The International CCS Knowledge Centre (“Knowledge Centre”) appreciates the opportunity to provide comments on the January 29, 2026 draft legislative proposals relating to the Carbon Capture, Utilization and Storage Investment Tax Credit (CCUS ITC), as well as related amendments introduced through Bill C-15.
As an independent, non-profit organization, we work with governments, industry, and international partners to advance carbon capture utilization and storage (CCUS) deployment through technical advisory, policy analysis, and knowledge-sharing. Our work includes direct support to commercial-scale CCUS projects across feasibility, front-end engineering and design, regulatory, and policy stages. The CCUS ITC is a cornerstone policy for enabling CCUS deployment in Canada, and the recent legislative amendments represent an important opportunity to ensure the framework supports projects effectively.
The January 29, 2026 legislative proposals introduce amendments that would restrict eligibility for dual-use energy equipment to electricity and heat used directly within the CCUS project boundary. This change would exclude electricity supplied via the grid, including electricity supplied to other CCUS projects through power purchase agreements, and reverses prior administrative interpretation that allowed electricity generated by dual-use equipment to be eligible where it supported additional CCUS deployment under contractual arrangements.
This change may materially affect project economics and deployment. Many CCUS facilities rely on integrated heat and power systems to provide the steam and electricity required for capture operations. These systems are typically designed for optimal thermodynamic efficiency and reliability, which may involve generating electricity in excess of direct on-site demand. In these configurations, electricity may be supplied to other facilities, or the grid to maintain efficient operations and improve project economics. Restricting eligibility strictly to electricity consumed within the project boundary reduces the eligible CCUS proportion of these systems and therefore the value of the ITC.
This impact is particularly significant for industrial facilities with limited on-site energy demand relative to optimal capture system sizing, and for facilities where redirecting internally generated electricity to capture operations carries material opportunity costs. In some cases, this change may affect whether projects are able to reach a positive final investment decision, particularly where integrated energy systems form a substantial portion of project capital costs.
The prior interpretation appropriately recognized that electricity generated to support CCUS deployment contributes to the policy objective of enabling carbon capture infrastructure, including where electricity supports CCUS operations across facilities. The Knowledge Centre recommends that the Department of Finance reconsider the categorical exclusion of electricity supplied over the grid. Alternative approaches could achieve policy objectives while preserving project viability, including refining the dual-use factor, introducing eligibility thresholds, or permitting electricity supplied to other CCUS facilities where appropriate contractual and measurement safeguards are in place. Maintaining flexibility for dual-use energy systems will support efficient industrial integration and CCUS deployment.
The Knowledge Centre also supports several other amendments included in the legislative proposals and introduced in Bill C-15. The extension of maximum ITC rates to 2035 through Bill C-15 is particularly important. CCUS projects have long development timelines and face supply chain, labour, and procurement challenges. Extending the availability of maximum rates reduces the risk of project delay due to timing constraints and provides greater certainty for projects currently advancing through feasibility and engineering stages.
The inclusion of excavation activities directly related to eligible CCUS infrastructure is also a welcome clarification. Carbon transport and storage infrastructure requires substantial subsurface construction, and this amendment better aligns the ITC with construction realities.
The introduction of relief for bona fide carbon reversals adds financing assurance. Long-term geological storage necessarily carries residual risk, even under robust monitoring frameworks. Providing certainty that tax credits will not be clawed back due to events outside the control of project proponents improves investment certainty and supports project financing.
While the recent amendments represent meaningful progress, additional refinements would further strengthen the effectiveness of the ITC.
First, the current framework relies on fixed equipment installation deadlines to determine credit eligibility, which creates execution risk related to supply chain and labour constraints outside the control of project developers. The Knowledge Centre recommends adopting a construction-based eligibility trigger tied to commencement of construction and demonstrated capital investment. This approach aligns eligibility with investment commitments and reduces avoidable execution risks.
The ITC framework should also ensure consistent treatment of durable carbon removal pathways based on permanence and verified storage outcomes. Certain carbon removal pathways, including bioenergy and waste-to-energy carbon capture, can generate durable removals and should be treated consistently with other removal technologies where permanence requirements are met – these projects should have access to the 60% capture equipment rate that Direct Air Capture projects are eligible for.
Another challenge area for the ITC is related to prevailing wage requirements. Prevailing wage requirements impact all of Canada’s clean economy ITCs and can unintentionally require wages significantly above typical local levels. If there aren’t nearby eligible collective agreements, resulting in wage benchmarks may not reflect the actual labour market conditions at the project site. This may disproportionately impact projects in rural or emerging industrial regions where local collective agreements do not exist.
We propose that prevailing wages be based on the eligible collective agreement applicable to the smallest possible geographic area in which the designated work site is located, or, if none exists, use the labour force survey data for the region. This would ensure wage requirements more accurately reflect local labour markets, improving fairness, predictability, and alignment with regional workforce conditions while maintaining the integrity of the prevailing wage framework across all clean economy investment tax credits.
Another refinement that could strengthen the CCUS ITC framework would be to establish a mechanism, similar to the United States Section 45Q regime, to allow additional CO₂ utilization pathways to be evaluated and approved on a case-by-case basis. Under such an approach, project proponents could submit proposed utilization pathways supported by a detailed lifecycle assessment demonstrating net emissions reductions and permanence, as applicable. Natural Resources and Environment, Climate and Nature ministries could review these assessments and provide recommendations to the Department of Finance regarding eligibility. Establishing this pathway would allow the ITC to adapt to emerging technologies and project configurations, while ensuring that eligibility remains grounded in verified emissions reductions and environmental integrity.
Finally, the Knowledge Centre recommends recognizing CO₂ enhanced oil recovery (EOR) as an eligible use under the ITC where net storage is verified and permanence requirements are met. CO₂-EOR is an established technology that supports large-scale carbon storage and enables development of carbon transport and storage infrastructure. Several Canadian jurisdictions already support EOR within broader carbon management frameworks. Aligning the federal ITC with these approaches would improve policy consistency and support deployment of CCUS infrastructure.
The Knowledge Centre supports the continued refinement of the CCUS ITC and commends the Department of Finance for engaging stakeholders through this consultation. The proposed amendments strengthen the framework and improve investment certainty. Refining the treatment of dual-use electricity equipment and adopting additional targeted refinements would further improve the effectiveness of the ITC and support CCUS deployment in Canada.
The Knowledge Centre would welcome the opportunity to engage further with the Department of Finance on these matters.
Mac Walton
Manager, Policy and Commercial
International CCS Knowledge Centre