Department: Natural Resources Canada

NRCan

Advancing a zero-emissions electricity grid

Achieving a net-zero emissions electricity system by 2035 is a foundational climate solution that will unlock emissions reductions and affordable energy for other sectors. Budget 2024 saw progress on the Clean Electricity Investment Tax Credit (ITC), including the addition of inter-provincial transmission projects as an eligible category, but funding for the credit was not increased. The new Indigenous Loan Guarantee Program is also a good step, but more is needed to support Indigenous leadership in clean electricity.

Low-income and vulnerable people — including remote and Indigenous communities — must have affordable and equitable energy access as Canada transitions to a clean electricity grid. Siting of renewable installations on traditional Indigenous territories, and reducing reliance on diesel in Indigenous and remote communities, requires special care and attention.

Achieving net-zero electricity by 2035 and modernizing the grid will require strong collaboration among all orders of government, including Indigenous governments, as well as with utilities and system operators. Rapid market transformation necessitates immediate federal funding and clear policy signals for future support.

Demand-side management (DSM) is one of the key strategies that can help address both equity and affordability concerns. Enabling utilities to decrease demand instead of increasing generation gives them more options to operate and plan the grid while making electricity more affordable for consumers. It also makes it easier to integrate more low-cost renewable electricity and storage in the grid, further increasing affordability. It uses incentives or market mechanisms to assign monetary value to the benefits that energy efficiency, demand response, and distributed energy resources offer to utilities and grid operators. Companies and consumers often get paid for participating in DSM programs which adds to their savings.

Canada is a signatory to the International Energy Agency’s commitment to doubling the global average annual rate of energy efficiency improvements to over 4% by the end of this decade, but has the lowest annual energy efficiency improvements among G7 countries. The Canada Electricity Advisory Council also noted in their May 2024 “Powering Canada” report that Canada is lacking investment in DSM and initiatives for modernizing the grid.

The federal government could play a vital role in reducing energy demand and supporting clean electricity generation through the following investments in Budget 2025.

Total Recommended Investment: $32.57 billion over five years

  • Interprovincial transmission: $20 billion over five years for strategic interregional transmission projects to support clean electricity infrastructure deployment and system reliability and to top up the existing Investment Tax Credit (ITC), consistent with the Canada Electricity Advisory Council’s recommendations. The ITC should be conditional on securing the support and free, informed, and prior consent of Indigenous communities. [NRCan]
  • Strategic support for Indigenous-led and community-led generation: $4.8 billion over five years for investment in clean electricity projects and programs targeted to benefit Indigenous, low- income, and vulnerable communities, with a focus on providing communities the necessary resources to engage effectively in consultation processes. These federal investments should take the form of grants, not loans, wherever possible. [NRCan]
  • Indigenous leadership and partnerships: $800 million over five years for programs specifically aimed at building Indigenous leadership and partnerships for clean energy deployment in remote Indigenous communities. Funding programs should be flexible and support Indigenous-led projects that reduce diesel consumption in homes and buildings through deep energy retrofits and through renewable heat and power generation. [Lead: NRCan; Involved: CIRNAC, ISC, HICC]
  • $15 million over five years to enable the Smart Renewables and Electrification Pathways Program (SREP) and the Canada Infrastructure Bank to support projects in equity-deserving communities that will help build their capacity and increase access to the programs that would deliver social, environmental, and economic benefits. [NRCan, CIB]
  • $355 million over five years to support provinces that have made public commitments to work toward a net-zero grid by 2035 to create plans to achieve that goal. Planning should involve consultation with provincial stakeholders and in partnership with Indigenous governments, as well as broader engagement and collaboration with regional stakeholders, such as governments, communities, regulators, utilities, and system operators in neighbouring provinces and states. [NRCan]
  • $6.5 billion over five years allocated to DSM initiatives that reduce customer bills, enable efficient use of grid and generation resources, allow for increased use of distributed energy resources, and lead to incremental emissions reductions. [NRCan]
  • $100 million over five years for relaunching the Smart Grid Program for grid modernization, enhancing the resilience and efficiency of the power grid. Launched in 2021, the Smart Grid Program has enabled 21 grid modernization projects across the country. [NRCan]
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Canada’s industrial carbon pricing system, and complementary mechanisms

Canada’s industrial carbon pricing system is intended to reflect the cost of pollution, ensuring that industrial emitters pay for the costs of emissions. It provides price signals needed by industry to invest in significant decarbonization projects. Its stability and predictability is key to stimulating investment in clean technology and large scale projects, which often take years to evaluate and implement. Established in 2022, the Canada Growth Fund can complement and supplement the industrial carbon pricing system in facilitating the significant investments required to decarbonize all sectors. The fund is also meant to serve as the principal federal entity to issue Carbon Contracts for Difference (CCfDs), or carbon credit offtake agreements, to de-risk investments.

Recommendations [ECCC, FIN, NRCan]:

  • Driving emissions reductions through strong industrial carbon pricing is smart fiscal policy, and Budget 2025 needs to commit to a fulsome assessment of the federal output-based pricing system (OBPS) and by extension, equivalent provincial systems, to ensure the long-term integrity of credit markets. This assessment is set to conclude in 2026, and should begin in 2025. Ensuring adequate demand in credit markets, and controlling for oversupply, is key to driving continuous improvements in emissions performance, but also to ensuring against undue public liability from the market guarantees inherent in CCfDs.
  • Now that the Canada Growth Fund is increasing its momentum, Budget 2025 should set more aggressive targets for the Fund to deliver on its objectives and benefit the Canadian economy. Those investments are urgently needed in 2025 and beyond, and should be utilized to the greatest extent possible to help get Canada on track to achieving its 2030 climate targets, competing with the US to grow its low-carbon industry and supply chains, and supporting long-term sustainable jobs and prosperity for Canadians while ensuring returns for the fund’s investors. We caution that if the OBPS review does not produce the conditions for long-term integrity of credit markets, then the possibility of a government backstop of certain CCFD liabilities of the Canada Growth Fund, as highlighted in 2024 budget, may become essential, though they may represent undue risk to taxpayers.
  • To reduce public liabilities for carbon contracts and ensure industrial carbon pricing continues to drive economically efficient emission reductions in the Canadian economy, federal and provincial carbon pricing systems must make credit prices public information, and their stringency- tightening rates must predictably align with Canada’s commitment to net-zero emissions by 2050. Engagement on post-2030 OBPS design should begin in late 2024, and transparent processes should be developed to monitor and make recommendations on credit market management, such as a national carbon credits exchange commission.
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Transparent elimination of domestic public finance and subsidies for fossil fuels

Canada has introduced policies to end domestic subsidies and international public financing for fossil fuel projects. To build on this progress, Canada should publish a policy to end domestic public finance for fossil fuels, as it has committed to do most recently in Budget 2024. This policy is critical to supporting the energy transition, particularly considering that Export Development Canada and other Canadian crown corporations provided at least $7.6 billion to $13.5 billion annually to the fossil fuel sector over 2020-2022. A substantial portion of public finance in recent years has supported the Trans Mountain Pipeline project.

With a strong and transparent approach, Canada can become a global leader in shifting financial flows away from fossil fuels as a key lever to support the energy transition.

Recommendations:

1. Publish a policy to end domestic public financing for fossil fuels by fall 2024 [FIN, ECCC]

a. Introduce a strong policy to end public financial support for fossil fuels domestically, including the full scope of financial instruments, such as loans, equity, grants, guarantees, and insurance. The policy should cover financing for all fossil fuels across their entire life cycle, including support for decarbonization. It should also include a plan to phase out existing public finance and direct government investments. A recent report has a full list of recommendations for a strong policy.

b. Direct public financial institutions (PFIs) to increase transparency by publishing transaction-level data, including company, project name, description and location, amounts disbursed, instrument type, co- investors or syndicate members, any other activities or roles undertaken by the PFI, and any performance or impact expectations (e.g., environmental, social, governance, and any sustainable development goal alignment, full life-cycle emissions for projects or projected dollars per tonne of emissions reductions).

2. Ensure centralized and transparent reporting for all fossil fuel subsidies and public financing [FIN, ECCC, PMO, PCO, NRCan, ISED]

a. Publish the results of Canada’s long-overdue subsidies self-review immediately, including a full inventory of all federal fossil fuel tax and non-tax subsidies and supports (such as the 128 measures identified in the inefficient fossil fuel subsidies framework), and analysis and rationale for any deemed ‘efficient’. [FIN, ECCC]

b. Create a central mechanism for transparency, accountability, and enforcement of policies to ensure they are upheld across departments. The mechanism could include a central database of departmental reports on potential fossil fuel supports and any rationale for exemptions under current policies. An enforcement body should assess information and analysis reported and ensure full enforcement of all policy conditions. [FIN, ECCC]

c. Develop and publish guidelines for federal departments to implement the inefficient fossil fuel subsidies framework. These guidelines should advance a narrow interpretation of exemptions under the policy, ensuring no further support for ‘abated’ oil and gas production, including through carbon capture and storage. [FIN, NRCan, ISED, ECCC]

For related recommendations, please see also Subsidy reform: Aligning investments with halting and reversing biodiversity loss by 2030 and Sustainable finance: Aligning Canada’s financial system with climate and biodiversity commitments, elsewhere in this document.

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Sustainable jobs for workers and communities

The effects of climate change, global market shifts, affordability challenges, and the energy transition have caused increasingly visible impacts on Canada’s workforce and economy. Now that the Canadian Sustainable Jobs Act has become law, it is time for the government to follow through with actions – investments, programs, and policies – that support workers and communities to take on good green jobs. Canada has taken positive steps by implementing the Sustainable Jobs Training Fund; announcing consultations on the Youth Climate Corps program; and attaching labour conditions and minimum apprenticeship hours to new sustainable investment tax credits.

The scale of investment must match the scale of the challenge in order to adequately equip workers and communities with the tools they need to manage the transition. It is imperative that investments that advance sustainable job creation, nature-based solutions and clean economic growth are grounded in social dialogue with workers decarbonization objectives, reconciliation, and equity. Investments in Budget 2025 will be crucial for securing additional support from Canadians for climate and environmental action by highlighting clear benefits and job opportunities.

Total Recommended Investment:

At least $6.5 billion over five years

The Green Budget Coalition recommends the following measures with the expectation that they would be refined through social dialogue with workers, employers, and direct government-to-government engagement with Indigenous communities.

Recommendations:

1. Youth Training and Empowerment: Budget 2024 announced consultations to develop a Youth Climate Corps that could provide paid training and apprenticeships for youth pursuing careers in climate and nature related sectors. Budget 2025 should provide a 5-year funding commitment, with at least $1 billion in the first year, to establish the Youth Climate Corps and train 10,000-30,000 young people per year. Investment in the program in subsequent years should increase as demand grows, scaling up the program and affirming that no qualified applicant would be turned away. Polling has found that the majority of adults support a Youth Climate Corps, and 15% of people under 35 (representing roughly 1.3 million people) would be interested in enrolling in two years of training through this program. Canada can take inspiration from the successful American Climate Corps, which has proposed investing USD $8 billion over ten years to support 50,000 participants annually by 2031 in initiatives such as supporting public lands and waters, clean energy, urban areas, community resilience, food systems and capacity building. The program should ensure that the principles of decent work and inclusion are upheld, skills and experience gained lead to real career opportunities (e.g., jobs in the red seal trades), a living wage is provided, and opportunities are prioritized for Indigenous peoples, people of colour, people with disabilities, and others facing labour market barriers. Consultation on this program should include engagement of the Prime Minister’s Youth Council, and other relevant youth councils. [ESDC, NRCan]

2. Indigenous clean energy pathfinding: Invest $500 million over five years to support Indigenous communities in charting the path to clean energy, conservation, and low- carbon infrastructure. Current programs supporting Indigenous clean energy and emissions reductions projects (e.g., CIB Indigenous Equity Initiative, Strategic Partnership Initiative, Wah-ila-toos) may not offer sufficient support for holistic, community-led transition planning to determine which projects are most appropriate, assess the impacts and benefits of potential equity partnerships, and seize workforce opportunities. This funding could also support better internal government coordination across departments and programs, and improved outreach and communication between government and communities regarding available funds. There is a need to streamline information and application processes to improve access for communities and organizations. Specific funding allocations should be determined with direction from Indigenous groups. [NRCan, ISC]

3. Regional Workforce Development: To prepare the workforce for sustainable jobs in a clean economy, we recommend that the federal government deliver a $1 billion fund over five years to: 1) double the funding allocated for the Sustainable Jobs Training Fund and UTIP Sustainable Jobs Stream ($200 million); 2) reinstate the funding to federal- provincial Labour Market Development Agreements ($625 million); and, 3) develop a new 25% training credit to support employers in delivering on-the-job training for skills and technology required as part of the clean economy transition ($125 million). This investment has the potential to equip an estimated 250,000 workers with the skills needed for sustainable jobs in climate and nature solutions, which will be increasingly in demand in the coming years. [ESDC, RDAs]

We recommend that these investments:

  • Include conditions to ensure funded training and skills pathways are aligned with projected growth sectors in a clean economy, specific to each region;
  • Be leveraged to equip workers with skills for clean economy projects identified through regional economic development initiatives such as the Regional Energy and Resource Tables, with labour conditions to ensure decent work standards;
  • Include measures that promote inclusion of equity-seeking groups, pursuant to the principles outlined in the Sustainable Jobs Act; and
  • Allocate specific funding for Indigenous-specific jobs readiness, upskilling and training programs.


4. Continued data collection, analysis and modelling to inform sustainable jobs planning: An investment of $10 million over five years is needed for regional data analysis and modelling projections that support decision makers, employers, and individuals to understand future workforce and economic scenarios and make informed decisions through the shift to a clean economy. This investment would support a working group of experts to define and classify sustainable jobs and indicators and determine a methodology for assessing sectoral, regional, and occupational impacts from different energy outlooks and climate policy scenarios. This information would be used to assess transition vulnerability impacts, provide industry growth outlooks, identify potential labour market gaps, and inform sustainable jobs policy development. Data should be disaggregated along lines of gender, age, race, and other identities to inform policies and programs that address existing inequities. Working closely with the Sustainable Jobs Secretariat, the results of this analysis would be reflected in the Sustainable Jobs Action Plans and made accessible to different audiences as part of the requirement to summarize available data used in the plan’s development as per the Act. [NRCan, ESDC, StatCan]

See also Youth employment programs to build a more equitable and inclusive future for conservation, later in this document.

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Sustainable Agriculture Strategy: Cultivating success

The Canadian agri-food and agriculture sector is at a critical juncture. As a sector inherently tied to the rhythms of nature, it is uniquely vulnerable to the impacts of climate change. These impacts threaten Canada’s ability to produce food, fiber, and fuel for both domestic consumption and the global market. Despite these considerable challenges, the agriculture sector holds significant potential to advance solutions for achieving national and international goals or commitments such as mitigating climate impacts and reversing biodiversity loss.

The Green Budget Coalition envisions Canada as a leader in sustainable and innovative agriculture, with a resilient and diversified food system. For Canada to sustainably intensify production and drive broader food system outcomes by improving food security, adapting to climate change, and managing demands on limited natural resources, it is integral that producers are encouraged and incentivized to adopt and augment climate-smart and nature-positive practices and technologies. This must be a collective priority, balancing the immediate needs of Canadians with the long-term health of our environment.

Agriculture and Agri-Food Canada’s Sustainable Agriculture Strategy (currently under development) aims to set a unified course for enhancing the sector’s environmental performance while supporting farmer livelihoods and the business vitality of agriculture. For this strategy to succeed, it requires an implementation plan that is adequately resourced and forward-thinking, promoting the widespread adoption of climate-smart and nature-positive practices, tools, technologies, and innovations across agricultural landscapes and agri-food value chains. Achieving this vision also requires robust collaboration across all levels of government and the private sector.

The Green Budget Coalition recommends that the federal government fund and implement the Sustainable Agriculture Strategy with an emphasis on continual improvement to achieve greater environmental outcomes and resiliency for producers. The following recommendations would help advance and support the implementation of the Sustainable Agriculture Strategy.

Total Recommended Investment: $2.6 billion over five years, followed by $87 million per year, ongoing

Specific Recommended Investments:

A) Support programs that provide biodiversity and ecosystem service benefits $290 million over five years [AAFC, ECCC, PMO, StatCan, NRCan]

Key Actions:

  • Provide financial incentives to producers for the avoided conversion of native and tame grasslands, wetlands, and forested areas. ($125 million over five years).
  • Support programs that maximize the economic and environmental return of marginal land ($50 million over five years).
  • Allocate start-up funding to facilitate the development of a market-based system for quantifying and valuing ecological services on-farm ($75 million over five years).
  • Develop a comprehensive and inclusive national land use strategy in collaboration with provinces, territories, and Indigenous peoples ($40 million over five years).
  • Improve the regulatory process and continuous monitoring of pesticide use to reduce risk and to ensure transparent, robust, and data-driven decisions. See also Data collection to support regulatory evaluation of pesticides, later in this document.

Rationale:

1. Environmental impact:

  • Supports healthy and resilient ecosystems.
  • Mitigates climate change by enhancing carbon sequestration and reducing greenhouse gas emissions.
  • Provides essential ecosystem services (provisioning, regulating, cultural, and supporting services) and supports climate resiliency.

2. Economic benefit:

  • Enhances soil health, biodiversity, and ecosystem services which can lead to increased agricultural productivity and resilience against climate change and pests.
  • Markets for ecological services can generate additional revenue streams for landowners and contribute to sustainable economic growth.
  • Creates new economic opportunities such as advancing sustainable agricultural practices.

3. Social and community impact:

  • Enhances community well-being through provisioning services (e.g., food and water), cultural services (e.g., recreational and spiritual), and supporting services (e.g., nutrient cycling) to enhance quality of life and overall health.
  • Promotes sustainable land use practices and secure livelihoods for producers and rural communities.
  • Engages communities in conservation efforts fosters a sense of stewardship and collective responsibility for the environment.

B) Build knowledge and technology transfer capacity to improve economic, environmental, and social benefits $1.040 billion over five years [AAFC, StatCan, ECCC, NSERC, SSHRC].

Key Actions:

  • Improve climate and biodiversity data collection, harmonization, transparency, dissemination, and utilization to improve measuring, reporting, and verifying data to inform the National Inventory Report, encourage the adoption of natural climate solutions, improve agricultural policy-making and programs, and decisions across the value chain ($500 million over five years).
  • Support the transition of the Living Labs Program from pilot to permanent program ($25 million over five years).
  • Advance social science research to ensure Best Management Practices (BMPs) are fiscally sound and financially attractive to encourage full-spectrum participation ($250 million over five years).
  • Enhance technical assistance and training by expanding the extension program to fund 1,500 new extension service agents; improving access to resources, training, and education; supporting farmer-to-farmer and peer-to-peer learning opportunities, and developing a training and certification program to help producers accelerate the adoption of best management practices ($250 million over five years).
  • Support the development and implementation of a Pan-Canadian soil health strategy that will provide farmers access to information, technical support, and financial resources needed to improve soil health ($15 million over five years, to grow over time ($1 million in 2025-26, $2 million in 2026-27, $3 million in 2027- 28, $4 million in 2028-29, $5 million in 2029-30)).

Rationale:

1. Environmental impact:

  • Enables evidence-informed decisions that enhance environmental outcomes.
  • Enhanced data transparency will promote sustainable practices and land use.
  • Contributes to mitigating climate change and improving ecosystem health.

2. Economic benefit:

  • Ensures that resources are allocated efficiently, maximizing return on investment.
  • Leads to cost savings for producers and new sustainable economic opportunities.
  • Enhances the competitiveness of Canadian agriculture in global markets.

3. Social and community impact:

  • Addresses factors that contribute to mental health pressures on producers.
  • Fosters collaboration and knowledge transfer among producers.
  • Improves the capacity of producers to adopt sustainable practices, benefiting communities.
  • Strengthens community ties and collective action towards sustainability.

C) Enhance producer resiliency and sustainable productivity $1.215 billion over five years, followed by $87 million per year, ongoing [AAFC]

Key Actions:

  • Support pilot innovations in business risk management design and integrate climate risk management and adaptation into Business Risk Management (BRM) programs that are additive and incentive-based ($615 million over five years, then $87 million per year, ongoing).
  • Integrate Livestock Price Insurance into AgriInsurance program ($350 million over five years).
  • Develop early warning sign systems for climate-related events (e.g., drought, floods) ($250 million over five years).
  • Review agricultural policies to realign subsidies that may be harmful to nature. See also Subsidy reform: Aligning investments with halting and reversing biodiversity loss by 2030, later in this document.

Rationale:

1. Environmental impact:

  • Promotes the adoption of best management practices that enhance environmental sustainability.
  • Helps producers prepare for and mitigate the impacts of climate-related events, reducing environmental degradation.

2. Economic benefit:

  • Reduces the long-term costs associated with climate-related risks and improves the financial stability of producers.
  • Supports income stabilization and reward practices that contribute to long-term economic resilience.

3. Social and community impact:

  •  Contributes to the overall resilience and sustainability of rural communities.
  • Helps secure livelihoods for farmers, enhancing food security and community well- being.
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