Why $90B in Low-Carbon Projects Is Flowing Toward Canada

Canada is moving aggressively to capture investment leaving the U.S. As Washington restricts its 45V clean hydrogen credit and cut regional hydrogen hub funding through H.R. 1 in July 2025, Canada extended its CCUS Investment Tax Credit through 2035, guaranteed minimum carbon prices, and identified $90 billion in projects ready to move. The timing is deliberate.

How Did the U.S. Lose Its Edge on Low-Carbon Investment?

When President Trump signed H.R. 1, the "One Big Beautiful Bill Act," on July 4, 2025, the impact on clean energy investment was swift. The Section 45V clean hydrogen production tax credit was restricted to projects beginning construction before December 31, 2027, cutting its effective runway by more than five years. Solar and wind credits faced accelerated phase-outs, and billions in unobligated IRA funds were clawed back from the DOE.

The DOE followed with sweeping hydrogen project cuts in October 2025. At least one Regional Clean Hydrogen Hub paused activities entirely after losing federal cost-share (Clean Air Task Force, Q3 2025 Investment Tracker).

Then in November 2025, ExxonMobil officially halted plans for what would have been one of the world's largest blue hydrogen facilities in Baytown, Texas, after the Trump administration had yanked the project's nearly $332 million DOE grant earlier that spring (Canary Media, December 1, 2025).

The shift sent a clear signal to global markets. The IRA had attracted over $200 billion in U.S. clean energy and manufacturing investment in its first year alone, according to multiple analysts. Abrupt policy reversals undermine the long-horizon certainty that capital-intensive carbon and hydrogen projects need to reach a final investment decision.

What Does Canada's CCUS ITC Extension to 2035 Mean for Developers?

Canada's Budget 2025, tabled in November 2025, extended the full-rate period for the CCUS Investment Tax Credit by five years. Under the original legislation, full credit rates ran through 2030. Budget 2025 pushed that deadline to the end of 2035, giving developers building large-scale projects today a materially longer window to qualify for the highest rates.

Those rates range from 37.5% to 60% depending on equipment type. Direct air capture projects qualify for the top 60% rate, point-source capture equipment earns 50%, and transport and storage equipment earns 37.5%, all based on qualifying expenditures from 2022 through 2035 (Budget 2025, Government of Canada). Reduced rates of 30%, 25%, and 18.75% respectively apply only from 2036 to 2040.

According to MLT Aikins, which advises on major CCUS projects across Western Canada, the credit "does not simply improve economics." For large-scale projects, it "can determine whether a project advances to final investment decision." Recent amendments through Bill C-15 and the January 2026 legislative proposals strengthened the framework further, expanding eligible timelines and improving long-term risk allocation.

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How Are Carbon Market Guarantees Reshaping the Investment Case?

The CCUS ITC is only one part of Canada's offer. The Canada Growth Fund is actively deploying Carbon Contracts for Difference (CCfDs), which guarantee a floor price for carbon credits generated by low-carbon projects over a defined period. This de-risks the long-term revenue side of a project and addresses one of the core reasons developers hesitate to commit capital at scale.

Clean Prosperity's "Creating a Canadian Advantage" working paper shows the impact directly. A blue hydrogen facility in Alberta relying on market carbon pricing alone generates estimated annual revenues of $0.09/kg of hydrogen from policy sources.

With a CCfD backstopping credit value, that same facility's guaranteed annual revenues rise to approximately $1.05/kg, effectively closing most of the incentive gap with U.S. competitors (Clean Prosperity / Transition Accelerator, 2023 working paper).

The November 2025 federal-Alberta MOU locked in a minimum effective TIER carbon credit price of $130 per tonne, giving developers the price certainty needed to commit to capital-intensive carbon management infrastructure. Canada's new federal carbon removal procurement program adds a direct government demand signal for verified carbon credit supply, further strengthening project economics.

Which Sectors Give Canada a Real Competitive Edge Right Now?

Clean Prosperity's December 2025 "A Canadian Advantage" report identifies CCUS, blue hydrogen, and direct air capture as Canada's strongest sectors for attracting displaced U.S. investment.

The geological foundation alone is difficult to replicate: Canada holds approximately 389 gigatonnes of prospective onshore CO2 storage capacity, mostly in Alberta, Saskatchewan and Manitoba, which is nearly 600 times Canada's total 2021 emissions (Clean Prosperity; Norton Rose Fulbright).

That natural advantage helps explain why Canada hosts roughly one-seventh of the world's active large-scale carbon management projects, according to Natural Resources Canada's 2025 Carbon Management Strategy.

In 2024, global clean energy investment reached over $2.8 trillion worldwide, nearly double the level going into fossil fuels (Government of Canada, 2025). Canada's growing portfolio of carbon mineralization and geological storage projects positions it directly in that capital flow.

The British Columbia carbon capture project pipeline is already drawing multi-technology investment, from point-source industrial capture to emerging direct air capture deployments. Canada's federal DAC offset protocol, currently past its public comment period, will add a federally recognized carbon credit revenue stream for qualifying DACCS projects, a mechanism the U.S. currently lacks.

Policy Area	Canada (2025-2026)	U.S. (Post H.R. 1, July 2025)
CCUS Tax Credit	37.5% to 60%, full rates through end of 2035	45Q maintained at $85/tonne through 2032
Clean Hydrogen Credit	Up to 40% ITC; expanded pathways including methane pyrolysis	45V restricted to projects starting construction before Dec 31, 2027
Carbon Price Guarantee	CCfDs via Canada Growth Fund; TIER minimum $130/tonne floor	No federal carbon price or guaranteed floor mechanism
DAC Offset Protocol	Preliminary draft published; public comment period closed March 2025	GHGRP rollback proposed; credit-verification uncertainty ongoing
EOR Eligibility for CCUS ITC	Federal-Alberta MOU commits to inclusion; legislative amendment pending	45Q already includes EOR as an eligible use

The Investment Case Is Built on Policy, Not Projections

Canada's low-carbon strategy has moved well past the vision stage. Enacted legislation, bilateral agreements, and guaranteed carbon pricing together present a credible, long-duration alternative for capital that was previously heading south.

One gap still needs closing: the CCUS ITC currently excludes CO2-enhanced oil recovery as an eligible use, which directly contrasts with the U.S. 45Q approach. The federal-Alberta MOU commits to fixing that, but the legislative amendment has not yet been made.

If both governments follow through on the MOU's commitments, the pipeline of CCUS projects across Western Canada moves from promising to compelling. Clean Prosperity's December 2025 "A Canadian Advantage" report identifies $90 billion in potential projects the MOU, fully implemented, could unlock, with direct benefits for jobs and emissions reduction in Alberta and across the country.

With U.S. policy in active retreat, the window for Canada to consolidate its position is real and time-sensitive. The policy architecture is largely in place. Execution is what turns this advantage into committed capital.