Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Presenting the country's first budget in two years, Canada's
Finance Minister Chrystia Freeland said 19 April the government
will spend C$17.6 billion (US$14 billion) on "green recovery"
programs for fiscal year 2021/22 that began on 1 April 2021.
During this period, Ottawa also will issue its first green bond,
with a target of C$5 billion (US$4 billion).
The Canadian budget, which is subject to parliamentary approval,
includes significant investments in clean energy programs just as
countries are gearing up to raise their climate ambitions in
connection with the upcoming Leaders Climate Summit hosted by US
President Joe Biden.
Revealed in the proposed budget is a forecast that Canada's GHG
emissions will fall by 36% compared with 2005 levels by 2030 if the
policies as proposed are put into effect. This GHG target
represents a sharper cut compared with the target of 30% designated
as the country's nationally determined contribution
(NDC) in 2016 and then updated in 2017.
However, Environmental Defence, an advocacy group, stated that
the implied 36% GHG emissions reductions cut is inadequate, saying
that "Canada's fair share," given its status as a high-emitter
nation, is a 60% reduction.
NDCs are a focus of discussion among major economic nations this
week, as Biden hosts the Leaders Climate Summit. The US' current
NDC is a 26-28% reduction from 2005 levels, promised by the Obama
administration; Biden is widely expected to issue a revised NDC, or
at least the emissions targets for it, as part of the summit
activities (see coverage here and here).
The green programs in the Liberal Party budget include a 50%
reduction in income tax rates for businesses that manufacture
zero-emission technologies as well as tax incentives to adopt
carbon capture, utilization and storage (CCUS).
The budget also includes funding for accelerated investment in
clean energy technologies. Tax credits are set to be expanded under
this budget request to equipment for pumped storage hydro,
renewable fuel production, hydrogen, and some forms of wave, tidal,
and geothermal energy projects.
The budget also includes a Clean Fuels Fund of C$1.5 billion and
a Clean Electricity Fund of C$77.9 million to ensure 100% renewable
energy purchases for federal buildings over time. To support new
technology, the budget includes more than C$45 million over three
years for a Critical Battery Minerals Centre for excellence and
research on minerals processing and refining.
"It is a plan that embraces this moment of global transformation
to a green, clean economy," said Freeland, who also has served as
the country's deputy prime minister since 2019.
To incentivize private-sector investment, the budget provides
C$1 billion over five years for cleantech projects that need
"investment at a scale and time horizon outside the scope of
traditional project financing."
The budget also includes C$56 million, to be spent over five
years, to work with the US to coordinate standards for zero
emission vehicle charging stations. The budget says Canada has more
than 6,000 public EV charging stations and hydrogen refueling
stations operating today.
On the energy efficiency side, the budget includes interest-free
loans for homeowners to install energy efficiency upgrades.
Canada already has one of the world's highest carbon fees, which
rebates 90% of the collected revenue to consumers each quarter as
Climate Action Incentive Payments. The budget document states the
government will consider adding a border carbon adjustment, as it
"will launch a consultation process … in the coming weeks" with
provinces and businesses involved in imports and exports.
Reaction
WaterPower Canada praised the budget, both for support of
hydropower and for backing projects to develop green hydrogen from
carbon-free hydroelectricity. It highlighted the C$40.4 million for
a feasibility study of the Atlin Hydro Expansion Project in Yukon
and the Kivalliq HydroFibre Link Project in Nunavut, and a
partnership grant with First Nations, Inuit, and Métis communities
for C$36 million.
WaterPower Canada added that it supports the expanded investment
of C$5 billion ($4 billion) over seven years in the Net Zero
Accelerator, which can be used for green hydrogen, among other
projects. The accelerator, which was launched in December 2020, now
is backed by C$8 billion.
The budget's investment tax credit for capital invested in CCUS
projects was backed by energy producers and industrial users, but
looked at skeptically by the environmental community. The
government said its goal is to reduce emissions by at least 15
million mt of CO2 annually. A 90-day consultation period will be
opened soon to design the tax credit, and the budget document
states it will not be available for enhanced oil recovery
projects.
Environmental Defence said it is concerned about the incentives
for the CCUS program. "Without robust conditions, this money could
support technologies, including plastic waste-to-fuel projects,
carbon capture and fossil fuel-derived hydrogen, that will delay a
transition away from fossil fuels and single-use plastics and lock
us into decades of increased carbon pollution," it said in a
statement on 19 April.
Overall, however, Environmental Defence had positive things to
say about the plan. "Budget 2021 contains unprecedented investments
to tackle climate change and a range of measures targeting other
environmental priorities, including a nearly $500 million
reinvestment in the Chemicals Management Plan that will provide an
opportunity for improvements to the ongoing evaluation and
management of toxic chemicals," it stated.
A week earlier, Environmental Defence issued a report that showed
federal government subsidies for fossil fuel industries totaled
C$18 billion in 2020, or more than the government's new climate
commitment over the next 10 years.
Overall, Canada's new budget includes C$101 billion over the
next three years for economic development to rebound from COVID-19
impacts — which was noted as priority No. 1 for the nation. The
government foresees budget deficits every year through FY 2026.
Those deficits would shrink from more than C$350 billion for
FY2020/21 (which ended on 31 March 2021) to C$154.7 billion this
fiscal year, to about C$31 billion in FY 2025/26.
The Fraser Institute, a think tank, criticized the government
for adding so much red ink. "While emergency spending was necessary
to deal with the fallout of the pandemic, COVID-related spending
only constitutes a relatively small portion of program spending
this year … only 12% will be spent on measures directly related to
COVID," it said in a critical analysis.
If the government's analysis is accurate, the Fraser Institute
said that at the end of FY2025/26, Canada's debt-to-GDP ratio will
be 51.2%, its highest since 1999.
