Can the Carney government's second budget help put Canada on a path to net zero?

In the spring of 2024, nine months before he formally entered politics, Mark Carney made a couple of public appearances to discuss the state of the Canadian economy and the possible paths forward. And on at least one specific area of policy Carney suggested he would do things differently than Justin Trudeau. "Personally, would I swap one battery plant for a million, million-five heat pumps?" Carney asked himself rhetorically during a Q&A in Toronto, referring to a series of deals the Trudeau government signed to attract battery manufacturing facilities to Canada.

"Yeah, I would. Because that would deliver — let's deliver stuff for people." The government, he said, needed to "make choices that deliver for people today as part of a larger change." Earlier this month, Carney acted on something like that idea, announcing a $2-billion heat pump rebate program that the federal government projects could benefit approximately 820,000 households. The Carney government hardly invented the idea of helping Canadians retrofit their homes or install heat pumps — the Trudeau government had its own initiatives, including a specific program for households that used oil to heat their homes.

But the new program did add something to a Carney climate agenda that has so far been defined by the Trudeau-era policies he has subtracted. Nonetheless, the Canadian Climate Institute greeted the announcement as a "modest" boost toward greater electrification. "It's modest in terms of the level of ambition that this government is showing on other public policy files. It's modest in terms of the amount of money that this government is spending on other public policy files.

And it's modest in terms of the time frame and the number of homes impacted," says Rick Smith, president of the climate institute. "I hesitate to use this overused expression, but it's a good first step." That more needs to be done is fairly indisputable. Analysis published by the Canadian Climate Institute last month confirmed that Canada is not on track to meet its greenhouse gas emissions target for 2030. The Trudeau government set a goal of reducing emissions by 40 per cent below 2005 levels, but the institute estimates emissions might only fall by 21 per cent.

That Canada would not achieve its target for 2030 was tacitly acknowledged by the prime minister in June when he said the changes made by his government would mean that "our emissions will be higher in the next few years than they were projected to be under the previous government's plan." The Carney government remains committed to aiming for net-zero emissions by 2050, but the institute's projections still show what it calls a "cavernous gap" between Canada's current track and the mid-century goal.

Could this week's federal budget go some way toward filling that gap? What will the budget mean for climate policy? Pre-budget submissions from climate-focused groups — the Green Budget Coalition , New Economy Canada , Clean Energy Canada , Efficiency Canada and the Pembina Institute — offered a number of proposals for boosting clean electricity and supporting home and building retrofits. Such initiatives would seem to be in line with where the Carney government would like to focus.

Carney has said Canadians' affordability concerns are weighing on climate policy and he has put clean electricity at the centre of his agenda moving forward. "The path to net-zero is electrification," the prime minister said earlier this year, announcing the government's new electricity strategy. That strategy embraced the goal of doubling Canada's electricity grid by 2050 . But getting to that goal without overly burdening ratepayers might require significant amounts of federal funding.

Carney himself has spoken of "using the government balance sheet" in a way that "spreads out the cost over a long period." To that end, the climate institute has proposed a new federal fund to help provincial utilities manage the cost of expansion. Tyler Meredith, a former policy adviser in the Trudeau government, has proposed a new federal transfer of $5.4 billion per year contingent on legislated conditions (similar to the way the federal government provides provinces with funding for health care).

"First and foremost [to doubling electricity and getting Canada on track to net-zero] is helping provinces finance the electricity build out and the interconnections that are needed," says Merran Smith of New Economy Canada, a coalition of business and labour organizations. "I'm not sure they're going to have exactly what the answer is [in the budget], but I'll be looking for progress on identifying how the federal government thinks it can work collaboratively with [provincial utilities]."

That the government chose to put a picture of electricity transmission lines on the cover of the budget might bode well for such hopes. But obviously the details within the budget will matter more than the nice photo on the front. The future politics of climate policy In an op-ed published earlier this fall, Rick Smith argued that Carney could now be measured against his own climate commitments, including the target of net-zero by 2050.

The prime minister has, for instance, set ambitious goals for electric-vehicle adoption. Recent changes to vehicle regulations were met with disappointment from climate groups, but the government also promised a new national charging infrastructure strategy . The Carney government has also talked about improving industrial carbon-pricing systems and perhaps linking provincial carbon markets — a federal-provincial working group is scheduled to offer recommendations on the latter next summer.

"To the extent that the current government has a climate change plan, it is a series of specific commitments that the prime minister has made that the federal government has yet to put the legs under," Smith says. The Carney government's approach to climate policy so far is no doubt downstream from the political reality of this particular moment. When the Environics Institute surveyed Canadians in 2019, 24 per cent said climate change was the most important issue facing the country.

When Environics asked again this year , just three per cent said the same, putting climate change far behind concerns about Donald Trump and the cost of living. The Carney government also faces only limited pressure within the House of Commons to take action to reduce emissions — the Conservatives are primarily focused on opposing existing federal climate policies. But as Abacus Data laid out earlier this year , the fact that Canadians are prioritizing other issues right now does not mean Canadians aren't worried about climate change.

As of this spring, 80 per cent of Canadians said they were at least moderately concerned about climate change. Abacus also detected a certain amount of uncertainty about the direction and effectiveness of the Carney government's approach to climate policy. And such doubts have at least the potential to become a problem in the future. "The Carney government's challenge … is to ensure that if climate becomes a bigger issue, Canadians believe it has a credible plan to respond," Abacus Data's researchers wrote.

This week's budget is another opportunity to fill both the political credibility and the practical emissions gaps.