The Liberal government tabled its first budget on March 22, 2016. While primarily focused on strengthening the middle class, the Budget contains a number of initiatives directed at the energy sector.

Investing in Clean Technology

The Budget includes an investment of $1 billion over four years to support clean technology, including in the forestry, fisheries, mining, energy and agricultural sectors. The Budget does not contain specifics as to how that investment will be allocated. That will be revealed in the coming months as part of the implementation of an Innovation Agenda.

The Budget sets out investments in clean technology R&D including:

  • $50 million over four years to Sustainable Development Technology Canada for projects that address climate change, air quality, clean water and clean soil.
  • $82.5 million over two years to Natural Resources Canada to bring clean energy technologies closer to commercialization.

Natural Resources Canada will also receive $62.5 million over two years to support the deployment of infrastructure for alternative transportation fuels, including charging infrastructure for electric vehicles and natural gas and hydrogen refueling stations.

To encourage businesses to invest in clean energy generation and energy efficient equipment, accelerated capital cost allowance rates will be implemented in two emerging areas: electric vehicle charging and electrical energy storage. The deferral of tax associated with these measures is expected to cost the federal government $19 million over a five-year period.

The Budget provides funding for the study of electricity infrastructure: $2.5 million will be made available over two years to facilitate regional dialogues and studies to identify the most promising electricity infrastructure projects with the potential to achieve significant GHG reductions. This is necessary, according to the government, given the significant investment in Canada’s electricity sector needed over the next 20 years to replace aging infrastructure and meet a growing demand for electricity.

Addressing Climate Change and Air Pollution

The Budget contains spending of $2.9 billion over five years to address climate change and air pollution issues, including:

  • $2 billion over two years to establish the Low Carbon Economy fund, which will be used to support provincial and territorial actions that reduce GHG within the period of Canada’s nationally-determined target.
  • $109.1 million over five years to Environment and Climate Change Canada to undertake actions in the areas of science, data reporting, policy and regulations to support climate change objectives.
  • $56.9 million over two years to support the transition to a cleaner transportation sector, including Canada’s continued participation in the development of international emissions standards from the aviation, marine and rail sectors.
  • $128.8 million over five years to support improved energy efficiency standards and codes for products, buildings, industry and vehicles and to further the development of a legislative framework for offshore renewable energy projects.
  • $10.7 million over two years to implement renewable energy projects in off-grid Indigenous and northern communities that rely on diesel and other fossil fuels for heat and power.
  • $61.3 million over five years to support international engagement by Environment and Climate Change Canada, Natural Resources Canada and Global Affairs Canada to advance Canada’s climate change and air pollution objectives, including in a North American clean energy and environmental agreement with the United States and Mexico.

Additionally, the Budget proposes a number of income tax rules to clarify the income tax treatment of emission allowances and ensure the appropriate tax treatment of transactions under provincial emission trading regimes.