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Budget 2025 takes clear steps to strengthen Canada’s climate competitiveness

Press Release

Nov. 5, 2025

Success will hinge on swift implementation and more concrete details to create policy certainty and attract investment.

OTTAWA — Rick Smith, President of the Canadian Climate Institute, made the following statement in response to the federal government’s Climate Competitiveness Strategy outlined in Budget 2025:

“The global economic activity generated by decarbonization is one of the greatest opportunities of this century. Canada’s Climate Competitiveness Strategy, announced by the federal government today, is a good first step toward ensuring Canada can succeed in this context. If Canada aims to double non-U.S. exports over the next decade, it will be critical to increase trade with Europe, Asia, and the Americas—all of which continue to take strong action to accelerate the shift to renewables, electric vehicles, and other low-carbon electric technologies.

“The budget proposes actions and delivery timelines to bolster Canada’s climate competitiveness—especially on core policies such as industrial carbon pricing, stronger methane regulations, sustainable investment guidelines, and tax credits for expanding clean electricity. We look forward to working with the federal government to ensure these essential policies result in more abundant and affordable energy, attract new investment to Canadian industries, support more well-paying jobs and economic growth across the country, and help make communities more secure and resilient.

“Swift implementation of climate competitiveness priorities will define how Canada succeeds or fails. In the absence of some remaining details, policy uncertainty persists, undermining Canadian firms’ ability to attract investment.”

KEY POLICY DETAILS

For the last six months, the Climate Institute has emphasized the importance of several climate and competitiveness priorities. This budget addresses each of them, with varying levels of detail:

Industrial carbon pricing:

Modernizing industrial carbon pricing remains one of the most important things the federal government can do to reduce emissions while keeping costs low for businesses and having virtually no impact on the cost of living. Doing so requires fixing problems with provincial carbon credit markets, and creating certainty around carbon markets beyond 2030 so that businesses can make big investments in low-carbon projects.

Critically, Budget 2025 makes a clear commitment to bring more certainty to industrial carbon pricing. It commits to fixing the federal benchmark (which defines minimum standards for provincial systems), improving the federal backstop (which will be decisively applied in jurisdictions that do not meet the benchmark), and developing a long-term price trajectory. The details and specifics of these changes will make or break this policy’s effectiveness, both for the climate and competitiveness. We look forward to contributing to the government’s efforts to improve this critical policy tool.

Methane regulations for oil and gas:

We support the government’s commitment to finalize enhanced rules to reduce methane emissions for the oil and gas sector. Oil and gas emissions remain a barrier to Canada’s overall climate progress and make up nearly a third of the country’s greenhouse gases. Stronger rules to reduce methane pollution would build on an impressive record of success in provinces like B.C., Alberta and Saskatchewan, and create new opportunities for Canadian companies that have been leaders in commercializing technologies to manage methane. And methane represents some of the lowest-cost emissions reductions available.

Clean Electricity Investment Tax Credit:

Budget 2025 explicitly recognizes the importance of dramatically increasing investment into Canada’s electricity system, and commits to introduce legislation soon implementing the Clean Electricity Investment Tax Credit to support provinces in upgrading and expanding their electricity grids, as well as enhancements to existing tax credits. We also support the decision to maintain the federal Clean Electricity Regulations, which will help accelerate the transition to clean, reliable power. Low-carbon electricity is already a major Canadian competitive advantage, and making sure electricity remains abundant and affordable will be essential for future competitiveness as demand continues to grow.

Climate Investment Taxonomy:

Importantly, the Budget recommits Canada to finalizing a national climate investment taxonomy (referred to as “Made-in Canada Sustainable Investment Guidelines”) for the financial sector by the end of 2026. The voluntary guidelines will provide much-needed criteria to help investors evaluate material risks and opportunities from transition. Budget 2025 also notes the government’s intention to explore a Sustainable Bond Framework in support of issuing both green and transition bonds to be aligned with a Canadian taxonomy, further mobilizing investment to support the transition.

Electric Vehicle Availability Standard:

While Budget 2025 notes that the national Electric Vehicle Availability Standard is currently under review, we urge the federal government to maintain the core elements of the policy, to help increase Canadians’ access to high-quality, lower-cost electric vehicles. The federal government should follow through on its commitment to bring clarity and transparency to any change to the policy within the following weeks.

Resilient communities and infrastructure:

Budget 2025 makes little mention of how the federal government will support provinces and communities in making infrastructure more resilient to climate-fueled extreme weather. Investing in adaptation is not a ‘nice to have’—upgrading infrastructure for current and future 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.

In particular, the announcement of $51 billion for a new Build Communities Strong Fund should be carefully designed to ensure that projects funded through this program do not make Canada more vulnerable to climate change. Funded projects should both strengthen resilience by building infrastructure that can withstand a harsher and more volatile climate, and avoid encouraging new development in areas that are—or will become—unsafe from threats such as flooding and wildfire.

Critical minerals:

Budget 2025 explicitly tackles some of the concerns the Climate Institute raised in our report, Critical Path, which called for policy to de-risk investment in Canadian critical minerals projects. The Budget responds to this concern by committing $2 billion dollars in a new Critical Minerals Sovereign Wealth Fund to make strategic investments in critical mineral projects and companies. This approach, if well-implemented, will unlock private investment in Canadian projects to help seize a growing opportunity in the global energy transition, while also protecting the economic security of Canadian electrification supply chains.

Indigenous housing:

Budget 2025 commits to addressing the unique and persistent housing and infrastructure challenges facing Indigenous communities. It commits to work with Indigenous leadership in developing Build Canada Homes to ensure it meets First Nations, Inuit, and Métis identified needs and priorities. It also confirms $2.8 billion for urban, rural, and northern Indigenous housing as well as an increase in the Canada Infrastructure Bank’s target for investments in Indigenous infrastructure from at least $1 billion to at least $3 billion. As it implements these changes, the federal government should work to link these actions with both reconciliation and climate objectives.

RESOURCES

CONTACTS

Claudine Brulé (Eastern Time)
Lead, Communications and External Affairs
Canadian Climate Institute
(226) 212-9883

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