After much speculation, the federal government is hinting at scrapping the oil and gas emissions cap, but it comes with conditions. The recent budget did not explicitly state the removal of the controversial Trudeau-era proposal but outlined specific requirements for its elimination. The budget emphasized the need for “effective” carbon pricing, improved methane regulations, and the widespread implementation of carbon capture and storage to render the emissions cap unnecessary in reducing emissions.
This conclusion was presented in “Canada’s Climate Competitiveness Strategy” introduced during the 2025 budget by the Carney government. Finance Minister François-Philippe Champagne highlighted the new approach to the cap in a news conference preceding the budget announcement.
The strategy reaffirms Prime Minister Mark Carney’s Liberal government’s commitment to certain climate policies from the previous administration, such as clean electricity regulations, finalizing methane regulations, and clean fuel regulations. However, the budget did not confirm the continuation of Canada’s 2035 electric vehicle sales mandate, promising to reveal “the next steps” in the near future.
A central focus of the strategy is industrial carbon pricing, with provinces like Ontario, Saskatchewan, and Alberta having systems that meet federal standards. The government pledges to increase the carbon price applied to these systems to $170 per tonne by 2030 and aims for a “pan-Canadian agreement” on a trajectory towards net-zero emissions by 2050.
Conservative Leader Pierre Poilievre criticized the proposed industrial carbon price hike, labeling it as a tax increase. Alberta Premier Danielle Smith expressed reservations about the federal government’s conditional decision to retract the emissions cap, emphasizing ongoing negotiations between Alberta and the federal government.
The strategy emphasizes incentivizing companies to invest in emissions reduction rather than imposing prohibitions. Natural Resources Canada plans to establish a critical minerals sovereign fund with $2 billion over five years to support equity stakes in mines, offtake agreements, and loan guarantees.
Moreover, the government will update its “greenwashing legislation” to combat false environmental claims and create certainty for investors. The budget also includes measures to address the climate crisis, such as establishing a Youth Climate Corps and implementing changes to benefit low-carbon liquefied natural gas facilities.
Green Party Leader Elizabeth May criticized the budget, particularly the support for LNG facilities, as a fossil fuel subsidy. She indicated opposition unless amendments are made to address these concerns.