Waning voter and political support for the consumer carbon tax, recently renamed the Canada Carbon Rebate, and the spate of pre-budget announcements over the last several weeks signals that Budget 2024 may be a climate-light budget.

The climate bright spot is a commitment to spend $903.5 million on improving energy efficiency, lowering energy costs, and reducing emissions of existing and new homes. These measures are part of the federal government’s broader efforts to increase housing supply and affordability. The dedicated funding for climate initiatives is a recognition that increasing housing supply and affordability go hand-in-hand with fighting climate change. This is smart policy and a rare opportunity for the government to have its cake and eat it too. The buildings sector, after all, is the third heaviest emitting sector, releasing an estimated 92 MT of CO2e in 2022 with heating and cooling accounting for 75% of residential operating emissions.

Much has been written about the Trudeau government’s climate policies. Some would say they are over-indexed on ideology and under-indexed on pragmatism. The budget measures announced in Canada’s Housing Plan show a government thinking more strategically and pragmatically about how to integrate climate into other policy issues that are top of mind for Canadians. And, also letting these headline policy issues take center stage without diminishing climate to a walk-on role.

Outside of housing, we are watching for three other  climate-related announcements, and whether the Trudeau government’s newfound pragmatic approach to climate will spill over to these policy areas. These commitments are top of mind for Indigenous and business communities based on what we’ve heard in the field as part of the Climate Action Institute’s research and engagement activities across all swaths of Canadian society from coast to coast. These outstanding policy decisions—with only one requiring an outlay of new money—will keep climate action moving forward by providing program and regulatory certainty. That is a prerequisite for businesses and investors to unleash the $60 billion needed annually on supply-side capital flows if Canada is to achieve Net Zero by 2050. Budget 2024 could very well be a climate budget in all but name if the government acts decisively and quickly on these matters.

  1. Funding and program eligibility details for the Indigenous loan guarantee program. The 2023 Fall Economic Statement announced the Trudeau government’s intention to introduce an Indigenous loan guarantee program. The program would address longstanding structural governance and financial management roadblocks preventing Indigenous communities from borrowing vast sums of capital. Capital that would open the door for more Indigenous communities to own an equity stake in major projects. The lack of program and funding details to date has meant that project developers and Indigenous communities are hampered in their efforts to unlock $225 billion in economic opportunities tied to the vast amount of land, energy and mineral resources under Indigenous control or ownership. These are key to Indigenous economic reconciliation and the country’s transition to a low-carbon economy.
  2. Update on clean investment tax credits eligibility and timing. Businesses welcomed the federal government’s five climate-related investment tax credits (ITCs). The Clean Electricity Investment Tax Credit—the last of the ITCs announced—is estimated by the Canadian Climate Institute to provide $25.7 billion in tax incentives between 2024 and 2035. The tax incentives will lower capital costs and put businesses in a better position to compete against the Inflation Reduction Act for domestic and foreign capital flows. Yet, businesses have been hesitant to move ahead with their planned capital projects. They want certainty that the ITCs will materialize, and their projects will meet all eligibility criteria. These concerns are not unfounded. The pace of climate policy making suggests there may not be enough runway room before the next federal election to pass all the legislative amendments required to operationalize the ITCs. An update on the ITC program design including finalized eligibility criteria, and the government’s targeted dates for clearing all legislative hurdles would provide businesses and investors with the clarity they need to start putting their plans and capital into motion.
  3. Update on Impact Assessment Act. About 150 mining and forestry major projects were planned or already under construction in May 2023. The economic value of these projects is $99.2 billion. The Supreme Court’s decision in October 2023 on the federal government’s overreach of applying the Impact Assessment Act added more regulatory uncertainty to the permitting process for resource projects. A detailed game plan of how the government intends to address the Supreme Court’s ruling will provide resource companies—in particular those with planned projects—and investors with the regulatory and timing certainty needed to decide if, where, and when to deploy their capital.

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