The background: Since coming to power in 2015, Prime Minister Justin Trudeau has stressed his government’s commitment to fighting climate change. As Canada’s economy is slowly recovering from the effects of Covid-19 amid renewed global interest in climate issues, the government’s first two-year budget seeks to capitalize on the recovery of its environmental policies.
“[The federal budget is] a plan that embraces this moment of global transformation into a green and clean economy, ”Freeland said in his budget speech. “In 2021, job growth means green growth.”
Another senior official summed up the government’s thinking: “Climate change is now an innovation and a job opportunity.”
This is how the Trudeau government intends to meet its climate goals.
Direct expenses: As part of the government’s stated goal of reducing Canada’s carbon dioxide emissions to zero by 2050, while pursuing a more activist role in guiding the economy, Ottawa is pumping C $ 5 billion over seven years into Net Zero Accelerator .
The program, announced in December with an initial funding of C $ 3 billion, aims to stop Canadian companies in traditional sectors to reduce their carbon footprint, whether by stimulating large emitters such as oil and steel producers. decarbonizing or encouraging automotive and aerospace manufacturers to adopt clean technologies.
In the same vein, directing private industries to pursue actions deemed worthy by the Liberal government, Ottawa will also provide US $ 1 billion over five years “to help attract private sector investment” in the clean technology sector. Canada.
One of the biggest new items in environmental budget initiatives aims to fulfill a liberal promise in the October 2019 elections to conserve 25% of Canada’s oceans and lands by 2025. The federal government plans to spend C $ 2.3 billion on over five years to conserve up to one million square kilometers of land and inland waterways. The government also promises to create “thousands of jobs” through “its historic investment in Canada’s natural heritage,” but gives no details.
Tax reductions: In an important budget for maximizing tax revenues, a group will see a lower tax bill, at least temporarily – producers of zero-emission technologies. It is a broad umbrella that includes manufacturers of wind turbines, solar panels, electric vehicles, batteries and fuel cells, as well as manufacturers of biofuels and green hydrogen.
Companies that earn at least 10% of their total gross revenue in Canada from eligible zero-emission efforts can get 50% of corporate and small business income tax rates, although the tax cut will start to be phased out in 2029 and will be eliminated by 2032.
Home is where it is green: Building on a program announced in the Fall 2020 Economic Declaration to encourage homeowners and homeowners to make energy-efficient upgrades, Ottawa intends to provide interest-free loans of up to C $ 40,000 each to homeowners. houses to carry out “deep modernizations” such as the replacement of oil furnaces, sliding windows and poor insulation.
Other measures: As expected, Canada intends to capitalize on the 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 2021-22, which the budget said would be “the first of many green bond issues”.
With the federal carbon tax passed its last legal hurdle with a thumbs up from the Supreme Court last month, rebate payments to consumers will begin to become more visible next year. At this time, Canadians receive payments as repayable credit when they file their taxes, but starting in 2022, the money will come out every quarter as regular benefits.
To be determined: Some important components of Ottawa’s climate-related budgeting measures that could have an oversized impact on Canada’s ability to meet its climate targets have not yet been highlighted.
There have been numerous calls from industry, especially in the oil and gas sector, for Ottawa to introduce a tax credit to encourage carbon capture, use and storage (CCUS). Ottawa says it is pursuing an investment tax credit for capital invested in CCUS projects and that the measure could reduce CO2 emissions by at least 15 megatons a year.
However, no dollar figure was attached to the budget, which said that the final cost is awaiting a 90-day consultation period without an official start date.
Finally, with nations around the world implementing different types of carbon pricing, and some countries not charging pollution prices at all in their domestic industries, the government seeks to provide a level playing field for Canadian businesses. It is exploring a carbon adjustment system at the border that would impose appropriate taxes on imports and exports, although the government says this will also require a “consultation process”.