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Navigating Green Transitions: Tax and Regulation Initiatives Driving Sustainable Practices

In the global pursuit of sustainability, nations are increasingly turning to innovative tax and regulation measures to drive environmental responsibility and low-carbon practices. In this blog, we delve into some noteworthy initiatives in North America— the US 45Q tax credit program, Canada’s Clean Fuel Regulations and Industrial Carbon Tax, and Extended Producer Responsibility (EPR) regulations and explore how they are shaping the landscape of sustainable business practices.

45Q Tax Credit in the United States: Encouraging Carbon Capture and Storage (CCS)

The 45Q tax credit is a pivotal component of the US strategy to address climate change. This incentive aims to encourage deployment of Carbon Capture and Storage (CCS) technologies, which play a crucial role in mitigating industrial emissions. The 45Q tax credit provides financial support to companies investing in CCS, offering a per-ton tax credit for CO2 stored underground or put to beneficial use. This initiative not only facilitates the reduction of greenhouse gas emissions but also fosters innovation in carbon capture technologies, propelling the US towards a more sustainable and low-carbon future.

Furthermore, 45Q provides a federal tax credit that supplements, and can be combined with, state and local clean energy incentives including (but not limited to) the California Low Carbon Fuel Standard CCS protocol. This incentive currently provides close to $200/tCO2 for CCS facilities that reduce the lifecycle emissions of transportation fuels, as well as direct air capture, recognizing that CO2 emissions are a global problem. Other examples of policies that can work in tandem with 45Q are clean energy standards and local investment tax credits, as well as a variety of grant and loan programs. So far, 45Q has already led to a series of project announcements and is considered a key driver enabling CO2capture and storage projects in the US.

Clean Fuel Regulations in Canada: Paving the Way for Cleaner Transportation

As the world aims for net-zero emissions by 2050, there's a significant shift towards lower-carbon and non-emitting fuels. Canada is well-positioned to both produce and consume these sought-after fuels, aligning with current consumer preferences and future trends.

The Clean Fuel Regulations provide increased incentives for clean fuel, technology, and process development, with the goal of substantially reducing daily fuel pollution over time (EarthShift Global helped create a life cycle assessment tool used in the Regulation’s development). Liquid fossil fuel suppliers are mandated to gradually decrease the carbon intensity of gasoline and diesel, targeting a 15% reduction (below 2016 levels) by 2030.

Anticipated to deliver a 26-million-ton reduction in greenhouse gas emissions by 2030, the Clean Fuel Regulations create economic opportunities and promote innovation. The Canadian government's $1.5 billion investment in the Clean Fuels Fund supports the production and adoption of low-carbon fuels, fostering early opportunities identified in the Hydrogen Strategy for Canada.

The regulations, which replace the 2010 Renewable Fuels Regulations, adopt a lifecycle approach, considering emissions throughout fuel production and use. To drive innovation at the lowest cost, a credit market is established, allowing regulated parties to buy or create credits for compliance.

The demand for credits under these regulations stimulates investment in low-carbon fuels and technologies, fostering economic opportunities for various participants. This approach supports jobs, grows the clean fuels industry, and encourages the purchase of zero-emission vehicles.

The Clean Fuel Regulations are part of Canada's comprehensive climate policies, contributing to the 2030 Emissions Reduction Plan. By increasing demand for low-carbon fuels, the regulations drive innovation, create jobs, and improve air quality, benefiting both the economy and the environment. Other jurisdictions, such as Alberta, British Columbia, California, Oregon, and several countries in the European Union, have successfully implemented similar clean fuel standards.

Industrial Carbon Tax: Aligning Industry Practices with Climate Goals

Canada’s Industrial Carbon Tax represents a pivotal step toward aligning industrial practices with climate goals. This tax, which puts a price on carbon emissions, serves as a catalyst for industries to embrace cleaner technologies and processes, ultimately diminishing their carbon footprint. This economic instrument reflects a commitment to realizing a low-carbon future and complements other regulatory measures guiding industries toward more sustainable practices.

In the broader context of carbon pricing, the Canadian approach since 2019 has been marked by flexibility, allowing provinces or territories to design their own systems or adopt the federal one. The federal government establishes minimum national standards to ensure uniformity and effectiveness in reducing emissions. If a province or territory fails to implement pollution pricing or proposes a non-compliant system, the federal system takes precedence. Strengthened standards were introduced in August 2021 for the 2023 to 2030 period.

The federal pricing system comprises a fuel charge on fossil fuels (gasoline and natural gas) and an Output-Based Pricing System for industries. Both components may be applicable in a jurisdiction. Manitoba, Nunavut, Prince Edward Island, and Yukon have both parts in effect. The federal fuel charge coexists with provincial industry systems in Alberta, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Saskatchewan. British Columbia, the Northwest Territories, and Quebec's pricing systems meet federal standards, rendering them exempt from the federal pricing system.

Extended Producer Responsibility (EPR) Regulations: Shifting Accountability to Producers

Extended Producer Responsibility (EPR) regulations are gaining traction globally as a mechanism to hold producers accountable for the environmental impact of their products throughout their lifecycle. In essence, EPR mandates that producers bear the responsibility for the proper disposal, recycling, or treatment of their products at the end of their life; over 100 major global corporations and many organizations have endorsed the concept.

EPR regulations push companies to adopt sustainable practices, from eco-friendly product design to efficient waste management. This transition towards a circular economy not only minimizes the environmental footprint of products but also encourages innovation in the development of more sustainable alternatives.

In the US, the states of California, Colorado, Maine, Maryland, and Oregon have passed EPR laws and are beginning to implement programs. A key element is the establishment in each jurisdiction of a Producer Responsibility Organization (PRO), which works on behalf of legally obligated companies to manage their packaging after use and coordinate related activities. One such organization is the Circular Action Alliance, founded by a group of large consumer goods and retail companies.


As the global community intensifies its efforts to combat climate change, tax and regulation transitions play a crucial role in steering businesses towards sustainable practices. Initiatives like the 45Q tax credit in the U.S., the LCFS and CFS in Canada, Extended Producer Responsibility regulations, and the Industrial Carbon Tax showcase a commitment to fostering environmental responsibility and driving the transition to a greener, more sustainable future. These measures not only incentivize cleaner technologies and practices but also reflect a collective determination to address the pressing challenges of our time through systemic change on a national scale.

To learn more about these initiatives and how Earthshift Global can support your own efforts, contact us for a free consultation.