Experts say the investment tax credits meant to spur Canada’s clean economy are being processed too slowly to help companies that need support addressing climate change and weathering the tariff war with the United States.

“By providing investment tax credits to offset the capital cost of adopting these technologies, Canada has a key tool in its arsenal to help with faster deployment and adoption of renewable energy solutions,” Fort Capital Partners Senior Advisor Peter McArthur, chair of the Ontario Clean Technology Industry Association and the Canada Cleantech Alliance, told The Energy Mix.

“We need to make a tectonic shift in our approach to energy and policy tools like [investment tax credits] to help expedite this shift.”

Canada’s government introduced its Clean Economy Investment Tax Credits (ITCs) in the 2023 federal budget, and passed the first four of them into law in 2024. The ITCs are part of a larger strategy to reshape the country’s economy and achieve net-zero national emissions by 2050, explains Borden Ladner Gervais LLP partner Steve Suarez.

But while the ITCs’ intent has been well received, critics say companies are struggling to reap the benefits, and an opportunity to grow Canada’s economy with clean technology is being lost. The Financial Post reported a backlog of unprocessed claims is building up as application requirements slow down processing times: only 31% of 1,261 total claims were processed by the Canada Revenue Agency in the ITCs’ first 20 months.

McArthur told The Mix there are several reasons for this. For one thing, there is confusion about what projects are eligible for the ITCs—not all clean technologies qualify—and labour requirements create additional complexity. A 100% audit rate is also discouraging potential applicants by prolonging the process to obtain the tax credit, which slows down the flow of benefits, he added.

“You might not receive funding back till close to two years since you dispersed funds,” said McArthur. “The capital cost is reduced but your cash flow for the same is very misaligned.”

In response, “some financiers are starting to finance these claims,” he added. “That can smooth things out, but the uncertainty related to the audit, as well as the administrative burden of the same, is a real issue to claimants.”

According to the Post, the Canada Revenue Agency said in a statement that processing volumes were initially low, but about 60 new staff have been brought onboard and the backlog is gradually being cleared.

Critics like StormFisher CEO Jud Whiteside, writing in The Hill Times, say the slow processing of ITCs is a lost opportunity to support Canada’s economy during the trade war with the United States.

A survey released this week with responses from more than 100 cleantech companies found respondents largely in favour of combatting tariffs through domestic investment and support, like that which would be provided by the ITCs. According to the Canada Cleantech Alliance’s Cleantech Trade & Tariff Impact Survey, 68% of respondents said commercialization and scale-up financing would be a helpful government response, while other measures—like support for domestic procurement of Canadian cleantech, international demonstrations, and support for entering non-U.S. markets—each received support from 46% to 57% of respondents. Only 29% selected tariff remission or relief.

“Canada’s cleantech sector already has a substantial domestic economic and employment footprint, but its $10.8 billion export base remains modest relative to several established Canadian industries,” the survey report says. “Helping more Canadian technologies reach commercial scale, secure customers at home, build resilient supply chains, and expand into global markets can turn that gap into a source of future economic growth.”