441-02151 (Environment)

The Government of Canada has taken a range of actions to address tax fairness, cost-of-living pressures, and climate change.

To make the tax system more fair, the government has reduced taxes for the middle class while implementing measures to ensure that the wealthiest individuals and corporations are contributing their fair share.

One of the government’s first actions after taking office was to reduce the rate of the second personal income tax bracket from 22 per cent to 20.5 percent, while introducing a new top bracket of 33 percent for the wealthiest Canadians. The government also increased the amount of income middle-class Canadians can earn before paying tax (the basic personal amount) by almost $2,000.

In addition, the government has:

• Permanently increased the corporate income tax by 1.5 percent on bank and insurance company groups in Canada, and introduced a one-time Canada Recovery Dividend of 15 percent the largest bank and insurance company groups;
• Introduced a 2 percent tax that applies on the net value of share buybacks by public corporations in Canada;
• Implemented a luxury tax on private jets and luxury cars priced over $100,000 and boats priced over $250,000; and
• Proposed to modernize the Alternative Minimum Tax to ensure that the wealthiest Canadians do not avoid paying their fair share through the significant use of deductions, credits, and other tax preferences.

The government has also taken action through the tax system to support those who are the most affected by cost-of-living pressures driven by inflation, including through the introduction of one-time targeted payments such as the doubling the GST Credit for six months in the fall of 2022 and the Grocery Rebate in July 2023.

Through the federal pollution pricing system, the government is also putting a price on pollution while making life more affordable for families through the Canada Carbon Rebate.

Notably, the carbon pricing system includes the Output-Based Pricing System which applies to heavy emitters and incentivizes their reduction of greenhouse gas emissions.

The government is also fighting climate change by introducing a new Oil and Gas Emissions Cap in addition to the Oil and Gas Methane Regulations, both of which will reduce emissions in the fossil fuel sector.

The government will continue to look at ways to improve the fairness of the tax system, support Canadians who need help most, and seize opportunities for a more prosperous and sustainable future.

The Government of Canada has made significant commitments to address climate change and improve affordability for Canadians through its support of public transit and through the Canada Infrastructure Bank (CIB).

Investments in public transit

•    Public transit and active transportation investments are a key part of Canada's plan to rapidly reduce greenhouse gas (GHG) emissions and achieve net-zero emissions by 2050. The Government of Canada is investing significantly in public transit and active transportation in order to help provide sustainable transportation options in communities across Canada.

•    Public transit is a significant funding commitment as part of the Emissions Reduction Plan. In February 2021, the Government announced funding to support the expansion of large urban transit systems, the electrification of bus fleets, active transportation infrastructure and transit solutions for rural communities while also committing to transit funding averaging $3 billion per year for Canadian communities beginning in 2026-27. This funding will also encourage the development of transit-oriented communities as it will be linked to long-term integrated plans, maximizing the benefits of transit investments.  

•    This new funding is separate from the nearly $30 billion in funding for transit and active transportation made available through the Investing in Canada Plan.

Canada Infrastructure Bank (CIB)

The CIB is an arms-length Crown corporation that makes independent investment decisions within priority sectors identified by the Government of Canada. The CIB operates in five priority sectors, each associated with an investment target: Clean Power ($10 billion), Green Infrastructure ($10 billion), Public Transit ($5 billion), Trade and Transportation ($5 billion), and Broadband ($3 billion). 

Building on its portfolio of investments, Budget 2023 announced the CIB will invest at least $10 billion of its $35 billion in capital in each of its Clean Power and Green Infrastructure priority areas, doubling the previous target of $5 billion per sector supporting the building of major clean electricity and green infrastructure projects, including building retrofits. This enables CIB to invest at least $20 billion to support the construction of major clean electricity and green infrastructure projects, including building renovations. Under its Building Retrofits Initiative, the CIB invests in the energy efficiency of existing buildings, which reduces GHG emissions and contributes to Canada’s transition to a low-carbon future.

Three of the five priority investment sectors of the CIB directly advance climate action:

•    Clean Power infrastructure such as zero-emission generation, electricity transmission and storage, small modular reactors, and high-efficiency district energy projects;

•    Green Infrastructure such as energy efficient retrofits, carbon capture utilization and storage, clean fuels, hydrogen and zero emission vehicle charging infrastructure; and

•    Public transit such as zero-emission-buses and light rail urban transit systems. CIB’s Zero Emission Buses initiative ($1.5 billion) is helping Canadian transport authorities and school boards to switch away from diesel by supporting the purchase of over 5,000 zero-emission-buses, resulting in significant GHG reductions. Additionally, the CIB is contributing to the financing of Montréal’s Réseau express métropolitain, which, once fully in service, will decrease 100,000 tons of GHGs annually, or the equivalent of 30,000 fewer cars on the road in 24 hours.

Since 2016, the Government of Canada has taken action and invested over $120 billion to reduce emissions, protect the environment, spur clean technologies and innovation, and help Canadians and communities adapt to the impacts of climate change. In doing so, the Government of Canada has succeeded in bending the emissions curve. Indeed, in 2015, Canada was trending to exceed 2005 emissions levels by 9% by 2030, but now Canada is on a solid path to reduce emissions by 36% below 2005 levels by 2030, and planning additional actions to get us to the 40% target.

Carbon pricing, which is a pillar of Canada’s plan to meet its 2030 emissions reduction target, is widely recognized as one of the most efficient tools to reduce greenhouse gases while being designed to protect affordability by returning the proceeds to Canadians. The proceeds are returned through the Canada Carbon Rebate which puts money directly back in people’s pocket and helps drive investment in clean technology alternatives.

The Government of Canada recognizes that carbon pricing is most effective when complemented with a mix of regulations, incentives, innovation programs, and enabling measures. We need investments and measures to ensure transformational changes in the sources and sectors where emissions are highest. For example, to ensure that we reduce emissions from fossil fuels used in transportation. Another area is basic research and development, especially where it is needed for transformational technologies that may benefit many different companies. The carbon price can’t incentivize these investments if the company making them can’t be certain it will be the one to reap the benefits.

That’s why Canada’s climate plan includes a suite of complementary measures (e.g., investments, programs, regulations, tax incentives) to increase the affordability, availability and use of clean technologies, clean fuels, and clean transportation. There are over 140 programs, policies, and regulations in development or being implemented that are shaping the future and reducing emissions, while the economy continues to grow. These include: 

• Helping to reduce energy costs for homes and buildings by continuing to develop the Canada Green Buildings Strategy to support a net zero and climate resilient buildings sector;
• Empowering communities to take climate action by expanding the Low Carbon Economy Fund, including a new Indigenous Leadership Fund to support renewable energy, energy efficiency, and low-carbon heating projects led by First Nations, Inuit, and Métis communities and organizations;
• Spurring innovation and encouraging the adoption of cleaner technologies and fuels for emissions intensive industrial emitters while limiting the impacts of carbon pricing on their ability to compete in the Canadian market and abroad under the Output-Based Pricing System where provinces and territories either request it or do not meet federal requirements to price carbon pollution;
• Driving progress on clean cars and trucks through investments of $400 million for zero-emission vehicles charging and refueling infrastructure, $1.7 billion to extend the Incentives for Zero-Emission Vehicles (iZEV) program to make it more affordable for Canadians to buy and drive new electric light-duty vehicles, and introducing a purchase incentive program of $547.5 million for medium-and heavy-duty vehicles;
• Positioning the Oil and Gas sector to cut pollution by working with stakeholders to implement the cap on oil and gas sector emissions;
• Powering the economy with renewable electricity by continuing to advance the Clean Electricity Regulations to enable Canada to achieve a net-zero electricity grid by 2035, providing $3 billion to the Smart Renewables and Electrification Pathways Program and Smart Grid Program for additional renewable electricity and grid modernization projects and $250 million to support predevelopment work of large clean electricity projects;
• Helping industries to adopt clean technology in their journey to net-zero emissions by implementing the federal Carbon Management Strategy, and establishing investment tax credits to de-risk investments in clean hydrogen, carbon capture, utilization and storage (CCUS), and zero-emission technologies;
• Driving further clean technology innovation through a $1 billion investment to create an independent federal innovation and investment agency;
• Implementing a $15 billion Canada Growth Fund to attract the significant private capital required to accelerate the deployment of technologies required to decarbonize and grow the Canadian economy;
• Developing of a whole-of-government strategy to strengthen policy coherence and coordination on clean technology and climate innovation;
• Investing in nature and natural climate solutions by providing an additional $780 million to the Nature Smart Climate Solutions Fund to support projects that conserve, restore and enhance wetlands, peatlands, and grasslands to store and capture carbon;
• Supporting farmers as partners in building a clean, prosperous future through investments in new programs such as the $250 million Resilient Agricultural Landscapes Program, and by topping up the Agricultural Climate Solutions: On-Farm Climate Action Fund with $470 million to support key climate mitigation practices, as well as providing $330 million to triple funding for the Agricultural Clean Technology program.

Further investments were also announced in Budget 2023 that will support prosperity, middle class jobs, and more vibrant communities across Canada. Using a variety of strategies and tools, the Government of Canada will work with provinces and territories to grow a green economy through priorities such as electrification, critical minerals, and electric vehicles and batteries. For example, in Budget 2023, the federal government proposed significant investments to accelerate the supply and transmission of clean electricity. This includes expanding Canada's electricity grid, connecting it from coast-to-coast-to-coast, and enabling Canadians and Canadian businesses to have access to cleaner and cheaper energy into the next century. We recognize our potential for a strong automotive sector that can support electric vehicle and battery manufacturing. Investing in building this capacity in Canada will have significant benefits for Canadian workers and the Canadian economy, both now and in the future. Budget 2023 also proposed a refundable tax credit that will provide a significant incentive to boost investments in critical minerals projects and create new opportunities and middle-class jobs in communities across the country. Collaboration with provinces and territories on these key strategies will be essential to the successful implementation of these initiatives.

Achieving Canada’s climate objectives demands that all sectors of the economy continue to decarbonize in a manner that makes cleaner alternatives more affordable and creates new sustainable job opportunities for workers. As proposed under Budget 2023, new funding through investment tax credits as well as new focus for the Canada Growth Fund and the Canada Infrastructure Bank, will help mobilize additional investments in clean growth projects across the country, such as clean electricity, hydrogen, clean technology manufacturing, electric vehicles, and batteries. Budget 2023 investments will "crowd-in" new private investment by leveraging public investment and government policy. These investment tax credits (for clean electricity, clean hydrogen, carbon capture, utilization and storage, clean technology innovation and manufacturing) will set a framework for boosting overall investment, while leaving the private sector to determine how to invest based on market signals.

The Government of Canada will continue to support households on the path to net zero through the Canada Carbon Rebate and other complementary measures and programs, while tax incentives will support the economy and drive investment and innovation in the technologies that will help shape Canada’s net-zero future.