages and offer employees training opportunities will get the full 30 per cent credit. Those who don’t will receive a 20 per cent credit.

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