After extensive speculation, the federal government has indicated its plan to eliminate the oil and gas emissions cap, albeit with certain conditions attached. In Tuesday’s budget announcement, there was no direct mention of scrapping the contentious Trudeau-era proposal, but specific terms were outlined for its potential removal.
The budget emphasized that “effective” carbon pricing, improved methane regulations, and the implementation of carbon capture and storage at a significant scale could lead to a scenario where the oil and gas emissions cap may become unnecessary due to its limited impact on reducing emissions. This conclusion was presented in the document titled “Canada’s Climate Competitiveness Strategy,” unveiled as part of the 2025 budget.
Finance Minister François-Philippe Champagne highlighted the revised approach to the emissions cap during a press briefing preceding the budget presentation on Tuesday. He stated that certain conditions must be met before the cap could be dispensed with.
A year had passed since the Trudeau government’s announcement of drafting regulations, but the final regulations for the emissions cap were never put into effect. The strategy outlined in the budget indicated the intention of Prime Minister Mark Carney’s new Liberal government to uphold some of the previous administration’s climate policies, such as clean electricity regulations, finalizing methane regulations, and clean fuel regulations.
While the budget did not commit to implementing Canada’s 2035 electric vehicle sales mandate, it promised to reveal “next steps” in the near future. The strategy emphasized the significance of industrial carbon pricing and aimed to raise the carbon price applicable to provinces like Ontario, Saskatchewan, and Alberta to $170 per tonne by 2030. The government also aimed to reach a “pan-Canadian agreement” on a trajectory towards achieving net-zero emissions by 2050.
Conservative Leader Pierre Poilievre criticized the proposed increase in industrial carbon pricing as a “tax” in the House of Commons. Alberta Premier Danielle Smith expressed reservations about the federal government’s conditional decision to withdraw the emissions cap, citing ongoing negotiations on a memorandum of understanding with the federal government.
The strategy focused on encouraging companies to invest in emissions reductions rather than imposing prohibitions. Natural Resources Canada is set to establish a critical minerals sovereign fund with $2 billion over five years to support equity stakes in mines, strike offtake agreements, and offer loan guarantees.
Additionally, changes to the tax system are planned to benefit low-carbon liquefied natural gas (LNG) facilities and make Canada more competitive with the U.S. The budget also proposed creating a Youth Climate Corps with an allocation of $40 million over two years to train young Canadians to respond swiftly to climate emergencies.
Green Party Leader Elizabeth May criticized the measures related to LNG facilities and other aspects of the budget as fossil fuel subsidies. She expressed intent to vote against the budget unless amendments are made to address these concerns.