Introduction

On November 4, 2025, the Government of Canada unveiled its first federal budget under Prime Minister Mark Carney. Framed as a “generational budget,” it aims to transform Canada’s economy for a low-carbon future while strengthening competitiveness and resource security. This post provides a summary of the provisions related to environment, energy, and natural resources.

1. Climate Competitiveness and Carbon Pricing

The budget reaffirms industrial carbon pricing as a cornerstone of Canada’s climate strategy:

– Durability of Carbon Pricing: Long-term stability for carbon pricing to provide certainty for investors and industries.
– Contracts for Difference: Continued collaboration with oil and gas on CCUS technologies.
– Methane Regulations: Finalization of regulations to reduce methane emissions from oil and gas production.

Why It Matters: Carbon pricing remains central to Canada’s competitiveness as global markets adopt carbon border adjustments. However, critics note the lack of consumer-facing incentives and unclear pathways to meet 2030 targets.

2. Clean Electricity and Energy Transition

Canada positions itself as a clean energy superpower through major investments:

– Clean Electricity Investment Tax Credits: Accelerating renewable generation and grid modernization.
– Net-Zero Grid by 2035: Reaffirmation of clean electricity regulations.
– Retroactive Tax Incentives: Unlocking stalled projects and attracting private capital.

Impact: These measures aim to deliver abundant, low-cost clean power for industries like advanced manufacturing and EV production.

3. Critical Minerals and Resource Development

Recognizing the strategic importance of critical minerals, the budget introduces:

– Critical Minerals Sovereign Fund: $2 billion for exploration, development, and processing.
– Expanded Tax Credits: Broader eligibility for critical minerals under investment programs.
– Infrastructure Investments: Transportation corridors and regional infrastructure to access resource-rich areas.

Goal: Secure Canada’s role in global clean technology supply chains while creating jobs in mining and processing.

4. Climate Resilience and Nature Protection

While energy dominates the budget, climate adaptation and biodiversity receive attention:

– Build Communities Strong Fund: Large-scale building retrofits for energy efficiency and resilience.
– Nature Conservation Commitments: Funding for ecosystem restoration and biodiversity protection.

5. Tax Measures: Capital Gains Relief and Green Incentives

Budget 2025 introduces targeted tax changes:

– Capital Gains Tax Relief: Measures to limit deferral opportunities and enhance fairness.
– Immediate Expensing: Immediate capital expensing for eligible manufacturing and clean tech facilities.
– Enhanced Clean Technology Credits: Expanded credits for CCUS and renewable energy projects.

Takeaway: These changes aim to stimulate investment while maintaining fiscal discipline.

6. Fiscal Anchors and Economic Context

The budget sets two fiscal anchors:

– Operating Balance by 2028–29: Commitment to balance operating spending with revenues.
– Deficit Trajectory: Declining deficit-to-GDP ratio despite $280 billion in capital investments over five years.

7. Gaps and Criticisms

Despite its ambition, Budget 2025 faces criticism:

– No Consumer Incentives: No revival of EV rebates or home retrofit subsidies.
– Uncertain Emissions Pathway: Lack of clarity on achieving 2030 and 2035 targets.
– Oil and Gas Emissions Cap: Indications that the proposed cap may be abandoned.

Conclusion

Budget 2025 represents a significant pivot toward clean growth and resource security, anchored by carbon pricing, clean electricity investments, and critical minerals development. While the measures strengthen Canada’s climate competitiveness, questions remain about consumer incentives and emissions targets.

Manning Environmental Law is a Canadian law firm based in Toronto, Ontario. Our practice is focussed on environmental law, energy law and aboriginal law.

Paul Manning is a certified specialist in environmental law. He has been named as one of the World’s Leading Environmental Lawyers and one of the World’s Leading Climate Change Lawyers by Who’s Who Legal. Paul is also ranked by Lexpert as one of Canada’s Leading Practitioners in Environmental Law.

As always, these posts  are provided only as a general guide and are not legal advice. If you do have any issue that requires legal advice please get in touch. Our contact details can be found here