Written by Mike Barrett and Matthew Peters
Finance Minister Bill Morneau's first federal budget includes many of the environmental initiatives the Liberals raised in their election platform. The federal government's approach is to infuse environmental concepts into a broad range of policy initiatives. This update will highlight certain features of the budget.
1. The Federation of Canadian Municipalities will receive $250 million to be invested as follows:
- $125 million for local governments to address climate change related risks to municipal assets; and
- $125 million into the Green Municipal Fund to invest in projects which are intended to reduce greenhouse gas emissions.
2. Two existing climate change adaptation projects will receive the following funding:
- $248 million to the Lake Manitoba and Lake St. Martin Outlet Channels project to provide enhanced flood protection to adjacent communities; and
- $212 million to the Lions Gate Wastewater Treatment Plant to make it more resilient to climate change related weather events.
3. The federal government will establish a new Clean Water and Wastewater Fund with $2 billion in funding for immediate improvement to water distribution and treatment infrastructure across the country.
4. Natural Resources Canada is set to receive new funding for each of the following initiatives:
- $82 million to support research and development into clean energy technologies;
- $62.5 million to support the deployment of alternative transportation fuels infrastructure, including electric and hydrogen-based infrastructure;
- $2.5 million to facilitate research studies and dialogue on replacing aging electricity infrastructure with projects with the potential to achieve significant greenhouse gas emissions reductions;
- $50 million to invest in technologies to reduce greenhouse gas emissions in the oil and gas sector;
- $2.1 million to create improved clean technology data collection and track progress;
- $128.8 million to deliver energy efficiency policies and programs.
5. The federal government intends to invest $1 billion directly into clean technology in the forestry, mining, energy, fishing and agricultural sectors, with more details to follow.
6. Sustainable Development Technology Canada will receive $50 million to invest in clean technology projects that address climate change, air quality, clean water and clean soil.
7. The federal government will create a Low Carbon Economy Fund and provide $2 billion in funding. The Fund will support provincial and territorial actions that materially reduce greenhouse gas emissions and are incremental to current plans, and achieve significant reductions within the period of Canada's nationally determined emissions reductions target. Resources will be allocated towards those projects that yield the greatest absolute greenhouse gas reductions for the lowest cost per tonne.
8. Environment and Climate Change Canada will receive new funding for each of the following initiatives:
- $109 million to develop climate change data reporting and policy/regulatory development; and
- $56.9 million for continuing development of regulations toward a cleaner transportation sector.
9. Indigenous and Northern Affairs Canada will receive $10.7 million to implement off-grid renewable energy projects adjacent to Indigenous and Northern communities.
10. Seven different federal agencies/departments will receive $129.5 million, in aggregate, to facilitate climate change adaptation across a broad range of economic sectors and communities.
11. The federal government will invest $40 million to integrate climate change resistance concepts into building codes.
The federal budget also included two key changes to the Income Tax Act and Regulations to address "green" matters included in the budget:
- Existing taxation rules provide for accelerated capital cost allowance (CCA) deductions for certain assets types (Class 43.1 and Class 43.2) that generate energy by using renewable energy sources or efficiently use fossil fuels. The federal government has expanded the types of assets eligible for such accelerated CCA treatment to include electric vehicle charging stations and certain electricity storage equipment.
- With the broad reintroduction of greenhouse gas emissions trading regimes, stakeholders expressed some concern regarding the uncertainty of how to treat certain transactions from a taxation perspective. The federal government intends to amend the Income Tax Act to clarify the treatment of emission allowances and to eliminate potential double taxation of certain free allowances. Emission allowances will be treated as inventory for all taxpayers, however taxpayers will not be able to use the "lower of cost or market" method of inventory valuation.
We would be pleased to discuss with you how the foregoing budget details may impact your business.