Canadian Finance Minister Chrystia Freeland unveiled the 2023 Federal Budget this week, introducing a wide range of measures—from cracking down on predatory lending and providing direct payments to lower-income Canadians, to making alcohol more affordable.
What matters most for innovative founders is Freeland’s pledge to provide more than $83 billion in tax credits for clean energy and technology over the next decade.
Here’s the breakdown: a 15% refundable tax credit for clean electricity investments, totaling $6.3 billion over four years, and a 30% refundable tax credit for clean technology manufacturing, amounting to $4.5 billion over five years.
Altogether, this new budget increases the federal deficit by $40.1 billion—up from the $30.6 billion projected in Freeland’s Fall Economic Statement last November—with no plan to balance the books in 2023-24.
Even though the price tag is higher than first expected, Tuesday’s budget didn’t deliver many surprises.
The new clean tech funding is widely seen as Canada’s answer to the recent Inflation Reduction Act in the United States, which is channeling over $370 billion into climate-focused policies. This builds on Freeland’s Fall Economic Statement, where she committed to tax credits for renewable energy, carbon capture, battery storage, and electric vehicles (EVs).
A key part of this EV push is the planned “gigafactory” in partnership with Volkswagen, set for St. Thomas, Ontario—though the exact federal budget allocation for this project hasn’t been disclosed yet.
Companies mining critical minerals stand to gain the most from these new incentives. Innovation in battery component development is crucial for speeding up the global EV supply chain—a sector where Canada aims to lead. For example, Alberta’s rich lithium reserves are vital for industry growth, and the 30% tax credit will help Canadian businesses take the lead in mining and developing these valuable resources. (For context: 20,000 tons of lithium hydroxide can power about 350,000 electric vehicle batteries.)
All things considered, this budget is a relatively cautious move from the Liberal government. Freeland has been careful to avoid bold measures that could fuel inflation or unsettle markets. She’s also emphasized in pre-budget speeches that the plan would “show fiscal restraint” to protect government revenues in an uncertain economy.
“Last year, Canada posted the strongest economic growth in the G7,” Freeland said as she opened her address. She also noted that Canada has recovered 126% of the jobs lost in the early months of the pandemic—outpacing the United States, which has recovered 114% since early 2020.
Big changes are coming to federal grants and tax credits for innovative businesses across sectors. For a detailed look at what’s new with IRAP—and what the upcoming Canadian Innovation Corporation means—check out our latest blog.
