The new strategy is an important moment for action to both reduce emissions in the country and support economic competitiveness in uncertain times. It follows months of speculation and some policy signals that introduced significant uncertainty about the government’s climate commitments.

The verdict? It ain’t perfect, but the strategy is a useful step forward.

Now the government needs to quickly implement it and flesh out the details it promises. That’s critical if Canada hopes to dramatically increase investments in low-carbon projects across the country and reduce uncertainty for businesses that stalls economic development. There’s never been a more urgent time: Canada’s trading partners are accelerating their energy transitions and Canada risks missing out on big economic opportunities right when they’re needed most.

So, what are some of the central pieces of the climate strategy that are encouraging – and where are some of the biggest uncertainties?

Top on the list is the commitment to strengthen industrial carbon pricing. This is one of the most important things the federal government can do to cut emissions while keeping costs low for businesses and having virtually no impact on the costs for consumers.

That last part is critical. Misinformation about this policy has ramped up recently, and it’s worth underlining that research shows that industrial carbon pricing has negligible costs for the average Canadian. The impact is around 0% on household consumption, according to Canadian Climate Institute research. There are a number of reasons for that: the carbon price applies to large emitters only; it adds very low costs on those businesses (think a Timbit per barrel of oil); moreover, these already-low costs on industrial goods are a small fraction of the final costs for finished consumer goods.

The climate competitiveness strategy commits to fixing the industrial-carbon-pricing benchmark, which defines minimum standards for provincial systems. It also commits to strengthening the backstop, which will be decisively applied in provinces that do not meet the benchmark. In addition, the government will be setting a carbon-price trajectory that is measured in decades and sets Canadian industry on the path to net-zero emissions.

Each of these commitments is positive. But the details here will matter greatly; it’s no exaggeration to say they will make or break this policy’s effectiveness, for both Canada’s emissions and its competitiveness.

Some other highlights included a commitment to finalizing methane regulations for oil and gas, which has been a long-standing promise to slash these powerful emissions by 75% over the next five years. Canada has already made big progress here, and these are lower-cost emission reductions that provide opportunities for innovative Canadian companies to lead the charge.

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The strategy also recognizes the importance of dramatically increasing investment into Canada’s electricity system: it commits to soon implementing the clean electricity investment tax credit and restates its commitment to the clean electricity regulations. It recommits to finalizing a national climate investment taxonomy for the financial sector by the end of 2026. And it dedicates $2 billion for a critical minerals sovereign fund to invest in critical mineral projects and companies using equity investments, loan guarantees and offtake agreements. These financial risk-sharing tools can unlock private-sector investment in Canadian projects to help seize a growing opportunity in the global energy transition.

There was nothing new on the fate of the Electric Vehicle Availability Standard, though we should hear more “in the coming weeks.” And the strategy is almost silent on climate adaptation. Investing in adaptation is not just a “nice to have”; upgrading infrastructure for extreme weather will be crucial to saving billions of dollars in costs from disrupted trade and other economic impacts, and should be a key component of any climate competitiveness strategy.

I’m often asked my opinion on how the new government is doing on climate change. My honest answer is “I’m hopeful but increasingly impatient.” Now that the government has declared its climate change intentions, it’s time to get a move on.

Rick Smith is president of the Canadian Climate Institute, the co-author of two bestselling books on the effects of pollution on human health, and the executive producer of Plastic People, a 2024 documentary chronicling the damage done by microplastics in the human body.

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In particular, the budget, released Tuesday, failed to clarify how the government plans to make up for its $14-billion climate funding shortfall – the gap that Corporate Knights has identified between federal commitments and funds disbursed as of the end of fiscal year 2024.  

While the federal government didn’t trumpet climate as a priority in its main communications about the budget, new climate funding over the next 10 years was the single largest spending increase in the budget, with a total of $14.2 billion in new climate funding commitments through 2035, according to calculations by Corporate Knights.  Two-thirds of that climate funding is via clean-economy tax credits meant to expire by 2035, while most new spending items are fanned out over the next five years.

The federal government has upped the ante on its running tally of climate funding commitments from 2015 through 2035, from more than $120 billion in Budget 2023 to more than $160 billion in Budget 2024. (While $40 billion in climate spending has been announced this year, only $14.2 billion of that was new in this budget.) But Budget 2024 reissued the same drawn-out timeline for the five climate-investment tax credits that were announced last year. And most of the new spending is backloaded into future years, with less than $1 billion flowing in 2024 to close Canada’s climate funding gap.  

When it released the 2022 budget, the federal government estimated the overall climate funding gap in Canada to be up to $125 billion per year. Over the next 10 years, planned federal climate investment averages $15 billion per year, mostly in the form of investment tax credits. 

This leaves a gaping hole of up to $110 billion a year, which the federal government along with other levels of government and the private sector will need to fill if Canada is going to meet its climate commitments and seize upon clean-economy growth opportunities.  

The federal government expects investments and tax credits for carbon capture, utilization and storage and clean technology to receive royal assent by June (six months after they were introduced in Parliament). It also plans to introduce legislation for the other previously announced tax credits for clean hydrogen, clean technology manufacturing and clean electricity this fall. The government plans to introduce a sixth climate-investment tax credit announced in this budget, called the Electric Vehicle Supply Chain Investment Tax Credit, in 2025. 

The government now estimates that its suite of climate-investment tax credits is worth up to $93 billion, up from $80 billion in Budget 2023. Normalized to gross domestic product, this would translate to about $1 trillion in the U.S., on par with the higher end of clean-economy funding the U.S. Inflation Reduction Act will provide.  

Considering that the lion’s share of the federal government’s planned climate funding over the next decade is via tax credits, it is concerning that none of the government’s six clean-economy tax credits worth $93 billion has yet been passed into law. 

But the government’s current timeline indicates that the most recently announced tax credit for EV supply chains may not be passed into law until after the next federal election. As the United States showed with the Inflation Reduction Act (with total climate spending ranging from $369 billion to $1.2 trillion), targeting clean-economy growth through more straightforward tax rebates tied to actual clean-economy outputs (such as kilograms produced of clean hydrogen), it is possible to move much faster with larger sums of money.  

 The federal budget’s running tally of climate funding commitments through 2035 leapt by almost $40 billion over the past year to $160 billion.

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