Today's pressure to bring commercial and industrial projects to a successful conclusion on time and on budget have never been greater. Added to the equation is the increasing pressure to infuse designs and functionality that reflect an environmentally sensitive approach. With a vast array of developers available, any advantage that results in cost savings to the overall development budget while preserving these goals is an opportunity to stand apart from the pack.
Financial incentives can be an integral component to realizing those savings and as governments assume an increasing responsibility in spearheading these types of economic stimuli, the selection of monetary inducements continues to grow. What used to be retail encouragement targeted at homeowners to replace inefficient incandescent light bulbs to environmentally friendly alternatives has burgeoned to include distinct project-specific financial programs.
In fact, the federal government has made amendments to the Income Tax Act to allow for previously disallowed write-offs of certain intangible expenses. This, in combination with other federal programs like ecoEnergy for Renewable Heat and ecoEnergy Renewable Power signal an alternative to approach and departure from the historical reliance upon regulatory penalties as the sole driver for increasing environmental efficiencies.
Not to be outdone, at the provincial level, various programs exist that are as comprehensive as a rebate on kilowatt-hour of electricity consumed across the incentive spectrum to embrace assistance to farmers and agri-food businesses seeking to reduce electricity costs. Loan programs are offered by Infrastructure Ontario that are tailored to specific financial and sectoral needs. Brownfields reclamation projects are eligible for tax assistance across a wider range of the project life cycle that provides advantages to municipalities as well as the developer.
Perhaps the most significant change in financial aid available to developers has occurred at the municipal level where we are witnessing extensive funding available to municipalities that undertake projects designed to realize sustainable communities. In recognition of the principle that environmental improvements can be realized one roof at a time, the City of Toronto has expanded its financial incentives available under its "Green Roof" program.
Listed below are some of the efforts made at all levels of government to assist in economically stimulating interest in sustainable development through the delivery of incentives. Many additional financial incentives of varying scope exist. Parties are encouraged to conduct an online web search or contact your Gowlings professional to be informed of other possible economic incentives available to suit the individual requirements and goals of your project.
Financial Incentives Available at the Federal Level
1. Canadian Renewable and Conservation Expenses (CRCE) Allowance
The Government of Canada wants Canadians to invest in a healthier environment, a more stable energy future and a more competitive economy. In order to achieve these goals, two specific taxation measures are available to encourage investments in energy efficiency and renewable energy projects:
1) The Canadian Renewable and Conservation Expenses (CRCE) allowance amounts to flow-through share financing for qualified investors who participate in the financing of intangible expenses incurred in the early stages of a project . Typical intangible expenses would include expenses incurred to determine the location, extent and quality of non-renewable resources. Renewable and conservation expenses that qualify as CRCE are eligible expenses for purposes of the flow through share provisions allowing purchasers of new equity tax deductions for eligible expenditures. It is hoped that the CRCE will facilitate financing and encourage investment in companies undertaking renewable energy and energy conservation projects.
2) The Class 43.1 Accelerated Capital Cost Allowance (ACCA) was introduced in the 1996 federal budget to promote energy efficiency and low-impact renewable energy through the income tax system and allows taxpayers an accelerated write-off at up to 30% per year for equipment generating electricity from solar electric systems. CRCE is a category of fully deductible expenditures associated with the start-up of renewable energy and energy conservation projects for which at least 50 percent of the capital costs of the property would be captured in Class 43.1.
In an effort to expand the appeal of this incentive, the government has recently decided to remove the size restrictions for PV systems, as well as the restrictions on the type of applications for solar air and water heating systems.
2. Renewable and Electrical Energy Division
The Renewable and Electrical Energy Division promotes the development of a sustainable renewable energy industry in Canada through the sponsorship of investments in renewable energy systems for heating and cooling and provides information on renewable energy technologies. It also provides analysis and advice to the Minister on electricity issues in Canada. Renewable energy sources are those that produce electricity or thermal energy without depleting resources including solar, wind, biomass, low-impact hydro, geothermal and ocean energy. NRCan delivers two programs to encourage the development and use of emerging renewable energy sources and technologies:
1) ecoENERGY for Renewable Heat
Using the power of the sun to heat buildings and water not only helps businesses lower costs, but it reduces the amount of harmful emissions produced. The ecoENERGY for Renewable Heat program is a four-year, $36 million investment to increase the use of renewable thermal energy by industry, commercial businesses and institutions and boost the amount of renewable thermal energy created for these sectors. The program also contributes to cleaner air by helping Canadian businesses use less fossil fuel-based energy for space and water heating in buildings.
The program runs from April 1, 2007 to March 31, 2011. Incentives are offered to the industrial/commercial/institutional sector to install active energy-efficient solar air and/or water heating systems and will rebate 25 percent of the purchase, installation and certain other costs of qualifying systems. Eligible projects must be completed and commissioned within six (6) months of the signing of a contribution agreement with NRCan. Preliminary estimates suggest that, by 2011, the program will have supported installations in about 700 buildings.
2) ecoENERGY for Renewable Power
ecoENERGY for Renewable Power is investing $1.48 billion to increase Canada's supply of clean electricity from renewable sources such as wind, biomass, low-impact hydro, geothermal, solar photovoltaic and ocean energy. The goal is to encourage the production of 14.3 terrawatt hours of new electricity from renewable energy sources, enough electricity to power about one million homes. Private businesses, municipalities, institutions and organizations are eligible for the program which provides an incentive of one cent per kilowatt-hour for up to 10 years to low-impact, renewable electricity projects constructed over the next four years, April 1, 2007 to March 31, 2011.
To date, a total of 136 projects across Canada, representing a total power generating output of 9554 MW, have either been built or are under construction.
3. ecoEnergy Retrofit for Buildings
Owners of small and medium-sized buildings in the commercial and institutional sectors often lack the financial and technical resources to make energy improvements. Natural Resources Canada's Office of Energy Efficiency now offers the ecoENERGY Retrofit Incentive for Buildings, the commercial/institutional component of the ecoENERGY Retrofit financial incentives for existing homes, buildings and industrial processes. Eligible entities include commercial and institutional buildings, including those owned by not-for-profit and religious organizations; provincial, territorial and municipal buildings; and multi-unit residential buildings (with a common entrance and at least four storeys or a footprint of 600 square metres or more) or mixed-use commercial/residential buildings. Qualified applicants can receive the lesser of $10 per gigajoule of estimated energy savings or 25 percent of eligible project costs up to a maximum of $50,000.00.
4. ecoENERGY Retrofit Incentive for Industry
Natural Resources Canada's (NRCan's) ecoENERGY Retrofit program is designed to help industrial facilities overcome financial barriers to improving the energy efficiency of their operations. NRCan will provide a financial incentive of up to 25 percent of project costs to a maximum of $50,000 per application and $250,000 per corporate entity to help small- and medium-sized industrial facilities implement energy-saving projects.
Financial Incentives Available at the Provincial (Ontario) Level
1. OSIFA Loan Program
Infrastructure Ontario offers affordable loans to help public sector clients build and renew essential local infrastructure by helping participants collectively save millions of dollars in interest charges and transaction fees over the life of their loans. Loan features include one comprehensive interest rate (no additional transaction or commission fees); identical interest rates and terms for rated and unrated borrowers; and longer financing terms at fixed rates generally not available from traditional financing sources.
The Program was recently broadened to provide affordable financing for all infrastructure expenditures by municipalities and universities to include local utilities, transit corporations, universities' federated and affiliated colleges, and not-for-profit long-term care service providers.
Eligible municipal borrowing would include investments to improve municipal administration buildings; local police and fire stations; emergency vehicles and equipment; ferries and docks; and municipal airports.
As of January 18, 2008, financing totalling $2879.3 million has been received by 189 clients for 974 projects throughout Ontario.
2. Brownfields Financial Tax Incentive Program (BFTIP)
In recognizing that brownfields1 improvement has both environmental and economic benefit, the BFTIP is a financing tool that allows municipalities to provide landowners with property tax incentives for environmental rehabilitation.
Amendments to section 365.1 of the Municipal Act, 20012 now mean that municipalities can now provide tax assistance during the rehabilitation and/or development periods (previously, assistance had to include the rehabilitation phase). The reform provides the opportunity for BFTIP matching education tax assistance to begin later in the developmental process up to and after reassessment allowing municipalities to take advantage of the rise in property tax value.
Local Distribution Companies (LDCs) across the Province are now administering a program in partnership with the Ontario Power Authority (OPA) that offers municipal customers financial incentives to increase their energy efficiency and improve their bottom line. As part of the program, participating LDCs will reimburse customers for a portion of the cost to purchase energy-efficient technology who are performing retro-fit or upgrading projects in the following categories: lighting, motors, cooling equipment, and transformers. In addition, Custom Projects are also eligible for an incentive of $150 per kW of demand reduction whereby a comprehensive evaluation of all technology equipment and systems are evaluated on the basis of energy performance.
The Program is a $9-million investment that will help farmers and agri-food businesses develop and build generating systems that produce clean energy, reduce electricity costs and contribute to local economies. There are two phases to the program. Phase 1 funding will cover up to 70 per cent of the eligible costs of carrying out a feasibility study, to a maximum of $35,000. Phase 2 funding will cover up to 40 per cent of eligible construction and implementation costs. The maximum total feasibility and construction cost funding is $400,000 for each anaerobic digester system.
Financial Incentives Available at the Municipal Level (Ontario)
The Green Municipal Fund (GMF) was established by the Government of Canada in its 2000 budget to stimulate investment in innovative municipal environmental projects that advance the progress of sustainable development in Canada's communities. The Fund supports partnerships, leveraging both public and private sector funding to encourage municipal actions to improve air, water and soil quality, and to reduce greenhouse gas emissions.
In 2000, the Government of Canada bestowed $125-million upon the Federation of Canadian Municipalities (FCM) to establish GMF. This was doubled in 2001-2002 to $250 million, and increased again in 2005 by $300 million, half of which was dedicated to a new brownfields category.
As the only fund that specifically addresses the needs of municipal governments, the GMF's broad range of financial products, resources, expertise and services have become the first stop for municipal governments wanting to pursue environmental infrastructure initiatives. Resources such as case studies and workshops are all part of the GMF toolkit that municipal governments are using to pursue their sustainable development goals.
In an effort to finance the implementation of leading edge municipal solid waste diversion projects, for example, Solid Waste Diversion Projects is a category of eligible project and include ventures that divert municipal solid waste (MSW) from landfill through reuse, recycling, thermal treatment processes or biological processes. In a soon to be issued Request for Proposal (RFP), GMF will award a total of up to $10 million in loans and up to $1.5 million in grants under this RFP to municipal governments or municipal partners in Canada with individual eligible applicants permitted to request up to $3 million in loans and $300,000 in grants for each project.
2. City of Toronto "Green Roof Incentive Pilot Program"
The Green Roof Incentive Pilot Program supports the City's stormwater plan known as the Wet Weather Flow Master Plan. The overall goal of the Green Roof Pilot Program is to encourage green roof construction in the City. In addition, the program will result in the construction of a variety of green roof types which could be used for education and promotional purposes and provide an opportunity to showcase various green roof technologies and planting styles
Successful applicants will receive a grant of $50 per square metre of eligible green roof area up to a maximum of $10,000 for single family homes and a maximum of $100,000 for all other property owners in the City of Toronto. At this time, there are approximately 102 existing and planned green roofs in Toronto.
While many roof tops in Toronto provide a growth platform for foliage of varying degrees, for the purposes of the incentive program, a green roof is defined as a system where a vegetated area becomes part of the building's roof and includes vegetation, a growing medium, a filter layer, a drainage layer, a root resistance layer and a waterproof membrane.