Budget 2025: Key Climate, Energy, and Indigenous Highlights

On November 4, 2025, Canada released a prudent, investment focussed Canada Strong Budget 2025 (“Budget 2025”) that is in line with the global energy transition in all major global economies other than the U.S. In doing so, it has: (i) accepted and embraced the country’s innate nature as a climate-forward, responsible energy, mineral, and nature resource producer with strong Indigenous rightsholders; and (ii) put in place the investment structures and tax incentives to go beyond resource production and lead in the knowledge economy. As with all government announcements, the success of the Budget 2025 strategy will rest on implementation, particularly the speed with which the government, Indigenous rightsholders, and cooperative provincial and territorial governments can manifest the changes outlined in the 2025 Budget.

The thrust of the new approach has tell-tale signs of a good investment finance strategy with new infrastructure and resource development funds, tax incentives, and necessary regulatory backstops. It is focussed on economic, infrastructure, and climate outcomes rather than aspirational targets (which Canada has repeatedly missed). Fiscal discipline is reflected in a downsizing (10%) of the public service largely through attrition, AI, and elimination of open positions that can be filled by same.

Key climate, energy, and Indigenous elements of Budget 2025 include:

Climate Action. Budget 2025 introduces new and proposed funding to support climate action, alongside the formal elimination of federal consumer carbon pricing (see our earlier bulletin here) and other program adjustments and reallocations, including:

• Direct Delivery Stream for Adaptation and Infrastructure. $6B over ten years, beginning in 2026–27, for a Direct Delivery Stream under Housing, Infrastructure and Communities Canada, to support regionally significant projects related to climate adaptation, retrofits, and community infrastructure.

• Biofuels Production Incentive. $372M over two years for a Biofeuls Production Incentive to Natural Resources Canada to establish a production incentive for biodiesel and renewable diesel producers (starting in 2026).

• Elimination of the Consumer Carbon Price. The federal consumer carbon price will be repealed through Bill C-4.

• Clean Technology Demonstration Initiative. The initiative will be expanded, with $39.9M over four years and an additional $11.1M to the National Research Council’s Industrial Research Assistance Program to broaden international engagement.

Greenwashing. Budget 2025 notes that the recent “greenwashing” amendments to the Competition Act (see our earlier bulletin here) have created investment uncertainty and may be having the opposite of their intended effect, with some parties slowing or reconsidering environmental initiatives. To provide greater clarity to the marketplace, the government intends to propose legislative amendments to remove certain aspects of the anti-greenwashing provisions while maintaining protections against false or deceptive environmental claims.

Canada’s Climate Competitiveness Strategy. Budget 2025 notes that clean energy investment reached USD $2T in 2024, with the global clean technology market projected to triple by 2035. The “Climate Competitiveness Strategy” aims to position Canada to benefit from this growth by reducing emissions and improving the competitiveness of key sectors, including oil and gas and steel, and will: (i) develop metrics to demonstrate emissions reductions by companies and households; (ii) track growth within the clean economy; and (iii) prioritize measures that balance emissions reductions, competitiveness, and cost effectiveness.

Industrial Carbon Pricing. Budget 2025 proposes the government take actions to improve the effectiveness of carbon markets and industrial carbon pricing, including:

• develop a post-2030 carbon pricing trajectory in collaboration with provinces and territories to support progress toward net-zero by 2050;

• enhance benchmark tools and harmonization across jurisdictions, with the federal backstop applied where systems fall below the benchmark; and

• continue Canada Growth Fund contracts to provide carbon price certainty for investors.

Clarity on Greenhouse Gas Regulations. Budget 2025 reaffirms Canada’s commitment to reducing GHG emissions and supporting a competitive transition to a net-zero economy. To align regulations with industrial carbon pricing, the government will advance the following measures:

• Electricity. The Clean Electricity Regulations will focus on reducing emissions to protect the environment and human health, with collaboration from provinces and territories, and to enable long-term agreements, the government intends to propose legislative amendments to the Canadian Environmental Protection Act.

• Methane. The government will finalize enhanced methane regulations for the oil and gas sector and landfills, and will work with provinces and territories to negotiate equivalency agreements, where appropriate.

• Oil and Gas Emissions Cap. Canada remains committed to lowering emissions from oil and gas production and notes that effective carbon markets, strengthened methane regulations, and scaled deployment of carbon capture and storage (CCS) could remove the need for an emissions cap.

• Electric Vehicles. The government has announced its intent to make targeted regulatory adjustments to help the automotive sector remain competitive amid changing U.S. trade and policy conditions. This includes removing the 2026 target from the Electric Vehicle Availability Standard and conducting a 60-day review of the overall regulation, with next steps to be announced in the coming weeks.

• Clean Fuel. Targeted updates to the Clean Fuel Regulations will seek to reduce reliance on imported fuels, strengthen domestic supply chains, and support employment in the agriculture, forestry, and waste sectors.

Federal Major Projects Office. The Major Projects Office under the Building Canada Act (MPO), launched in August 2025, will coordinate nation-building infrastructure and energy projects (see our earlier bulletin here). Budget 2025 highlights the initial “nation-building” projects, and identifies the following strategies and projects that require further development:

• Critical Minerals Strategy. MPO will prioritize advancing critical minerals projects to final investment decisions within a two-year window to accelerate Canada’s role in the extraction and upgrading of key resources, with development opportunities across Canada, including Ontario’s Ring of Fire, British Columbia’s Golden Triangle, and the Slave Geological Province in the Northwest Territories and Nunavut.

• Wind West Atlantic Energy. Projects leveraging over 60 gigawatts of wind power potential in Nova Scotia and across Atlantic Canada to meet regional electricity demand and support potential exports to the Northeastern U.S., with a focus on providing regulatory certainty to attract private investment and facilitate long-term wind development, with this Eastern Energy Partnership including potential interties between provinces.

• Pathways Plus. An Alberta-based CCS network and pipeline project aimed at substantially reducing emissions while supporting competitiveness in the oil sands, in order to enable low-carbon oil exports and strengthen Canada’s position in global energy markets.

• Arctic Economic and Security Corridor. A set of all-weather, dual-use infrastructure projects to enhance northern economic development, defence capability, connectivity, support northern critical mineral development, and improve community access.

• Port of Churchill Plus. Partnerships with Indigenous Peoples to expand Manitoba’s northern port and trade corridors, including upgraded rail, road, and energy infrastructure, as well as marine ice-breaking capacity, that will also prioritize Indigenous equity participation and expand four-season export capacity through Hudson Bay.

• Alto High-Speed Rail. Canada’s first high-speed rail project, spanning approximately 1,000 km from Toronto to Québec City. The MPO will work to accelerate permitting and engineering timelines to enable construction to begin within four years.

Investment Tax Credits. Budget 2025 notes that the government has already delivered four of its clean economy investment tax credits (see our earlier bulletin here). The government intends to introduce legislation to implement the Clean Electricity Investment Tax Credit, which would be available as of April 16, 2024, for projects that did not begin construction before March 28, 2023, as well as proposing to remove conditions imposed on provincial and territorial governments for their Crown corporations to be eligible. Budget 2025 proposes the following targeted enhancements and new incentives for the clean economy investment tax credits:

• Clean Electricity and Clean Technology Investment Tax Credits. Expanded eligibility to include systems that produce electricity, heat, or both electricity and heat from waste biomass and changed the eligibility requirements for small nuclear energy property under the Clean Technology investment tax credit, both measures would be available retroactively as of November 21, 2023, and March 28, 2023, respectively. The government also indicated that it intends to consult on the potential introduction of a domestic content requirement for both credits.

• Clean Technology Manufacturing Investment Tax Credit. Expanded eligibility to include qualifying equipment used in eligible polymetallic mining projects retroactively available as of January 1, 2024, and expanded list of eligible critical minerals to include antimony, indium, gallium, germanium, and scandium, supporting investment in the extraction, processing, and recycling of co-product and by-product critical minerals. 

• Clean Hydrogen Investment Tax Credit. Expanded eligibility to include hydrogen produced from methane pyrolysis, available as of December 16, 2024.

• Carbon Capture, Utilization, and Storage (CCUS) Investment Tax Credit. Extend, by five years, the availability of the full credit rates, that would apply from 2031 to 2035, with credit rates remaining unchanged from 2036 to 2040.

Investing and Expensing Incentives. Budget 2025 proposes introducing a Productivity Super Deduction, an enhanced tax incentives on new capital investments for businesses to write off large shares of the cost of investments immediately, supporting the growth of businesses and their investments. Budget 2025 announces the government’s intention to move forward with all previously announced measures that would allow businesses to write off the cost of their investments more quickly, including:

• reinstatement of the Accelerated Investment Incentive, which provides an enhanced first-year write-off for most capital assets;
• immediate expensing (i.e., 100-per-cent first-year write-off) of manufacturing or processing machinery and equipment;
• immediate expensing of clean energy generation and energy conservation equipment, and zero-emission vehicles;
• immediate expensing of productivity-enhancing assets, including patents, data network infrastructure, and computers; and
• immediate expensing of capital expenditures for scientific research and experimental development.

Budget 2025 also proposes reinstatement of accelerated capital cost allowances (CCAs) for LNG equipment and buildings for low-carbon LNG facilities meeting higher standards of performance (applied to properties acquired on or after Budget Day 2025 and before 2035). New high standards of emissions performance would make eligible facilities competitive depending on the emissions performance of the facility as follows:

1. facilities in top 25% of emissions performance would be eligible for accelerated CCAs with rates of 30% for liquefaction equipment and 10% for non-residential buildings; and
2. facilities in top 10% of emissions performance would be eligible for accelerated CCAs with rates of 50% for liquefaction equipment and 10% for non-residential buildings.

Sustainable Investment Guidelines. Budget 2025 proposes appointing an external organization to develop Made-in-Canada sustainable investment guidelines (a climate investment taxonomy) as a voluntary framework for evaluating investments and transition opportunities.

Indigenous Partnerships. Budget 2025 announces the government’s intention for the Canada Indigenous Loan Guarantee Corporation to work with Indigenous investors on greenfield (new build) projects that will generate economic prosperity for Indigenous communities. It also supports ongoing efforts under the MPO to ensure meaningful participation of Indigenous communities in national project consultations, guided by the Indigenous Advisory Council (IAC), including the following proposed funding:

• $213.8M over five years for the MPO so support the IAC; and

• $10.1 million over three years, starting in 2025-26, to Crown-Indigenous Relations and Northern Affairs Canada through the Federal Initiative on Consultation to support the meaningful participation of Indigenous rightsholders in consultation processes throughout the review cycle of national interest projects listed under the Building Canada Act, including through Indigenous-led resource centres and consultation protocols.

Fiscal Restraint and Program Streamlining. Budget 2025 proposes significant reductions in the public sector and program savings, including:

• reducing the federal public service by 40,000 positions (10%) by 2028–29, including 16,000 full-time positions by March 2025;

• 15% savings target over three years for both Natural Resources Canada by winding down the Canada Greener Homes Grant and the 2 Billion Trees Program and Environment and Climate Change Canada by consolidating or transferring programs; and

• modernizing government operations by increasing the efficiency of back-office and administrative functions, leveraging new technology, and limiting spending on discretionary travel and training, and the use of external consultants.

For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.comc