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Enhanced Oil Recovery Joins the CCUS Credit: What That Means for Clean Economy Investors
Canada is expanding eligibility under its Carbon Capture, Utilization & Storage tax regime by recognizing Enhanced Oil Recovery—read what qualifies, timing, and game-changing opportunities.
By NomadicTax Research Team • 5-8 min read • June 18, 2026
## What’s Changing with the CCUS Tax Credit
In the Spring Economic Update 2026, the Government of Canada proposed to **expand the Carbon Capture, Utilization, and Storage (CCUS) tax credit** to include **Enhanced Oil Recovery (EOR)** as an eligible use starting the day of the Update. Previously EOR had not qualified. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/chap1-en.html?utm_source=openai))
Other related changes:
- Clean economy investment tax credits for capture, transportation, and storage/use equipment will carry new **rates**: 30% for direct air capture equipment, 25% for other capture equipment, and 18.75% for transportation and storage. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/chap1-en.html?utm_source=openai))
- These changes aim to attract investment in clean technologies and infrastructure. High-emitting industries may use these credits when deploying EOR in conjunction with permanent storage. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/pdf/update-miseajour2026-eng.pdf?utm_source=openai))
## Who Can Benefit
- **Energy companies** using or planning EOR in eligible jurisdictions will now be able to access CCUS credits.
- **Clean tech startups** or suppliers of capture/processing equipment may see growing demand.
- **Investors** seeking stable government-incentivized projects, particularly in clean energy and environmental sectors.
## Practical Steps for Businesses
1. Ensure your project qualifies under CCUS rules and is designated by Environment Minister.
2. Identify which parts of the project fit capture, transportation or permanent storage—and apply credits at appropriate rate.
3. Include EOR only if CO₂ is permanently stored—a critical condition. Temporary injection without storage may not qualify. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/chap1-en.html?utm_source=openai))
4. Use advance income tax rulings for large, nation-building projects to lock in certainty. Canada has announced that CRA will **prioritize such rulings**. ([budget.canada.ca](https://budget.canada.ca/update-miseajour/2026/report-rapport/chap1-en.html?utm_source=openai))
## Example Scenario
A company builds an EOR facility paired with permanent geological storage:
- CO₂ capture equipment cost: $20 million → eligible for **25%** credit = $5 million;
- Transportation infrastructure: $10 million → at **18.75%** credit = $1.875 million;
- Direct air capture component (if any): higher 30% rate, if applicable.
If EOR is necessary for oil production enhancement and CO₂ storage is permanent, overall project economics improve by significantly reducing net capital cost via tax credits.
## Things to Keep in Mind
- Must confirm **jurisdiction designated** by environment minister for eligibility.
- Keep detailed engineering and environmental records to prove permanence of CO₂ storage.
- Understand interaction with other tax incentives and provincial programs.
- Be aware that these credits are claimed across multiple taxation years—capital cost allowances, investment timelines matter.
## Key takeaway
The inclusion of EOR under CCUS credits marks a major evolution in Canada’s clean economy tax policy. For those in the energy sector, clean tech, and climate finance, this opens up fresh strategic options, improved returns, and stronger incentives to invest in emission reduction technologies.