Budget boosts clean growth, but accountability and ambition needed on climate goals: ISF statement

Canada’s federal government made clear in Thursday’s budget that supporting major investments in clean electricity and developing new green technologies will be Canada’s path to sustainable growth. To have a real impact, these investments will need to attract additional hundreds of billions in private capital. So the focus on targeted funding, de-risking private investments and tax credits is appropriate.

But according to ISF Director of Research Yrjö Koskinen, the government can be still more ambitious and promote clean energy and technology in a manner that matches federal support for resource development.

“There are a lot of important initiatives here that will attract investment to electrifying Canada. This is needed both for this country’s competitiveness and prosperity, and to reduce carbon emissions,” said Dr. Koskinen. “But the government is asking us to trust them to achieve net zero by 2050. We need credible interim goals by 2035 to keep the government accountable.”

Important investments in budget 2026 include:

• $52B in overall spending supporting grid expansion and clean power development.
• Extending and/or expanding a range of tax incentives and programs that can boost research and commercialization of cleantech including the Clean Technology and Clean Electricity investment tax credits, the Industrial Research Assistance Program Clean Technology Initiative, the Strategic High-efficiency Industrial Facilities Transition (SHIFT) program and the new Canada Growth Incentive.
• Combining the Business Development Bank of Canada and Export Development Canada into one federal financing agency for greater simplicity and efficiency, and a broader mandate for the Canada Growth Fund that hopefully becomes more responsive to market needs.
• Incentivizing consumers to electrify home heating and transportation with rebates for heat pump home retrofits and investments in electric vehicle charging networks.

What we’d still like to see next:

The budget references the pending new federal benchmark for provincial compliance carbon markets but full-scale reform is required. While Europe maintains an effective compliance carbon market for the entire continent, Canada’s fragmented system of provincial markets is a serious challenge to effective carbon pricing and investing in climate solutions. The federal government should be working toward a truly pan-Canadian industrial carbon pricing system.

See ISF’s recommendations for reforming compliance carbon markets in its recent submission to Environment and Climate Change Canada. 

More and smarter investment in clean technology is needed. Support for Canada’s growth in clean technology does not match the federal government’s support for fossil fuel development. For example, Canadian cleantech venture capital investment has fallen sharply in the last few years while Canadian firms struggle to scale up and remain in Canada.

See ISF’s recommendations for supporting green innovation in its report on "The state of Canadian cleantech venture capital markets."