The backdrop: Since coming to power in 2015, Prime Minister Justin Trudeau has underscored his government’s commitment to fight climate change. As the Canadian economy slowly rebounds from the effects of Covid-19 amid renewed global interest in climate issues, the government’s first budget in two years seeks to put the recovery at the service of its environmental policies.
“[The federal budget is] a plan that embraces this moment of global transformation towards a green and clean economy, ”Freeland said in his budget speech. “In 2021, job growth is synonymous with green growth.”
Another senior official summed up the government’s thinking: “Climate change is now an innovation and a job opportunity.”
Here’s how the Trudeau government plans to meet its climate goals.
Direct expenses: As part of the government’s stated goal of reducing Canada’s carbon dioxide emissions to net zero by 2050, while pursuing a more activist role in guiding the economy, Ottawa is injecting $ 5 billion Canadians over seven years in the Net Zero accelerator.
The program, announced in December with initial funding of C $ 3 billion, aims to encourage Canadian companies in traditional sectors to reduce their carbon footprint, whether by encouraging large emitters like oil and steel producers to decarbonising or by encouraging automotive and aerospace manufacturers to adopt clean technologies.
Likewise, to encourage private industries to pursue actions that the Liberal government deems worthy, Ottawa will also release C $ 1 billion over five years “to help attract private sector investment” to the Canadian sector. clean technologies.
One of the most important new elements among the budget’s environmental initiatives is to deliver on the Liberal promise in the October 2019 election to conserve 25% of Canada’s oceans and lands by 2025. The federal government plans to spend C $ 2.3 billion over five years for the conservation of up to one million square kilometers of land and inland waterways. The government also promises to create “thousands of jobs” through its “historic investments in Canada’s natural heritage”, but gives no details.
Tax cuts: In a budget focused on maximizing tax revenue, one group will see a smaller tax bill, at least temporarily – from the makers of zero-emission technologies. It’s a broad umbrella that includes manufacturers of wind turbines, solar panels, electric vehicles, batteries and fuel cells as well as producers of biofuels and green hydrogen.
Businesses that earn at least 10% of their total gross revenues in Canada through qualifying emission reduction efforts can get 50% of their corporate and small business income tax rates, although tax relief will begin to disappear in 2029 and will be eliminated. by 2032.
Home is where the green is: Building on a program announced in the Fall Economic Statement 2020 to encourage homeowners and homeowners to make energy efficient upgrades, Ottawa plans to provide C $ 4.4 billion in interest-free loans to a maximum of C $ 40,000 each to homeowners for “major renovations”. such as replacing oil furnaces, drafty windows and poor insulation.
Other measures: As expected, Canada plans to take advantage of growing demand from global investors for fixed income securities that fund green infrastructure projects and other sustainability initiatives. Canada hopes to raise C $ 5 billion by issuing green bonds in fiscal year 2021-22, which the budget says will be “the first of many green bond issues.”
With the federal carbon tax clearing its latest legal hurdle with a push from the Supreme Court last month, rebate payments to consumers will start to become more visible next year. Currently, Canadians receive payments in the form of a refundable credit when they file their income tax returns, but starting in 2022, the money will be paid quarterly in the form of regular benefits.
To be determined: A few important elements of Ottawa’s climate-related budget measures that could have a disproportionate impact on Canada’s ability to meet its climate goals have yet to be defined.
There have been numerous calls from the industry, particularly in the oil and gas sector, for Ottawa to introduce a tax credit to encourage carbon capture, use and storage (CCUS). Ottawa says an investment tax credit for capital invested in CCUS projects is imminent and that the measure could reduce CO2 emissions by at least 15 megatonnes per year.
However, no dollar amount has been attached to the budget, which indicates that the final cost is pending a 90-day consultation period with no formal start date.
Finally, as countries around the world implement different types of carbon pricing and some countries charge zero pollution prices to their domestic industries, the government seeks to level the playing field for Canadian businesses. It is exploring a border carbon adjustment program that would apply appropriate levies on imports and exports, although the government says this will also require “a consultative process”.