Canadian budget introduces incentives for renewables

In his budget speech on 10 December, Minister of Finance Paul Martin announced a number of new or improved environmental measures. Firstly, incentive payments for wind energy will initially be 1.2 cents per kilowatt-hour (kWh) of production, and will gradually decline to 0.8 cents per kWh, for eligible projects commissioned after the end of March 2002 until the beginning of April 2007.

“Recognizing that there are few things more basic to life than the quality of the air we breathe, and in order to reduce greenhouse gases that contribute to climate change, this budget will fund a new, long-term program to provide incentives for the production of a key source of renewable energy – wind power,” said Martin.

Tax incentives under the capital cost allowance (CCA) scheme to further encourage renewable energy, and for certain energy efficiency projects, are also being broadened. Renewable projects that qualify for the scheme will now include hydroelectric projects with a maximum annual rated capacity of up to 50MW, and will include equipment used to generate electricity from blast furnace gas. The government also intends to launch a consultation with industry in order to determine whether additional improvements are required for the CCA.

The budget also doubled the Green Municipal Enabling Fund and the Green Municipal Investment fund, both launched last year in order to stimulate community-based work in projects to improve the environment. The funds are now valued at $25 million and $100 million respectively.

These two funds “have already spawned more than 100 projects in areas as diverse as energy and water savings, urban transit, waste diversion and renewable energy”, said Martin. “We would like to congratulate the Federation of Canadian Municipalities both for its initiative and for its management of these Funds,” he added.

Martin pointed out that Canada, as with most countries, has much contaminated land lying unused and unproductive, which may have the potential for rejuvenation. “Therefore, responding to the government, the National Round Table on the Environment and the Economy has agreed to develop a National brownfield redevelopment strategy in order to ensure that Canada is a global leader in remediation,” he announced.

Finally, Martin announced a measure designed to promote sustainable woodlot management. In the past, woodlots may have been harvested prematurely in order to generate sufficient revenues to pay the income tax required when owners transfer them to their children on retirement. Tax will now be deferred where woodland is being managed in accordance with a prescribed forest management plan.