Time for Canada to Mimic U.S. Renewables Tax Credits

With Canadian Finance Minister Bill Morneau about to table his first budget this week, he could do far worse than to mimic the investment tax credits that helped jump-start the renewable energy industry in the United States.

That’s the conclusion that University of Ottawa adjunct professor Ken Johnson reaches in a recent guest post on the National Observer.

“Why a renewable energy tax credit? Because it’s elegant, understandable, simple to implement, equitable (no playing favourites), scalable,” Johnson writes. “And most importantly, the American example has proven that it works—sending a strong market signal that helps stimulate major investment in renewables, build businesses, and create jobs.”

U.S. wind production has increased by 300% since 2008, solar output by 1300% since 2010, and solar employment has grown by 115,000 jobs, or 123%—results that Johnson attributes largely to the country’s 30% Investment Tax Credit for solar and other renewable technologies and the 2.3¢/kilowatt-hour Production Tax Credit for wind.

“In Canada, wind energy generating capacity increased an average of 23%, per year since 2010, to 11.2 gigawatts,” while “solar installed in Canada 2010-2014 paled at only 1.71 gigawatts, less than one quarter of the 7.3 gigawatts installed in 2015 in California alone.” Johnson cites Clean Energy Canada’s finding that Canadian clean energy investment fell 46% in 2015.

“Can we afford the tax credit?” he asks. With the credit in place, “the federal government collects fewer taxes from those investing in the renewable revolution, but increases the tax base because of the substantially greater revenues from businesses building and supplying the solar and wind industry. And for every million dollars invested in renewables, an estimated 17 jobs are created in the United States, more than three times the five jobs per million in fossil fuels or nuclear. Many solar and wind workers are well-paid, a further contribution to the tax base.”