Ottawa is exploring ways to give municipalities a bigger role in delivering billions in climate and infrastructure funding, as communities argue they can do the job faster and more effectively.

Documents obtained by Canada’s National Observer through an Access to Information request to Natural Resources Canada show the Federation of Canadian Municipalities pushed the federal government to direct part of a new $6-billion infrastructure stream through its Green Municipal Fund, arguing it could quickly roll out projects across the country without creating a new bureaucracy.

A briefing note prepared for a February 2026 meeting between federal officials and senior Federation of Canadian Municipalities representatives says the fund’s mandate and experience were “well aligned” with the goals of Ottawa’s new infrastructure program.

The proposal was tied to Ottawa’s new $51-billion Build Communities Strong Fund announced in Budget 2025, including a $6-billion stream for projects such as building retrofits, climate adaptation, clean-energy systems and community infrastructure.

The federation proposed that if Ottawa directed $400 million through the Green Municipal Fund, more than 70 high-impact municipal projects could be approved within three years. The organization argued projects could begin receiving approvals within six months because the delivery system already exists.

Carole Saab, CEO of the federation, was part of the meeting and said municipalities are essential partners in delivering climate and infrastructure outcomes because they own roughly 60 per cent of Canada’s public infrastructure and are responsible for many of the systems needed for the country’s energy transition.

“Municipalities are on the front lines of climate impacts,” Saab said, adding local governments are responsible for many of the buildings, energy systems and community infrastructure that will determine whether Canada can successfully advance building retrofits, climate adaptation and clean-energy projects.

Saab told Canada’s National Observer the Green Municipal Fund already has experience supporting municipalities of different sizes and can help communities move projects from planning to implementation quickly.

The fund was established in 2000 and has supported more than 2,700 municipal projects across Canada.

It has helped avoid nearly three million tonnes of greenhouse gas emissions through investments in energy-efficient buildings, district energy systems, electric vehicle infrastructure, fleet electrification and climate adaptation projects, according to the document. 

Between 2018 and 2025, the amount of funding approved through the fund increased by more than 400 per cent, according to the organization, reflecting growing demand from municipalities for climate adaptation, resilience and low-carbon infrastructure projects.

Cities face funding pressures

Municipalities say the need for funding is becoming increasingly urgent.

Waterloo Mayor Dorothy McCabe said cities are often where climate action happens but they are forced to compete for limited funding through lengthy application processes.

“The more streamlined and simplified a program is, the better it is for municipalities,” McCabe told Canada’s National Observer.

She pointed to Waterloo’s Rim Park recreation complex, which accounts for about 30 per cent of the city’s corporate greenhouse gas emissions.

McCabe says the city has spent years seeking support for a major retrofit project estimated to cost between $20 million and $35 million but has been unsuccessful after three separate funding applications.

“We know the work needs to be done, but it takes so much longer when municipalities have to go cap in hand and wait years for decisions,” she said.

McCabe said Waterloo has successfully received federal support for energy and accessibility retrofits at community centres and for active transportation projects, but many larger projects remain difficult to finance.

She also argued municipalities face growing responsibilities while receiving only a small share of overall tax revenues.

“The federal and provincial governments collect the vast majority of taxes, while municipalities are responsible for delivering much of the infrastructure people rely on every day,” she said.

Climate advocates say stronger federal funding for municipalities is becoming increasingly important as communities face rising costs from extreme weather events. At the same time, some provinces like Ontario and Alberta have rolled back climate commitments and limited municipalities’ ability to advance local climate action.

In Ontario, Ford’s government has made it increasingly difficult for municipalities to advance climate and transportation initiatives, restricting their ability to impose some green-building standards and overturning Toronto’s green-roof bylaw requirements.

The provincial government has also justified a series of environmental and planning changes as necessary to speed up housing and infrastructure development.

Last year, Toronto shelved plans to tighten building emissions standards, citing federal program cuts and provincial actions that limited the city’s powers. Buildings account for nearly 60 per cent of the city’s greenhouse gas emissions.

Zoe Grams, executive director of the national municipal advocacy group Climate Caucus, said local governments are struggling to maintain infrastructure while dealing with flooding, extreme heat, wildfires and other climate-related impacts.

“Municipal leaders are invested in making their communities as resilient and affordable as possible, but there is only so much they can do with their limited fiscal capacity,” Grams said in an email response.

“Funding through the Green Municipal Fund is enormously helpful, but both the federal and provincial governments continue to have an important role to play.”