Summary of federal budget proposals related to addressing climate risk
20 April 2021
The Canadian federal budget outlined more than $17 billion to reduce greenhouse gas emissions across the economy and help drive a green economic recovery from the pandemic-induced slowdown in a mix of spending and tax relief:
- $5 billion to the Net Zero Accelerator fund that helps large-emitting companies from sectors such as cement and steel to reduce their greenhouse gas emissions.
- 50% cut to corporate taxes for companies that manufacture zero emission devices like solar panels and electric vehicles for the next 10 years.
- Accelerated capital cost allowance for qualifying clean energy equipment.
- A commitment to introduce a new investment tax credit for capital investments in carbon capture, utilization and storage (CCUS) to be designed via consultation in the coming months.
- Interest-free loans of up to $40,000 for an estimated 200,000 homeowners to retrofit their homes through upgrades in energy efficiency and clean energy. The CHMC will run this program, worth an estimated $4.4 billion.
The Global Risk Institute (GRI) recently published the paper “Tax Incentives to Fight Climate Change” where it called for a mix of direct financing, subsidies and tax incentives for clean tech and carbon emissions reduction. GRI notes that the budget does not include any measures to provide Canadians the opportunity and incentive to connect their savings to climate objectives, as recommended by the Expert Panel on Sustainable Finance.
The budget’s proposed new programs will help reduce greenhouse gas emissions in Canada by 36 per cent compared to 2005 levels by 2030, the government has said, which goes beyond the long-standing target of 30 per cent.
Further details on more ambitious interim targets from Canada and other major emitters are expected to be announced at President Biden’s Earth Day climate summit later this week. Canada’s budget priorities were made in the context of our national pledge for net zero carbon emissions by 2050, as well as our promise to restore and conserve 25% of our land and marine ecosystems.
GRI is engaged in expanding the financial sector’s understanding of climate risks while identifying proactive responses and new market opportunities.