Prime Minister Mark Carney’s first federal budget, Canada Strong, arrives at a moment of fiscal constraint and global uncertainty. Yet behind its talk of “generational shifts” and claims that “climate action is not just a moral obligation but an economic necessity,” the plan repeats old formulas while deferring the bold action true nation-building demands.
The government calls its “climate competitiveness strategy” a “central pillar” of the plan to make Canada the strongest economy in the G7 – based on “results, not objectives.” While these initiatives provide continuity, they fall short of the acceleration needed to compete in a global economy already moving toward clean technology.
The new post-2030 carbon-pricing trajectory and the “improved backstop” simply repackage commitments made years ago. The much-touted carbon contracts for difference are likely too small to transform markets, while the suite of refundable tax credits extends programs launched between 2022 and 2024. The Critical Minerals Sovereign Fund, worth $2 billion over five years, re-profiles existing Natural Resources Canada initiatives.
Global trackers rate Canada’s climate action as “highly insufficient,” and while extreme weather devastates our communities, the measures presented in Budget 2025 are unlikely to shift this metric.
Fiscal storytelling
The government’s new “capital budgeting framework” gives the deficit a makeover, recasting almost every dollar as an “investment.” The plan promises to balance day-to-day spending with revenues by 2028/2029 while nearly doubling capital expenditures: from $32.2 billion in 2024/2025 to $59.6 billion in 2029/2030, to spur productivity and long-term growth. By then, 100% of the deficit would be branded as investment spending.
But branding isn’t proof. Budget 2025 offers no metric of return, no measure of efficiency, and no test of climate alignment to show whether these billions are building resilience or simply deepening debt. The intent to modernize fiscal planning is welcome, but transparency on the real return of these investments – economic, social and environmental – is essential for public trust.
The government’s focus on modernization and efficiency is understandable, especially amid fiscal pressures. But to save $25.2 billion over four years, Ottawa will cut operating costs by 15% through “reducing inefficiencies” and “automating processes.” Uniform cuts rarely have uniform effects: departments with smaller budgets lose a far greater share of their operational capacity.
Environment and Climate Change Canada, for instance, is expected to save $1.1 billion in four years – a staggering sum for a ministry already stretched thin – largely through automation and program wind-downs. Natural Resources Canada must find similar savings of up to 15% over three years by “optimizing processes” and ending initiatives such as the Two Billion Trees program. Efficiency and modernization are laudable goals, but cutting capacity in key departments undermines the outcomes modernization seeks to achieve.
Small steps forward for preparedness
Budget 2025 takes small steps toward climate preparedness but falls short of the scale the crisis demands. It commits $40 million over two years to launch a Youth Climate Corps to train young Canadians to respond to climate emergencies and strengthen community resilience. It also allocates $257.6 million over four years to Natural Resources Canada to lease four aircraft and boost aerial firefighting capacity, and $55.4 million to Public Safety Canada to develop a new National Public Alerting System for timely disaster warnings.
These are positive measures, but modest when measured against record-breaking wildfires, floods and insurance losses that already cost Canada billions each year. Training youth to respond is vital; equipping the country to prevent and withstand these disasters is what leadership requires.
Incremental movement in climate finance
Canadians needed six clear signals of climate-aligned financial leadership in yesterday’s budget, but few appeared. Under “Mobilising Capital for Transition to Net-Zero,” the budget reconfirmed the intent to move forward with a “Made-in-Canada” taxonomy, with completion delayed until 2026, and indicated its intention to explore the development of a sustainable bond framework. These steps are within reach. Together, they would turn Canada’s fiscal promises into a credible plan for a resilient, low-carbon economy.
What was missing?
We need a green nation-building fund to enhance renewable energy and adaptation efforts in collaboration with Indigenous partners. Additionally, we propose a finance-sector alignment framework, such as the Climate-Aligned Finance Act, to ensure that banks, pensions and insurers align with our climate goals. We advocate for tax reforms that reward clean innovation while gradually phasing out fossil fuel subsidies. Furthermore, an Indigenous climate-leadership capital fund should be established to finance community projects. To ensure accountability, we recommend regular audits and penalties for greenwashing. The government will update existing greenwashing provisions, removing certain aspects while maintaining protections against false claims.
Closing call – from rhetoric to results
Capital diverted to stranded assets is lost capital growth. Without climate-aligned financial flows, Canada faces a vicious cycle: inflation driven by climate shocks, rising indebtedness from bailouts or repair bills, and weak growth from stranded industries. Instead, we need a budget that funds clean growth and relies on a robust framework to shift finance toward low-carbon growth, fights inflation and secures long-term prosperity.
Other G7 economies are already integrating climate risk into regulation, creating taxonomies and redirecting investments toward clean growth. Without similar accountability, Canada risks becoming a “stranded-capital nation” – reliant on devaluing fossil assets while others seize tomorrow’s markets. Left unchecked, climate risk is inflation risk, debt risk and competitiveness risk.
Budget 2025 could have been the moment when fiscal discipline met climate ambition. Instead, it leans on past frameworks, future promises and cuts that weaken delivery. The tools exist to align dollars with duty and finance with the future.
In 2024, global investment in the energy transition exceeded $2 trillion. Capital is moving, and Canada must act or risk forfeiting future prosperity. History will judge not intentions but courage. This budget needs to seize the chance to invest in Canada’s future, not cling to its fossil past.
Rosa Galvez is a civil-environmental engineer and an independent senator for the province of Quebec.
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