Clean Technology Tax Credits in Canada: ITC, CCUS & Carbon Capture (2026 Guide)

Clean Technology Tax Credits in Canada: Your Complete 2026 Guide

Canada has introduced a suite of refundable investment tax credits (ITCs) that represent the largest clean technology incentive package in the country's history. For businesses investing in clean energy equipment, carbon capture systems, clean hydrogen production, or clean technology manufacturing, these credits can return up to 30% of your capital investment as a direct cash refund from the CRA.

This guide covers every major clean technology tax credit available to Canadian businesses in 2026, including eligibility requirements, credit rates, how to claim them, and strategies for stacking them with SR&ED and other incentive programs.

Overview of Canada's Clean Technology Tax Credits

The federal government introduced several new ITCs as part of its broader climate plan, beginning with the 2022 Fall Economic Statement and refined through subsequent budgets. Here are the four primary credits:

All of these credits are refundable, meaning you receive the full credit amount even if your company has no federal tax payable. This is a critical distinction from traditional non-refundable credits, which only offset existing tax liability.

Clean Technology Investment Tax Credit (CT ITC)

The Clean Technology ITC is the broadest and most accessible of the new credits. It provides a 30% refundable tax credit on the capital cost of eligible clean technology property acquired and available for use on or after January 1, 2024.

Eligible Property Categories

The credit applies to the following categories of property:

Electricity generation from renewable sources:

• Solar photovoltaic equipment (panels, inverters, racking systems, wiring)
• Wind energy conversion systems (turbines, towers, nacelles, foundations)
• Water (small hydro) energy generation equipment
• Geothermal energy systems
• Wave and tidal energy equipment
• Concentrated solar power (CSP) equipment

Stationary electricity storage systems:

• Battery energy storage systems (lithium-ion, flow batteries, solid-state)
• Compressed air energy storage
• Flywheel energy storage
• Pumped hydro storage (new installations)
• Hydrogen fuel cell systems used for stationary power generation
• Systems must have a minimum storage capacity and be connected to the grid or used in industrial applications

Low-carbon heating equipment:

• Ground-source heat pump systems (including the ground loop, heat pump unit, and directly connected distribution systems)
• Air-source heat pumps (for commercial and industrial applications)
• Active solar heating systems
• Small modular nuclear reactors (as designated)

Industrial zero-emission vehicles and charging infrastructure:

• Zero-emission vehicles used in mining, construction, warehousing, port operations, and other industrial contexts
• Hydrogen-powered vehicles used in industrial operations
• Charging and fueling infrastructure dedicated to supporting eligible zero-emission industrial vehicles

Non-road zero-emission equipment:

• Electric or hydrogen-powered forklifts, excavators, loaders, and other heavy equipment
• Zero-emission locomotives (for rail operators)
• Electric ground support equipment at airports

Credit Rate Details

The base credit rate is 30%, but it is subject to a labour requirement. To receive the full 30% rate, the taxpayer must meet prevailing wage and apprenticeship conditions:

• Prevailing wage: Workers involved in the installation or preparation of the property must be paid at or above the prevailing wage for their occupation and region, as determined by Employment and Social Development Canada (ESDC)
• Apprenticeship hours: At least 10% of the total labour hours for the project must be performed by registered apprentices in Red Seal trades

If the labour requirements are not met, the credit rate drops to 20%. For most large installations, the labour requirements are readily achievable; for smaller projects, the additional administration may or may not be worth the 10 percentage point difference.

How to Claim

1. Acquire eligible property: Purchase and install qualifying equipment. The property must be "available for use" (generally when installation is substantially complete and the asset is operational)
2. Complete Form T2SCH31: Calculate the ITC on CRA Schedule T2SCH31 (Investment Tax Credit, Corporations). The clean technology ITC has its own designated line on this form
3. File with your T2 return: Include the completed schedule with your corporate tax return for the year the property became available for use
4. Maintain compliance documentation: Keep records demonstrating that the property meets the eligible categories, the acquisition cost, the date available for use, and compliance with labour requirements (if claiming the full 30% rate)
5. CRA verification: The CRA may request additional documentation, particularly for large claims. Natural Resources Canada (NRCan) provides technical guidance on whether specific property qualifies

Carbon Capture, Utilization, and Storage (CCUS) ITC

The CCUS ITC is the highest-value credit in the suite, with rates up to 50% for certain carbon capture equipment. It was designed to support the enormous capital investments required for industrial-scale carbon capture.

Credit Rates by Project Component

The CCUS ITC applies different rates depending on the type of equipment and where the captured carbon is stored:

Capture equipment:

• Used in direct air capture (DAC): 60% (the highest rate, reflecting the nascent nature of DAC technology)
• Used in all other capture projects: 50%

Transportation equipment:

• Pipelines and transportation infrastructure for captured CO2: 30%

Storage equipment:

• Dedicated geological storage (permanent sequestration): 37.5%

Utilization equipment:

• Equipment for using captured CO2 in producing concrete, fuels, or other products: 37.5%

Note: These are the rates for projects that meet the labour requirements (prevailing wage and apprenticeship conditions). Rates are reduced by approximately one-third if the labour conditions are not met.

Eligible Activities

The CCUS ITC covers the full carbon capture value chain:

• CO2 capture systems: Equipment that separates CO2 from industrial flue gas, process streams, or ambient air. This includes absorption towers, membranes, cryogenic separation units, and direct air capture contactors
• CO2 compression and processing: Compressors, dehydration units, and purification equipment that prepare captured CO2 for transportation or storage
• CO2 transportation: Dedicated pipelines, trucking equipment (specialized CO2 tankers), and rail cars used to move captured CO2
• CO2 storage: Injection wells, monitoring equipment, surface facilities, and related infrastructure for permanent geological sequestration
• CO2 utilization: Equipment that converts captured CO2 into commercial products (mineralization in concrete, synthetic fuels, enhanced oil recovery under certain conditions, chemicals)

Key Requirements

• Climate plan requirement: Projects must be consistent with Canada's climate objectives. The credit is not available for enhanced oil recovery (EOR) projects unless they meet specific net-negative conditions
• Provincial regulatory compliance: Storage projects must comply with the relevant provincial regulatory framework for CO2 injection and storage
• Minimum project size: While there is no explicit minimum, the economics of CCUS generally make projects viable only at industrial scale
• Verification and reporting: Projects must submit an annual climate risk disclosure and report on the quantity of CO2 captured, transported, and stored

Clean Hydrogen ITC

The Clean Hydrogen ITC provides a refundable tax credit for investments in equipment used to produce clean hydrogen. The credit rate varies depending on the carbon intensity (CI) of the hydrogen produced.

Credit Rates Based on Carbon Intensity

The lowest-CI hydrogen (produced via electrolysis powered by renewable electricity, for example) receives the highest credit. Hydrogen produced from natural gas with carbon capture typically falls in the 0.75-2.0 range.

Eligible Equipment

• Electrolyzers: Proton exchange membrane (PEM), alkaline, and solid oxide electrolyzer systems
• Hydrogen production equipment: Steam methane reformers with integrated carbon capture, autothermal reformers, and other production technologies that achieve the CI thresholds
• Hydrogen storage: Tanks, compression equipment, and liquefaction systems at the production site
• Electricity generation for hydrogen: Dedicated wind, solar, or other renewable generation assets whose output is used exclusively to power hydrogen production
• Water treatment: Purification and treatment systems required to produce feedwater for electrolysis

Carbon Intensity Verification

The CI of your hydrogen production must be verified through a lifecycle analysis methodology prescribed by the government. This involves:

1. Calculating the CI using a prescribed methodology (based on the federal Clean Fuel Regulations framework)
2. Third-party verification by an accredited auditor
3. Ongoing annual reporting to maintain the credit

Clean Technology Manufacturing ITC

The Clean Technology Manufacturing ITC provides a 10% refundable tax credit on investments in property used in:

• Manufacturing or processing clean technology equipment: Building solar panels, wind turbines, batteries, heat pumps, EVs, or other clean technology equipment in Canada
• Extracting and processing critical minerals: Mining, smelting, refining, and processing of six designated critical minerals (lithium, cobalt, nickel, graphite, copper, and rare earth elements) essential for clean technology supply chains

While the 10% rate is lower than the other clean tech credits, this credit targets the manufacturing and supply chain side rather than the deployment side. It is designed to encourage companies to build clean technology equipment in Canada rather than importing it.

Stacking Clean Tech ITCs with SR&ED

One of the most valuable strategies for Canadian clean technology companies is stacking these new ITCs with the existing SR&ED program. The programs target different types of expenditures and can create combined incentive rates that dramatically reduce the net cost of clean technology development and deployment.

How They Interact

The SR&ED program covers R&D expenditures, salaries, contractor fees, and materials consumed in experimental development aimed at technological advancement. The clean tech ITCs cover capital expenditures, the cost of acquiring and installing eligible equipment.

These are fundamentally different cost categories, so double-dipping is generally not an issue:

• SR&ED claim: The salaries of your engineering team developing a new carbon capture membrane technology (see SR&ED eligible project examples for clean technology scenarios that qualify)
• CCUS ITC claim: The cost of the pilot plant equipment where you deploy and test the technology
• Clean Technology ITC claim: The solar installation powering your facility

Example: Clean Technology Company in Ontario

Consider a company developing and deploying a novel battery energy storage system:

SR&ED (R&D phase):

• 10 engineers working on next-generation battery chemistry: $1.2M in salaries
• Materials consumed in experimental testing: $200,000
• Total SR&ED qualified expenditures: $1.4M
• Federal SR&ED ITC (35% for CCPC): $490,000
• Ontario Innovation Tax Credit (8%): $112,000

Clean Technology ITC (deployment phase):

• Battery storage system installed at customer site: $2M capital cost
• Clean Technology ITC (30%): $600,000

Combined incentives: $1,202,000 on total expenditures of $3.4M, an effective rate of 35% across both R&D and capital deployment.

Important Considerations When Stacking

• No double-counting: The same expenditure cannot be claimed under both SR&ED and a clean tech ITC. SR&ED covers operational R&D costs; clean tech ITCs cover capital equipment costs
• Timing matters: SR&ED credits are claimed in the year the expenditure is incurred. Clean tech ITCs are claimed in the year the property becomes "available for use." These may be different tax years for the same overall project
• Capital cost reduction: Receiving a clean tech ITC reduces the capital cost of the asset for CCA (depreciation) purposes. This is standard treatment and affects future depreciation deductions
• Recapture provisions: If you dispose of the property within a specified period (generally within 10 years for the CT ITC), some or all of the credit may be recaptured. Plan your asset lifecycle accordingly

Provincial Clean Technology Programs

In addition to the federal credits, several provinces offer complementary programs:

Alberta

• Alberta Technology and Innovation Strategy: Various grants and incentives for clean technology development
• Emissions Reduction Alberta (ERA): Funded by the Technology Innovation and Emissions Reduction (TIER) fund; provides grants for technology projects that reduce greenhouse gas emissions
• Alberta Carbon Capture Incentive Program (ACCIP): A 12% grant on eligible capital costs for new carbon capture projects, stackable with the federal CCUS ITC

British Columbia

• BC Clean Energy Act incentives: Various programs supporting clean energy deployment
• InBC Investment Corp: Government-backed investment fund that provides capital to clean technology companies
• CleanBC Industry Fund: Grants for industrial emitters pursuing decarbonization

Ontario

• Ontario Innovation Tax Credit (OITC): 8% refundable credit on SR&ED-eligible expenditures, stackable with federal SR&ED
• Ontario Made Manufacturing Investment Tax Credit: 10% refundable credit for capital investments in manufacturing, potentially applicable to clean tech manufacturing

Quebec

• Quebec R&D Tax Credit: Among the most generous provincial R&D credits, stackable with federal SR&ED and applicable to clean technology R&D
• Transition Energetique Quebec (TEQ): Various programs supporting clean energy and transportation electrification
• Investissement Quebec: Provides loans, equity investments, and tax credits for clean technology projects

How to Claim Clean Technology Tax Credits: Step by Step

Step 1: Determine Eligibility

Review the eligible property categories for each credit and identify which of your planned or recent capital investments qualify. For large or complex projects, consider engaging a tax advisor with specific clean tech ITC experience.

Step 2: Meet Labour Requirements (for Full Rate)

If you want the full credit rate (30% for CT ITC, higher rates for CCUS), ensure your project meets the prevailing wage and apprenticeship requirements. This typically means:

• Paying construction workers at or above ESDC prevailing rates
• Ensuring at least 10% of total labour hours are performed by registered apprentices
• Documenting compliance with payroll records and apprenticeship registrations

Step 3: Acquire and Install Property

Purchase the eligible equipment and complete installation. The credit is claimed in the tax year when the property becomes "available for use", generally when it is installed, tested, and operational.

Step 4: Calculate and File the Credit

• Complete Schedule T2SCH31 (Investment Tax Credit, Corporations)
• Report the eligible capital cost and applicable credit rate for each property
• Include any applicable labour requirement attestation
• File with your corporate T2 return

Step 5: Maintain Records

Keep comprehensive records for at least 6 years, including:

• Purchase agreements and invoices for eligible property
• Installation and commissioning documentation
• Prevailing wage compliance records (payroll, trade certifications)
• Apprenticeship records (registration numbers, hours logged)
• For CCUS: CO2 capture volumes, transport records, and storage verification
• For Clean Hydrogen: carbon intensity calculation and third-party verification

Frequently Asked Questions

Can I claim the Clean Technology ITC and SR&ED on the same project?

Yes, but on different expenditure categories. The SR&ED ITC applies to R&D expenditures (salaries, materials, contractors for experimental development), while the Clean Technology ITC applies to the capital cost of eligible equipment. You cannot claim both credits on the exact same dollar, but a project that involves both R&D and equipment deployment can access both programs.

What is the deadline for claiming clean technology tax credits?

Clean technology ITCs are claimed on your corporate tax return (T2) for the tax year in which the eligible property becomes available for use. The standard filing deadline is 6 months after your fiscal year end. Unlike SR&ED (which has an 18-month deadline for the T661), there is no separate extended filing deadline, the ITC is part of your regular tax return.

Do clean technology credits apply to used or refurbished equipment?

Generally, no. The clean tech ITCs require the property to be new and previously unused. Used, refurbished, or remanufactured equipment does not qualify. The property must not have been used for any purpose before its acquisition by the taxpayer.

Can non-Canadian companies claim these credits?

The credits are available to taxable Canadian corporations and certain other entities (partnerships, trusts) that are subject to Canadian income tax. A foreign corporation operating in Canada through a permanent establishment may qualify, but purely foreign entities without Canadian tax presence cannot claim the credits.

What happens if I sell the equipment within 10 years?

If you dispose of eligible property within the recapture period (varies by credit but is generally up to 10 years), a portion of the ITC may be "recaptured" and added back to your tax payable. The recapture amount generally decreases over time. This is designed to prevent companies from claiming the credit and then immediately selling the equipment.

How do the clean tech credits interact with CCA (depreciation)?

The ITC amount reduces the capital cost of the asset for CCA purposes. For example, if you purchase $1M of solar equipment and receive a $300,000 Clean Technology ITC, the depreciable capital cost is reduced to $700,000. Most clean technology property falls into CCA Class 43.1 or 43.2, which allows accelerated depreciation (30% or 50% declining balance, respectively), further enhancing the tax benefit.

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Clean technology investment in Canada has never been more heavily incentivized. These tax credits are powerful forms of non-dilutive funding for Canadian startups that let you scale without giving up equity. Between the Clean Technology ITC, CCUS ITC, Clean Hydrogen ITC, and SR&ED, your company could recover 30-50% or more of eligible project costs. Find all clean tech funding programs you qualify for or learn how GrantOps can automate your SR&ED claim for the R&D side of your clean technology work.