April 22, 2026
On March 26th, Bill C-15, which enacted many of the measures proposed in the federal Budget 2025, received Royal Assent and was entered into law. This included the Clean Technology Investment Tax Credit (Clean Tech ITC) which now provides eligibility for equipment related to the generation of electricity and heat from waste biomass feedstocks, including some biogas to electricity project components. The CBA applauds the bill’s adoption as an important win for our industry and a strong step towards unlocking Canada’s biogas potential.
This is an exciting opportunity for biogas projects and, in response to strong member interest, this article provides a simplified overview of what may be eligible under the ITC. Members are encouraged to review their project’s eligibility with their own tax and legal advisors.
First proposed in Fall Economic Statement 2023, this expansion of the 30% Clean Tech ITC includes eligibility for certain biogas to electricity equipment, retroactively including equipment acquired after November 20, 2023. The text of the enabling legislation, C-15 (Budget 2025 Implementation Act, No. 1), provide detailed definitions of the waste biomass electricity generation equipment and waste biomass heat generation equipment that describe eligible property and that will be added to the Clean Tech ITC subsection 127.45(1) of the Income Tax Act.
To be considered eligible waste biomass electricity generation equipment, property must meet all three of the following conditions:
- Be part of a system used solely for the purpose of generating electrical and/or heat energy, consuming substantially all of the energy content per a defined annual heat rate; and
- Be electricity generation and/or heat production equipment, heat recovery or distribution equipment, equipment used to produce or upgrade a biofuel solely for the operation of electric or heat generation equipment, equipment described only in subparagraphs (d)(xi), (xii), (xvi) or (XX) of Class 43.1 of Schedule II to the Income Tax Regulations, or integrated or ancillary equipment supporting the functioning of electric or heat generation equipment; and
- Not be a building, transmission or distribution equipment, feedstock or fuel storage equipment, pollution abatement equipment, a vehicle, equipment used to export heat energy from the system, or equipment described in Class 57 or 58 of Schedule II to the Income Tax Regulations.
Eligible feedstocks for these systems are defined under specified waste material in subsection 1104(13) of the Income Tax Regulations, which include municipal waste, separated organics, food and animal waste, wastewater treatment sludge, and more.
This overview is intended as a high-level summary only and should not be considered tax advice. Given the complexity of the legislative definitions, members are strongly encouraged to review the full provisions with their tax and legal advisors to determine project-specific eligibility and seek an advance ruling from the CRA if uncertainty remains.
Based on the definitions of eligible equipment, the CBA understands that RNG systems are not eligible for this tax credit. Specifically, equipment used in systems producing RNG for use outside the system, including those producing RNG for sale or injection into the grid, would not be eligible.
However, this limitation is increasingly at odds with industry trends. Most new biogas projects are being developed for RNG production, and planned capacity is expected to increase output roughly four-fold over 2024 levels in the coming years. The CBA continues to highlight this shift to government.
Feedback from a subset of project developers indicates that a 30% ITC could materially impact investment decisions for RNG development, potentially catalyzing approximately 70 additional RNG projects across Canada and representing over $1 billion in new investment.
The CBA will continue to advocate for the further expansion of Canada’s suite of ITCs to support and accelerate investments in biogas & RNG equipment and to fully realize Canada’s biogas & RNG potential.
