Navigating the 2025 Federal Budget

Energy

The Prime Minister and the Minister of Natural Resources have been emphasizing the need to build new projects. This budget addresses some of the energy sector’s concerns but not all.

While many of the prior government’s legislative and regulatory pressure points, such as the Oil Tanker Moratorium Act, remain in place, the budget attempts to offset these concerns by offering longer timelines for utilizing Carbon Capture, Utilization, and Storage (CCUS) tax incentives and signaling the potential removal of the oil and gas emissions cap. Any further changes to the cap, however, remain contingent on further discussions with the provinces on a significant number of other energy and climate policy measures.

Outside oil and gas, this budget signals a wave of continued interest in the development of carbon-capture, battery/critical minerals, grid/storage, and, possibly, hydrogen. The focus for the federal government is shifting gears from setting net-zero targets to enabling large-scale deployment of clean-industry infrastructure. The Climate Competitiveness Strategy seeks to position Canada’s economy to compete globally by combining decarbonization, industrial policy, and domestic value-chains.

Key Policy & Funding Signals

• Budget 2025 proposes reinstating accelerated capital cost allowances (CCAs) for LNG equipment and related buildings, but only for low-carbon LNG facilities 
• Bolstering industrial base: Defence Investment Agency + Buy Canadian policy implies demand uplift for steel, fabricated metal, and associated energy-intensive manufacturing
• Labour & training: Clean-industry workforce flagged alongside housing/trades, indicating federal support for training infrastructure 
• Finally, the budget states the government’s intention to select an external organisation with the expertise to develop the sustainable investment guidelines and explore the development of a Sustainable Bond Framework for industrial and agricultural sectors

Climate Competitiveness

• The government proposes to improve the effectiveness of industrial carbon pricing by developing a post-2030 carbon pricing trajectory, fixing the benchmark and improving the backstop. The Canada Growth Fund will continue to issue carbon contracts for difference 
• The 2024 Canadian federal budget proposes amendments to soften the Competition Act's "anti-greenwashing" provisions (added under Bill C-59), aiming to reduce "investment uncertainty" and avoid slowing environmental efforts; the key changes include removing the requirement for environmental claims to meet international methodology standards and eliminating the ability for third parties to bring direct complaints to the Competition Tribunal, while still retaining protections against false or misleading claims
• The budget commits to maintaining the Clean Electricity Regulations. It emphasizes that achieving the related greenhouse gas emission reduction goals will require cooperation with provinces and territories 
• Positioned as an update on the Oil and Gas Emissions Cap, the budget notes that the combined measures of effective carbon markets, oil and gas methane regulations, and carbon capture and storage, “create the circumstances whereby the oil and gas emissions cap would no longer be required.” However, the budget stops short of committing to such action, as such uncertainty remains
• The budget notes that the government will soon introduce legislation to deliver the Clean Electricity investment tax credit along with enhancements to the other investment tax credits
• The budget maintains the Carbon Capture, Utilization, and Storage (CCUS) Investment Tax Credit and extends the qualifying period for the full credit rates by five years. The full rates will now apply to eligible expenditures incurred from the start of 2022 to the end of 2035 (up from the original 2030 deadline), a measure intended to improve project economics and attract major private investment

Productivity Incentives – Productivity Super Deduction Measures

Budget 2025 announces a set of measures packaged as a “Productivity Super-Deduction,” aimed at reducing Canada's marginal effective tax rate (METR) by more than two percentage points. This includes:

• Reinstating the Accelerated Investment Incentive, expensing of manufacturing or processing machinery and equipment, and immediate expensing of capital expenditures for scientific research and experimental development 
• Immediate expense for manufacturing or processing buildings acquired on or after Budget Day (November 4), used for manufacturing or processing before 2030
• Accelerated CCAs for Low-Carbon LNG Facilities: The budget reinstates accelerated CCAs for LNG equipment and related buildings, applying only to low-carbon facilities that meet new high emissions performance standards. The incentive is two-tiered: facilities in the top 25 per cent of performers receive the previous 30 per cent CCA rate, while top 10 per cent performers receive a significantly enhanced 50 per cent CCA rate for liquefaction equipment. These measures apply to property acquired on or after Budget Day (November 4, 2025) and before 2035, with full details on the emissions requirements to be provided subsequently

Real Estate & Housing

The push from Ottawa is centered on addressing the nation's housing supply and affordability challenges by accelerating construction, reducing costs, and mitigating delays. Key measures include leveraging federal land, providing longer-term financing, and promoting the use of modular builds and domestic supply chains. The budget incorporates significant allocations to incentivize municipal governments to streamline approval processes and release more land, ultimately aiming for a potential uptick in project pipelines for developers, investors, and lenders. However, this growth is paired with the need for these stakeholders to manage risks related to supply-chain and assembly-capacity. Specific funding also enhances support for first-time home buyers and bolsters financing for affordable rental housing projects. While the budget attempts to balance demand-side support with critical supply-side expansion, the primary hurdle remains execution, particularly overcoming the ongoing labour shortage while managing temporary immigration levels.

Key Policy & Funding Signals

• Build Canada Homes (BHC) capitalization of $13 billion, including 88 federal-owned properties slated for repurposing into housing 
• Target to deliver 4,000 factory-built units in the first tranche across six sites (Dartmouth, Longueuil, Ottawa, Toronto, Winnipeg, Edmonton); capacity to scale up to ~45,000 units
• BHC Procurement strategy: Bulk long-dated contracts for modular/mass-timber, with cost‐savings target of 20 per cent and build-time reduction up to 50 per cent 
• Federal materials policy: Buy Canadian preference (lumber, steel, aluminum, mass timber) flagged explicitly by the government
• The annual issuance limit for the Canada Mortgage Bond (CMB) program is being raised from $60 billion to $80 billion, starting in 2026. This $20 billion increase is specifically designated to unlock low-cost, long-term financing for CMHC-insured multi-unit rental projects
• Continued funding for federal programs such as the Apartment Construction Loan Program and Mortgage Loan Insurance for purpose-built rentals
• First-time home buyers will see the elimination of the GST on new homes up to $1 million, and a GST reduction on new homes purchased between $1 million and $1.5 million. Buyers may hold off on new home purchases to realize the benefit of this tax cut. The agreement of purchase and sale for the new home must be entered into on or after May 27, 2025, and before January 1, 2031

Agriculture

The proposed budget for the agriculture sector emphasizes three core strategic areas: supporting agriculture, enhancing Agriculture and Agri-Food Canada (AAFC) efficiency, and boosting food exports. This emphasis suggests a focus on increased business risk management support, along with a pledged investment into biofuel production, and efforts toward trade diversification. While the budget positively recognizes the sector as a strategic industry, a notable comprehensive "competitiveness framework" may be perceived to be missing. Much of the sector agrees a clear strategic framework is needed to make regulations better for competitiveness, not simply cost-cutting measures. This is an opportunity to formalize a clear, unified plan.

Key Policy & Funding Signals

Federal commitment of more than $639 million over five years, starting in 2025-26, for the following measures:

• $109.2 million in 2025-26 to Agriculture and Agri-Food Canada for the federal-provincial-territorial cost-shared AgriStability program.Increase the compensation rate for agricultural producers from 80 to 90 per cent, along with raising the payment cap per farm from $3 million to $6 million 
• $75 million over five years, starting in 2026-27, to Agriculture and Agri-Food Canada for the AgriMarketing Program to enhance the diversification and promotion of Canada’s agriculture, agri-food, fish, and seafood products into new markets
• $97.5 million is allocated over two years, starting in 2025-26, to temporarily increase the interest-free limits under the Advance Payments Program (APP). Specifically, the limit for canola advances will rise to $500,000 for the 2025 and 2026 program years to mitigate financial stress from China's tariffs, while the limit for all other producer advances will temporarily increase to $250,000 for the 2025 program year 
• $372 million over two years, starting in 2026-27, to Natural Resources Canada to establish a Biofuels Production Incentive to support domestic producers of biodiesel and renewable diesel, with $175.2 million repurposed from the Clean Fuels Fund
• In addition to the $639 million, the budget proposes to provide $76 million over five years, starting in 2026-27, to the Canadian Food Inspection Agency (CFIA) to modernize the food export system. This investment will integrate digital trade tools and AI to streamline processes and enhance traceability, while also securing and expanding global market access for Canadian agriculture through direct engagement and trade agreement advocacy