Canada Extends CCUS Credits, Igniting a Carbon Capture Rush

Ottawa’s tax credit extension to 2035 clears the path for major carbon capture investments

26 Jan 2026

Canada has given its carbon capture sector a long-awaited jolt of certainty. In its 2025 federal budget, the government extended the carbon capture, utilization, and storage tax credit to 2035. For an industry built on massive upfront costs and long timelines, that extra runway matters.

The credit, introduced in 2022, helps offset the heavy capital required to build capture and storage systems. These projects are slow by nature. It can take close to a decade to move from early studies to a working facility. By extending support well into the next decade, Ottawa reduces the risk that policy support disappears halfway through construction.

That stability could unlock projects that have been stuck on the drawing board. Large energy companies such as Shell and Suncor have repeatedly said that predictable policy is critical before committing billions of dollars. With clearer timelines, developers can better reassure boards, lenders, and partners that the economics will hold. The ripple effects go beyond project owners, supporting engineers, equipment suppliers, and builders who rely on steady demand.

The timing is not accidental. Countries are competing hard for clean energy capital, and carbon capture remains one of the few options for cutting emissions in heavy industries. Sectors like cement, steel, and chemicals have limited alternatives. Companies such as Lafarge have argued that carbon capture is essential if these materials are to be made with far lower emissions.

The extension does not solve every problem. Permitting can still drag on for years. Questions remain about who is responsible for stored carbon over the long term. Transport networks for moving carbon dioxide are incomplete. Critics also warn that generous tax credits may favor established emitters over newer clean technologies.

Still, most industry watchers see the move as a necessary foundation. With a longer horizon, project planning and early engineering work are likely to accelerate. If that momentum holds, Canada’s carbon capture sector could move from cautious trials to real scale. The signal from Ottawa is simple: the rules are clearer, the window is longer, and the build-out is ready to begin.