The Canadian government proposed new clean tech and hydrogen investment tax credits as party of its fall economic statement. The proposed credits would help the country keep pace with financial incentives provided to U.S. manufacturers through the Inflation Reduction Act (IRA).

The government proposed a tax credit of up to 30% of the capital cost of investments made in small modular nuclear reactors; wind, hydro and solar systems; battery energy storage; and in low-carbon heat equipment and industrial zero-emission vehicles used in mining or construction.

The Canadian Renewable Energy Association (CanREA) said it approved of the federal government’s “commitment to accelerating investment in decarbonization in Canada.”

Clean hydrogen investments could receive a tax credit of at least 40%. The tax credit would be available once the 2023 budget is finalized and will be phased out after 2030.

The clean technology and clean hydrogen tax credits are intended to make it more attractive for businesses to invest in Canada, said Deputy Prime Minister Chrystia Freeland in a statement.

To qualify, companies would need to meet certain labor conditions, including paying wages based on market conditions and ensuring training opportunities for workers. 

The government also launched the Canada Growth Fund which is intended to support emissions reductions by accelerating the investment in and deployment of low-carbon hydrogen and other decarbonization initiatives. The fund includes an initial C$15 billion ($11.12 billion) in government funding. 

The government also pledged new resources committed to agencies responsible for clean energy projects will help expedite approval processes and ensure Canada’s first-mover advantage in global clean energy markets. It said expedited approval processes will better allow investment certainty.

The tax credit proposal came on the heels of a warning from Canada’s automotive, steel and manufacturing sectors that the IRA could trigger a flight of investment capital south to the U.S.

The government said the IRA offers “enormous financial supports to firms that locate their production in the United States — from electric vehicle battery production, to hydrogen, to biofuels, and beyond” and “without new measures to keep pace … Canada risks being left behind.”

Meanwhile, news reports said that the European Union had “serious concerns” about the IRA, saying that parts of it breach international trade rules.

European officials said they were worried about the design of nine tax credit provisions, mostly focused on electric vehicle production. South Korea has expressed similar concerns, reports said.

The EU set up a taskforce and said it hoped there was a willingness from the U.S. to address its concerns.