Green Budget Out of the Blue
Expansion to Capital Cost Allowances under CRA 43.2
The Federal government's new 2008 budget announced last week contains so many "green" initiatives it's sometimes easy to forget we have a Conservative government in power. Under an upbeat subheading "Ensuring a Cleaner, Healthier Environment" Canadians were given details on a smorgasbord of tax incentives that will certainly have an impact on all green technologies, and specifically our ground source heat pump industry.
However, a more important potentiality is the positive impact this budget may have on cleaner electricity for powering our heat pumps, thereby decreasing our carbon footprint, especially in provinces like Alberta where going geothermal currently has little positive impact on our GHG emissions due to old-tech coal-fired electrical generation.
The Feds stated, "Budget 2008 includes new measures to strengthen and ensure the effective implementation of Canada's ecoACTION plan."
- Providing $66 million over two years to set up the regulatory framework for industrial air emissions.
- Providing $250 million for a full-scale commercial demonstration of carbon capture and storage in the coal-fired electricity sector, research on the potential for carbon storage in Nova Scotia and economic and technological issues.
- Increasing the capital cost allowance rate for carbon dioxide pipelines, a component of carbon capture and storage systems.
- Providing $10 million over two years for scientific research and analysis on biofuel emissions.
- Investing $300 million to support nuclear energy, including the development of the Advanced CANDU Reactor and maintaining the safe, reliable operations of the Chalk River Laboratories.
- Expanding the accelerated capital cost allowance for clean-energy generation equipment to additional applications involving ground-source heat pump and waste-to-energy systems.
- Extending GST/HST relief to land leased to situate wind- or solar-power equipment for the production of electricity.
- Providing $21 million over two years to make environmental law enforcement more effective.
- Providing $12 million over two years to enhance law enforcement within Canada's National Parks.
The details include a Clean Energy Generation Accelerated CCA (Capital Cost Allowance), "Accelerated CCA for clean energy generation equipment is provided through CCA Class 43.2 at a rate of 50% per year. The class covers a variety of stationary equipment that generates electricity or heat by using renewable or waste sources, or by using fossil fuel efficiently.
Budget 2008 proposes to expand eligibility for accelerated CCA under Class 43.2 to several additional applications:
- Ground source heat pump systems used for space heating and hot water.
- Biogas production systems that use animal waste and sewage treatment residue as inputs and those that produce biogas for commercial sale.
- Electrical or thermal generating systems that use purchased biogas.
- Systems that produce bio-oil, or heat from specified waste sources, where the system output is sold to a third party that uses it for specified purposes.
These enhancements will promote investment in technologies that help reduce emissions of greenhouse gases and air pollutants and increase the diversity of Canada's energy supply by converting waste materials into energy.
These measures are expected to reduce federal revenues by approximately $5 million over the next two fiscal years.
Property Leases for Wind and Solar Power Equipment
Wind and solar energy represent clean and sustainable alternative sources of electricity, helping to reduce air pollutants and address climate change.
Budget 2008 proposes to expand GST/HST relief currently available to land leased to explore or exploit mineral, peat, forestry, water or fishery resources to include land leased to situate wind or solar power equipment for the production of electricity. It's applicable to lease payments due on or after February 26, 2008. The proposed change will result in consistent tax treatment of leases for wind and solar power and those for other natural resources."
These new measures expand on the Accelerated CCA we saw in the last budget, but it should be noted that the bean counters at Canada Revenue estimate the measures for ground source heat pumps will only cost the Feds $5 million in lost revenue which may mean they either don't think many business people in Canada will take advantage of it, or the process of getting it may be so convoluted that few will be willing to jump through the hoops to apply for it.
That said, it appears the old saying that minority governments are often the most productive and responsive to the needs of their people, seems to be holding true as this Conservative minority parliament heads toward our next federal election.
