The recent federal budget, aimed squarely at economic stimulus and tax reduction, failed to deliver some of the hoped-for items that had been proposed by the energy sector. There are, however, opportunities within the budget for many in the energy industry.

The corporate tax provisions of the Budget were extremely modest in their nature and scope. The income limit for the small business deduction will be raised from $400,000 to $500,000, capital cost allowance (CCA, i.e. depreciation) of manufacturing and processing equipment and computers will be accelerated, and tax credits for mineral exploration (unfortunately not extending to energy exploration) have been extended.

One specific tax policy item was directed towards the energy sector, although it will not be implemented immediately: the government announced a consultation process with the energy industry regarding accelerated CCA for carbon capture and storage (CCS) assets. Although there is no specific indication in the budget, this would likely become a part of, or replicate, the current regimes for Class 43.1 and 43.2 assets.

Likewise, there was very little direct support for the energy sector in the budget, unlike the extensive targeted support delivered to manufacturing, forestry and the auto industry. The exceptions were a one-time investment of $351 million for Atomic Energy of Canada Limited to develop a new line of CANDU reactors, and the new Clean Energy Fund which has been allocated $200 million per year over five years, with the majority apparently targeted at CCS projects. The Budget documents were not specific but set a target of $2.5 billion in CCS investments to be stimulated by the Clean Energy Fund.

The Clean Energy Fund is clearly aimed at the development of hoped-for technology, rather than the immediate impact of investment in current clean energy technology. Eighty-five percent of the Fund is to be used for the "development and demonstration of promising technologies" and the remainder for "research". This allocation should provide a boon for companies currently looking to develop and implement new ideas in the clean energy field, particularly in CCS.

Also announced was an additional $500 million per year over two years for the Green Infrastructure Fund (GIF) that partners with the provinces and municipalities to fund sustainable energy infrastructure. The announcement in the budget documents that modern energy transmission lines will be an item of emphasis for the GIF will be of particular interest to the electricity industry.

Finally, an item of interest to energy producers dependent on imported machinery and equipment is the permanent elimination of customs tariffs on 214 classes of specialized equipment, as of January 28, 2009. Energy producers are specifically targeted (among other industries) by the tariff eliminations.

One notable item that failed to find support was the ecoENERGY for Renewable Power Initiative (eRP) that had been originally announced in early 2007 and slated to run until March of 2011. However, the eRP had been so successful that all of the funds originally allocated have now been spent. There was hope within the alternative energy sector that further support would be forthcoming to spur more immediate investment in renewable power. It had been particularly hoped Canada would match the extensive commitment made by the U.S. federal government in late January to the corresponding U.S. program, increasing funding and extending it to 2012. It seems entirely plausible that this American commitment, in addition to the mixed signals it transmits, will shift some alternative energy investment to the U.S.