The climate side of Budget 2024

Cash for home retrofits and a new investment tax credit to bolster electric vehicle supply chains are among the most notable climate measures in Budget 2024.

Tabled by Finance Minister Chrystia Freeland on April 16, this year’s federal budget has big-ticket housing items and proposes to increase the capital gains tax for the extremely wealthy.

“In a sense, it's a proxy for a wealth tax,” David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, told Canada’s National Observer in the budget lockup.

“This is an important change in taxation. We're not sort of fiddling on the edges.”

Changes to the capital gains tax would only affect the 0.13 per cent Canadians who have capital gains greater than $250,000 each year and approximately 12.6 per cent of corporations. The measure is expected to bring in $19.4 billion over five years, starting this year.

The NDP, Green Party and Bloc Québécois have regularly called for an excess profits tax on the oil and gas industry, but that was not part of this budget.

This year’s budget proposes to spend $800 million over five years to launch a new home retrofit program starting in 2025. The new program replaces the federal government’s popular $2.6-billion Canada Greener Homes grant, which ran out of funding earlier this year. The new Greener Homes Affordability Program is targeted at low- and middle-income households.

The fact that this new program would start in mid-2025 “could leave both energy customers and those retrofit businesses ready to do the work in the lurch,” said Brendan Haley, policy director at Efficiency Canada, in an emailed statement to Canada’s National Observer.

Reducing emissions from buildings is an important piece of Canada’s greenhouse gas reduction strategy: buildings accounted for about 13 per cent of the country’s planet-warming emissions in 2021.

Macdonald was heartened to learn the home retrofit program was renewed but said, “The scale of the program isn't up to the challenge that we're facing in terms of the climate crisis.”

The budget includes an additional $73.5 million over five years to help renew and modernize existing energy efficiency programs and “spur the development of better, more ambitious building codes to further reduce emissions and lower energy bills,” which the provinces and territories will be encouraged to adopt.

Another $30 million over five years will help provide homebuyers with information about the energy efficiency of their new home through labelling.

Budget 2024 also added another clean economy investment tax credit to the five formerly proposed in past budgets. Last year, the federal government announced a suite of investment tax credits to bolster the clean economy in response to the United States’ Inflation Reduction Act. Altogether, these investment tax credits total about $93 billion, Freeland boasted during a news conference Tuesday afternoon.

The Electric Vehicle Supply Chain investment tax credit is estimated to cost over $1 billion. The 10 per cent tax credit would apply to the cost of buildings used in electric vehicle assembly and battery production. More details on this tax credit will appear in the fall economic statement, but it is intended to complement a previously proposed 30 per cent investment tax credit for clean technology manufacturing (purchasing equipment and machinery).

NDP Leader Jagmeet Singh panned the federal budget, noting his party wanted to see an excess profits tax.

Budget 2024 confirms that provinces and territories will have to agree to “work towards” a net-zero electricity grid by 2035 in order for Crown corporations to access the $25.7-billion clean electricity tax credit. To access the 15 per cent tax credit, provincial and territorial governments also must direct Crown corporations claiming the credit to publicly report each year on how the tax credit has improved ratepayers’ bills.

Alberta and Saskatchewan have vocally opposed the federal government’s clean grid target, with Alberta Premier Danielle Smith calling it “unrealistic” on multiple occasions.

When the federal government says net-zero electricity, it means the electricity generated — for example, by natural gas power plants — does not emit any planet-warming greenhouse gas emissions when emission reduction technology like carbon capture or carbon offsets are taken into account.

The Department of Finance Canada will consult with provinces and territories on the details of these conditions before legislation is introduced this fall, according to the budget.

A new set of measures proposes to “clarify and reduce” timelines to get major projects built faster. This includes a three-year target for nuclear project reviews by working with the Canadian Nuclear Safety Commission and Impact Assessment Agency of Canada to streamline the process. As well, there is a similar target of five years or less for completion of federal impact assessment and permitting processes for federally designated projects, and a two-year target for non-federal projects.

Over $2.5 billion in proceeds from the federal carbon price will be “urgently returned” directly to about 600,000 small- and medium-sized businesses in provinces where the federal carbon fuel levy applies.

Biofuels got a bump in the federal budget, with a focus on renewable diesel, sustainable aviation fuel and renewable natural gas. The federal government intends to hand out up to $500 million per year from Clean Fuel Regulations compliance payment revenues to support biofuels production in Canada, with more details to come in the fall. As well, it says biofuels production will benefit from a minimum $500-million investment from the Canada Infrastructure Bank’s green infrastructure investment stream.

Transport Canada will receive nearly $608 million over two years, to top-up a program that offers incentives for Canadians to lease or buy electric and hybrid vehicles, like rebates between $2,500 and $5,000 for eligible vehicles.