After a period of anticipation, the federal government has indicated its plan to remove the oil and gas emissions cap, albeit with specific conditions attached. The recent budget did not explicitly state the elimination of the controversial Trudeau-era proposal but outlined requirements for its potential removal.
The budget emphasized that the implementation of “effective” carbon pricing, enhanced methane regulations, and the utilization of carbon capture and storage at a significant scale could render the oil and gas emissions cap unnecessary, as it would offer minimal value in emission reduction efforts.
This decision was put forth in the “Canada’s Climate Competitiveness Strategy,” unveiled during the 2025 budget by the Carney government. Finance Minister François-Philippe Champagne highlighted the altered approach to the emissions cap during a pre-budget news conference.
The strategy affirmed the intent of Prime Minister Mark Carney’s new Liberal government to continue certain climate policies from the previous administration, such as clean electricity regulations, finalizing methane regulations, and clean fuel regulations. However, the budget did not commit to moving forward with Canada’s 2035 electric vehicle sales mandate, with plans to announce further steps in the near future.
A key focus of the strategy is industrial carbon pricing, with provinces like Ontario, Saskatchewan, and Alberta operating systems that meet federal standards. The government aims to raise the carbon price applicable to these systems to $170 per tonne by 2030 and seeks a “pan-Canadian agreement” on a trajectory towards net-zero emissions by 2050.
Conservative Leader Pierre Poilievre criticized the proposed industrial carbon price hike as a tax increase, raising concerns about its impact on various sectors. Alberta Premier Danielle Smith expressed reservations about the federal government’s conditional decision to withdraw the emissions cap, noting ongoing negotiations between the federal and provincial governments.
The strategy stresses the importance of incentivizing companies to invest in emissions reduction efforts rather than imposing prohibitions. Additionally, Natural Resources Canada will establish a critical minerals sovereign fund with a $2 billion allocation over five years to support equity stakes, offtake agreements, and loan guarantees in mining projects.
The budget outlines plans to update “greenwashing legislation” to address false environmental claims effectively and enhance transparency in environmental marketing. It also includes initiatives like the Youth Climate Corps, aimed at training young Canadians to respond to climate emergencies, and tax system adjustments to benefit low-carbon liquefied natural gas facilities for enhanced competitiveness.
Green Party Leader Elizabeth May criticized elements of the budget, including support for liquefied natural gas facilities, labeling them as fossil fuel subsidies. May indicated potential opposition to the budget unless amendments are made to address these concerns.