NEW – Federal: Latest federal budget highlights on climate, innovation and housing

On April 7, federal Minister of Finance Chrystia Freeland tabled the 2022 federal budget. The minister framed the budget as being about “three pillars”: the green transition, productivity and innovation, and housing. 

Climate 

The green transition continues to be a focus for the government. On March 29, the government announced an updated climate plan – the Emissions Reduction Plan (ERP) – that included several policy pledges financed in the new budget. Building on the ERP, new climate measures announced in the budget include:

• Proposing a refundable investment tax credit for carbon capture use and storage (CCUS) business expenses, starting in 2022;
• Eliminating the flow-through share regime for fossil fuel sector activities (steps to eliminate fossil fuel subsidies were a key requirement of the Liberal-NDP Confidence and Supply Agreement);
• Broadening the Canada Infrastructure Bank’s mandate to include investing in private sector-led low-carbon infrastructure projects, such as small modular reactors, clean fuel production, hydrogen production, transportation and distribution, and CCUS; and
• Engaging stakeholders to create an investment tax credit of up to 30% for investments in net-zero technologies, battery storage solutions, and clean hydrogen. 

Measures announced in the budget that support the ERP will require significant stakeholder consultation to flesh out the CCUS and net-zero investment tax credits. 

Innovation and Industry 

Investing in industrial and innovation support development is usually linked to climate policy considerations. Major spending proposals in this area include:

• Creating a Canada Growth Fund, initially capitalized with $15 billion, to attract private sector investment to help reduce emissions, diversify the economy and restructure supply chains. The fund will be a new public investment vehicle operating arms-length from the government, similar to the Canada Infrastructure Bank. Details of the fund will be determined by public consultations and announced in the fall 2022 fiscal update;
• Allocating up to $1.5 billion over seven years, starting in 2023, for infrastructure investments that support the development of critical minerals supply chains; and
• Updating the Strategic Innovation Fund to create a $1.5 billion stream of the fund targeted to support critical minerals projects. 

Housing 

A key spending and policy proposal in this area is to help other levels of government improve housing access. They include:

• An allocation of $4 billion over the next five years to the Canada Mortgage and Housing Corporation to launch a Housing Accelerator Fund aimed at helping municipalities build 100,000 net new housing units over the next five years;
• Amending the Canada Community-Building Fund and future federal infrastructure programs to tie funding access for other levels of government to actions to increase the housing supply; and
• An allocation of $1.5 billion to extend the Rapid Housing Initiative for two years. 

One of the CPA’S recommendations in its pre-budget submission focused on affordability. To that end, the CPA recommended that the federal government change Part IX of the Excise Tax Act that would categorize heating fuels such as propane, when used in residential applications, as zero-rated for purposes of the GST/HST, similar to most groceries. 

While the budget did not contain that recommendation, the CPA will continue to advocate for government to introduce policies prioritizing affordability for residential energy.